With news that retail sales have fallen by the most on record in May, Plimsoll has taken a look at the longer term trends in how UK Retailers are generating sales and profits from their investment.
Looking at the latest full years’ financial data for the UK’s leading Retailers, the following chart shows that sales return on investment (the measure of a company’s trading stability) while falling dramatically over the past few years has actually picked up in the latest full financial year. This has been driven by a retrenchment of investment, heavy discounting to drive sales and favourable weather:
Sales return on Investment
However, while this uptick in sales return is welcome news, it appears to have been at the direct expense of profitability. The following chart shows profitability continues to fall dramatically as retailers are forced to discount to protect their already dwindling market share in the face of seemingly limitless consumer choice. Stubborn landlords protecting expensive rents and a Brexit consumed government doing little to alleviate crippling business rates have left many of the UK’s leading retailers facing a perfect storm.
Profit return on investment
Plimsoll analyses the annual trends in the retail sector to show how well prepared the market and the key individual companies are as new updates become available. Retailers already struggling to grow or make a profit are unlikely to thrive if the market continues to contract. Based on the latest full financial year we found a market:
- Struggling to retain significant growth
- Losing its grip on profitability
- Rife with companies overtrading
- Failing to deliver on investment
With that in mind, the latest update from the BRC-KPMG Retail Sales Monitor showing conditions getting dramatically worse couldn’t have come at a worse time:
- Sales are down by 2.7% in May – largest fall since records began
- A 3% fall in sales compared to the previous May – the biggest fall since 2008
- A significant fall in online sales
The decline in online sales is perhaps the biggest warning that political and economic uncertainty is affecting the market. Rather than the migration from brick and mortar to online of the last few years, Consumers are becoming more cautious as the Brexit chaos continues to affect sentiment.
The Plimsoll Analysis provides an individual assessment on each of the UK’s 1000 leading Retailers to show which companies are best prepared to weather the ongoing issues in the market and which will be the next to follow the likes of HMV into the abyss.
For more information about the Plimsoll Analysis please visit www.plimsoll.co.uk