Record price deflation hits retailers’ margins in January, warns KPMG

Record price deflation hits retailers’ margins in Jan

With a more supportive economic backdrop helping to increase consumers’ disposable income, UK retailers have seen an encouraging return on their efforts this month; with a reported year-on-year sales growth of 4.8 percent by volume.

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Commenting on the publication today of the latest ONS retail sales figures, Don Williams, retail partner at KPMG said:

“With a more supportive economic backdrop helping to increase consumers’ disposable income, UK retailers have seen an encouraging return on their efforts this month; with a reported year-on-year sales growth of 4.8 percent by volume.  However there are signs that this demand has been heavily driven by discounts, as evident by the record price deflation seen across the sector.

“A concern for all retailers is that without these “reduced price” stickers in the shop window, they would have found it difficult to encourage sales from a customer who remains cautious and value sensitive. Only time will tell if, by cutting prices to shore up demand, retailers have damaged their margins and/or their brands.

“The challenge for retailers now is how to once again make full price purchases the “new normal”.  Many retailers will be hoping that, with an environment that sees some limited wage growth combined with food and fuel prices that continue to fall, many consumers will have more disposable income so the High Street will be able to relegate the sale rail, for a while at least.”

-ENDS-

 

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About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such. 

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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