One of the UK’s leading retail specialists is urging stores to focus less upon sales and more upon shrink to boost their margins.

Professor Adrian Beck, Reader in Criminology at the University of Leicester, says the retail sector continues to confound the media with sales growing despite all the supposed doom and gloom about the economy.

He was commenting upon the latest CBI Distributive Trade Survey that sales on the high street were higher than a year ago in September, representing the third consecutive year-on-year increase and surpassing expectations. Retailers expect another strong rise in sales next month.

The survey says that sixty per cent of retailers surveyed said that the volume of sales rose during September, while 11% said that it fell, giving a balance of +49%. This was the highest balance since May 2004 (+51%), and compares with an expected figure of +39% last month.

Sales volumes (+14%) were also above average for the time of the year for the first time since June 2007.

This increase was also reflected in the volume of orders placed upon suppliers (+39%), which rose strongly again on a year ago, surpassing last month’s prediction of +29%.

The clothing and footwear and leather sub-sectors saw particularly strong sales growth, which are likely to have been boosted by the arrival of new autumn ranges. Solid sales growth was also recorded in the furniture & carpets sector.

Looking to October, a balance of +47% of firms expect a higher volume of sales than a year ago.

But, the leading criminologist argues the good times may be short lived with the Government’s imminent spending review announcement on October 20th and the 2.5% VAT increase in January, both of which will inevitably dent consumer confidence.

“The reality to date is that for those who have a job, the recession has been financially very beneficial – can you remember the last time interest rates were this low for this long?” says Beck.

“Now, I’m sure the Spending Review may begin to change all that but we will have to wait and see. However, retail has enjoyed sales growth over this period because some people have more money to spend. Now, should retailers target shrink losses to improve their profitability – absolutely – I regularly pull out a chart which shows that if retailers reduce their shrinkage by 50% then they can increase their overall profitability by 36%.”

He adds: “and even if they take a conservative reduction of a 25%, then that still equates to actual profit growth of 18%. When you compare this number with how much some companies project to earn at any time, then for me targeting shrinkage is the most attractive and lucrative proposition – it really is the last free money on the table!

Ian McCafferty, CBI Chief Economic Advisor, says: “High street sales have performed well again this month, with growth better than retailers predicted. The bank holiday weekend, combined with the tail-end of summer sales have resulted in a bumper period for retailers. Clothing and footwear sales in particular look to have been boosted by the launch of new autumn ranges.

“Retailers expect sales growth to continue next month and, as we get closer to January, sales will be helped by households seeking to beat the VAT rise. However, weak prospects for take-home pay mean that consumer spending is likely to be fairly restrained in 2011.”

Richard Lowe, Head of Retail and Wholesale at Barclays Corporate says: “September’s sales growth exceeds expectations. This is encouraging news for the High Street in the face of subdued consumer confidence levels which prompted the recent Bank of England call for individuals to spend. Despite positive indicators, retailers will remain cautious as the environment is likely to get tougher with next month’s Comprehensive Spending Review set to considerably impact on household spending. The significant increase in clothing and footwear sales corresponds with the change in seasons, an encouraging sign for order books in the run up to Christmas.”

One of the UK’s leading retail specialists is urging stores to focus less upon sales and more upon shrink to boost their margins.

Professor Adrian Beck, Reader in Criminology at the University of Leicester, says the retail sector continues to confound the media with sales growing despite all the supposed doom and gloom about the economy.

He was commenting upon the latest CBI Distributive Trade Survey that sales on the high street were higher than a year ago in September, representing the third consecutive year-on-year increase and surpassing expectations. Retailers expect another strong rise in sales next month.

The survey says that sixty per cent of retailers surveyed said that the volume of sales rose during September, while 11% said that it fell, giving a balance of +49%. This was the highest balance since May 2004 (+51%), and compares with an expected figure of +39% last month.

Sales volumes (+14%) were also above average for the time of the year for the first time since June 2007.

This increase was also reflected in the volume of orders placed upon suppliers (+39%), which rose strongly again on a year ago, surpassing last month’s prediction of +29%.

The clothing and footwear and leather sub-sectors saw particularly strong sales growth, which are likely to have been boosted by the arrival of new autumn ranges. Solid sales growth was also recorded in the furniture & carpets sector.

Looking to October, a balance of +47% of firms expect a higher volume of sales than a year ago.

But, the leading criminologist argues the good times may be short lived with the Government’s imminent spending review announcement on October 20th and the 2.5% VAT increase in January, both of which will inevitably dent consumer confidence.

“The reality to date is that for those who have a job, the recession has been financially very beneficial – can you remember the last time interest rates were this low for this long?” says Beck.

“Now, I’m sure the Spending Review may begin to change all that but we will have to wait and see. However, retail has enjoyed sales growth over this period because some people have more money to spend. Now, should retailers target shrink losses to improve their profitability – absolutely – I regularly pull out a chart which shows that if retailers reduce their shrinkage by 50% then they can increase their overall profitability by 36%.”

He adds: “and even if they take a conservative reduction of a 25%, then that still equates to actual profit growth of 18%. When you compare this number with how much some companies project to earn at any time, then for me targeting shrinkage is the most attractive and lucrative proposition – it really is the last free money on the table!

Ian McCafferty, CBI Chief Economic Advisor, says: “High street sales have performed well again this month, with growth better than retailers predicted. The bank holiday weekend, combined with the tail-end of summer sales have resulted in a bumper period for retailers. Clothing and footwear sales in particular look to have been boosted by the launch of new autumn ranges.

“Retailers expect sales growth to continue next month and, as we get closer to January, sales will be helped by households seeking to beat the VAT rise. However, weak prospects for take-home pay mean that consumer spending is likely to be fairly restrained in 2011.”

Richard Lowe, Head of Retail and Wholesale at Barclays Corporate says: “September’s sales growth exceeds expectations. This is encouraging news for the High Street in the face of subdued consumer confidence levels which prompted the recent Bank of England call for individuals to spend. Despite positive indicators, retailers will remain cautious as the environment is likely to get tougher with next month’s Comprehensive Spending Review set to considerably impact on household spending. The significant increase in clothing and footwear sales corresponds with the change in seasons, an encouraging sign for order books in the run up to Christmas.”

Retail Fraud 2nd October 2010