Covering the four weeks 1 28 January 2017 Strictly Embargoed until 00:01 hrs Wednesday 15 February % change year on year. % change year on year

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1 Strictly Embargoed until 00:01 hrs Wednesday 15 February 2017 % change year on year % change year on year In January, Scottish sales declined by 3.2% on a like-for-like basis compared to January 2016, when they had decreased by 4.0%. In January, Total Scottish sales declined by 3.5% compared with January 2016, when they had declined by 3.8%, the last month in which the decline exceeded 3.5%. This month s figure is below the 3- month and the 12-month averages, both -1.3%. Adjusted for deflation measured at 1.7% by the BRC- Nielsen Shop Price Index (SPI), January sales declined by 1.8%. % change year on year % change year on year % change year on year Total Food sales declined 2.6% on January 2016, when they had decreased by 5.8%, this month s growth the lowest since then. This pulls the 3-month average down to 0.2%, and the 12-month average to -0.5%, though the latter remains the best since August Total Non-Food sales declined 4.3% compared to January 2016, when they had decreased by 2.1%. This is lower than the 3- month and 12-month averages of -2.4% and -1.9% respectively. Adjusted for the estimated effect of Online sales, total Non-Food sales decreased by 1.8% versus January 2016, when they had increased by 0.2%. On a 3-month basis, the Online-adjusted Total Non-Food change was 0.5%, above the UK average of 0.3% for the second month in a row.

2 David Lonsdale, Director of the SRC Scottish Retail Consortium These are somewhat dreich retail sales results for January, showing a dip of nearly two percent even when falling shop prices are taken into account. After the extravagances of the festive period, which saw solid sales growth in December and indeed during the final few months of last year, shoppers were clearly keeping a firmer grip on purses and wallets in January and focusing more on essential spending as lower footfall data for the period suggested. Grocery sales dwindled last month and non-food items fell back, even once increasingly popular online sales were factored in. In an otherwise drab overall set of figures, furniture, mobile phones and skincare products were among the better performers, as were grocery sales related to Burns Night and Chinese New Year. With the Chancellor s Spring Budget and commencement of the Brexit negotiations just a month or so away, Scotland s retailers will be looking for measures which help them keep down prices for consumers, and for the prioritising of tariff-free trade with the rest of the EU; especially on everyday staples such as food and clothing. The Scottish local authority elections are coming into view, and retailers are keen to see action which makes it easier and less costly to invest in our town centres and which improves footfall. In particular, more widespread use of local discretionary powers to reduce business rates and easier and more affordable parking for shoppers could help support struggling high streets. Craig Cavin, Head of Retail in Scotland KPMG After December s strong festive figures boosted Scottish retailers, January blues have struck. Having splashed out over the Christmas period, shoppers were keen to save money, despite the sales bringing prices down. As Hogmanay was included in January s figures this year and December s last year, total food sales fell by 2.6%. After feasting over the festivities, consumers appear to have lost their appetite in the New Year. Non-food products saw the largest percentage fall year on year (4.3%), with clothing and footwear s poor performance condemning them to the bottom of the rankings in January. Returned Christmas gifts and January sales may have hurt profitability, but a later return to school meant children s clothing performed better than adults. The popularity of buying electricals and health and beauty products appears not to be just for Christmas, with demand for both sectors bucking the trend of non-food decline. January is usually a difficult month for purses and wallets across the country, as consumers count the cost of Christmas. It appears retailers are also counting that cost. 2

3 yoy % growth yoy % growth Food Other Non-Food Clothing & Footwear Source: SRC-KPMG RSM In January, Total Scottish sales declined by 3.5% compared with January 2016, when they fell by 3.8%. This is the lowest total growth since last January, and stark contrast to last month s growth, the strongest since January Adjusted for deflation measured at 1.7% by the BRC-Nielsen Shop Price Index (SPI), sales in January fell by 1.8%, again the steepest drop since last January. GfK s consumer confidence index in the UK increased two points to -5 in January from -7 in December. Sales growth picked up as the month progressed, with the worst week coming at the beginning of the month, perhaps hampered by the New Year bank holidays falling in the January sales period rather than the December period this year. Sales rallied at the end of the month, and could have been helped by Burns night celebrations. January began with a northerly outbreak followed by fairly settled and, at times, cold weather. While there was snow mid-month, the weather was mostly dry and settled during the second half. The mean temperature for January was provisionally 1.0 C above the long-term average. It was a dry January except in parts of the north-east, with only 53% of average rainfall overall. It was also the third sunniest January in a series from 1929, with 135% of average sunshine. 4.0% 3.0% 1.0% % -1.0% -6.0% % D J F M A M J J A S O N % D J F M A M J J A S O N Source: SRC-KPMG RSM 3

4 yoy % growth Food sales fell by 2.6% in January, a disappointing performance after such strong growth of 2.5% in December. However, the two months have to be looked at as a whole period because of the distorting effect of the timing of Hogmanay, included in the December period in 2015 but in January this year. Over these two months total Food growth was 0.2%, in-line with the 3-month average of 0.2%, and two percentage points lower than the 12-month average of -0.5%, which continues to be the highest since August Adjusted for Food deflation of 0.8% as measured by the BRC-Nielsen Shop Price Index, total Food sales decreased by 1.9%, the steepest decline since last January, which dragged the 3-month average SPI adjusted growth down to 0.9%, the lowest since August. While Burns Night towards the end of the month boosted whisky sales, food sales at the beginning of the month suffered, again likely a result of the distortion mentioned above. Unadjusted for Online sales, Total Non-Food sales in Scotland declined 4.3% in January. Online sales added 2.4 percentage points to the total growth of a UK Non-Food sales in January, and through this dragged the three-month average online contribution to Non-Food growth to an all-time record of 2.9%. When adjusting Scottish Non-Food sales for this online effect, total Non-Food would have fallen by -1.8%, the lowest result since April. On a 3-month basis, the Online-adjusted Total Non-Food change was 0.5%, above the UK average of 0.3% for the second month in a row D J F M A M J J A S O N Source: SRC-KPMG RSM (online-adjusted figures) Clothing & Footwear lay at the bottom of the growth rankings in January, mirroring the poor performance in the UK as a whole. Adjusted for the effect of online shopping, Clothing & Footwear showed its worst growth since September. January was a difficult month for Clothing in Scotland, impacted by the sales, and returns from Christmas. Since retailers typically use January to clear their stock with promotions, which can hurt full-price sales, profitability took a hit. Women s clothing was said to drag behind the other categories, though Menswear also suffered this January. Children s clothing performed better than the adult ranges, perhaps aided by a later back-to-school date pulling sales into the January period. As for Clothing, January was a difficult month for Footwear. Fortunes were mixed across the ranges and genders, and although women s full-priced stock in particular stuck to the shelves, items on sale did better. Canny promotions meant that children s shoes sold much better. Of that which sold, branded and sports shoes were more popular than formal styles, particularly for women. 4

5 yoy % growth D J F M A M J J A S O N Source: SRC-KPMG RSM (online-adjusted figures) Other Non-Food fell in January in both the total figure and adjusted for the effect of online sales. This is the first decline in online-adjusted Non-Food growth since August, and the worst since May Other Non-Food includes in particular: Of the Non-Food category, furniture was said to have performed the best. The first week of January is traditionally a big week for furniture promotions, and, with a post-christmas week distorted by the timing of the bank holidays, an extra day falling into this January, this was exacerbated this year. Toy sales dropped off after a number of months of strong growth, while Home Accessories and House Textiles benefitted from the knock-on effect of furniture interest. Demand for mobile phones was said to have remained high in January after a number of months of popularity. Wearable technology continued to attract attention as the must-have gadget of the moment, though the market for small electricals was tougher. In contrast to the other categories, Health & Beauty performed relatively well in January in Scotland. It could be the case that the additional bank holiday for Scots at the beginning of the month drove them towards Health & Beauty retailers during the peak of their promotional period. As a result, gifting products were said to have been popular, as were new skincare products launched in January. 5

6 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan m avg m avg m avg Source: SRC-KPMG RSM (not online-adjusted), BRC-KPMG RSM for UK data (including Food data from IGD) 6

7 yoy % growth Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 % change y-o-y 6.0% 4.0% % -6.0% -8.0% Food All Sales Non Food Source: SRC-KPMG RSM (not online-adjusted) 1.0% 0.5% -0.5% -1.0% -1.5% % -3.0% -3.5% -4.0% D J F M A M J J A S O N Source: SRC-KPMG RSM (not online-adjusted) 7

8 % y-o-y change % change year-on year 4.0% 3.0% 1.0% -1.0% % -4.0% Total Sales LFL sales Source: SRC-KPMG RSM 8.0% 6.0% 4.0% % -6.0% UK Scotland Source: SRC/ BRC-KPMG RSM (including Food data from IGD). 8

9 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 % y-o-y change Jan Feb Mar April May Jun Jul Aug Sep Oct Nov Dec Jan Source: SRC-KPMG RSM, BRC-KPMG RSM for UK data and online adjustment (figures are rounded to the first decimal point) 4.0% 3.5% 3.0% 2.5% 1.5% 1.0% 0.5% -0.5% -1.0% UK Non Food Total Scotland Non- Food Online Adjusted Source: SRC/ BRC-KPMG RSM. Scotland is adjusted for the estimated effect of online sales. 9

10 The SRC-KPMG Retail Sales Monitor measures changes in the actual value (including VAT) of retail sales excluding automotive fuel. The Monitor measures the value of spending and hence does not adjust for price or VAT changes. If prices are rising, sales volumes will increase by less than sales values. In times of price deflation, sales volumes will increase by more than sales values. Retailers report the value of their sales for the current period and the equivalent period a year ago. These figures are reported both in total and on a like-for-like basis. Total sales growth is the percentage change in the value of all sales compared with the same period a year earlier. The total sales measure is used to assess market level trends in retail sales. It is a guide to the growth of the whole retail industry, or how much consumers in total are spending in retail retail spending represents approximately one-third of consumer spending. It is this measure that is often used by economists. 'Like-for-like' sales growth (LFL) is the percentage change in the value of comparable sales compared with the same period a year earlier. It excludes any spending in stores that opened or closed in the intervening year, thus stripping out the effect on sales of changes in floor space. Many retailers include distance sales as a component of like-for-like comparable sales. The like-for-like measure is often used by retailers, the city and analysts to assess the performance of individual companies, retail sectors and the industry overall, without the distorting effect of changes in floor space. Online (including mail order and phone) sales of non-food are transactions which take place over the internet, or via mail order or phone. Online sales growth is the percentage change in the value of online sales compared to those in the same period a year earlier. It is a guide to the growth of sales made by these non-store channels. It should be noted that online sales are still a small proportion of total UK retail sales. Estimates based on ONS figures show about 10 per cent of total UK retail sales (food and non-food) are achieved via the internet. The responses provided by retailers within each sales category are re-weighted (based on ONS weightings) to reflect the contribution of each category to total retail sales, thus making it representative of Scottish retail sales as a whole. Because the figures compare sales this month with the comparable period last year, a seasonal adjustment is not made. However, changes in the timing of Bank Holidays and Easter can create distortions, which should be considered in the interpretation of the data. In its role as sponsor of the SRC-KPMG Scottish Retail Sales Monitor (SRSM), KPMG is responsible for the aggregation of the retail sales data provided by the retailers on a weekly basis. This data consists of the relevant current week s sales data and comparative sales figures for the same period in the prior year. The aggregation has been performed by KPMG on data for periods from June 2009 and equivalent prior periods. The accuracy of the data is entirely the responsibility of the retailers providing it. The sponsorship role has been performed by KPMG since June 2009 and, save for the aggregation of comparative sales figures for the period from June 2009, it is not responsible for the aggregation of any data included in this Monitor relating to any period prior to June Between its inception in January 1999 and June 2009 the aggregation of the SRSM data was carried out by the University of Edinburgh. To the fullest extent permitted by law, KPMG will accept no responsibility or liability in connection with its sponsorship of the Monitor and its aggregation work to any party other than the SRC/BRC. Copyright British Retail Consortium and KPMG (2016). The contents of this report and those of all ancillary documents and preparatory materials are the sole property of BRC and KPMG and are not to be copied, modified, published, distributed or commercially exploited other than with the express permission of BRC or for the purposes of journalistic comment and review. All rights reserved. 10

11 SRC Box 112, 12 Southbridge Edinburgh EH1 1DD T W David Lonsdale Director of the SRC M E david.lonsdale@brc.org.uk KPMG 15 Canada Square London, E14 5GL T W Phil Addicott The Big Partnership M E phil.addicott@bigpartnership.co.uk The February 2017 Monitor, covering the four weeks 29 January 25 February, will be released at 00.01am Wednesday 15 March The Scottish Retail Consortium (SRC) is Scotland s leading retail trade association. It represents the full range of retailers, large and small, multiples and independents, food and non-food, online and store based. S 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 revenue of 1.96 billion in the year ended September KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 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. Detailed weekly data by category is available to retailers who contribute to the monitor: If you would like to participate in the Retail Sales Monitor, please contact: Anne Alexandre anne.alexandre@brc.org.uk 11