Supermarket Price Wars Stifle Sales Growth

UK retail sales fell in July as the supermarket price war continues.

According to the British Retail Consortium (BRC), like-for-like-sales for the month were down by 0.3%, a sharpe contrast to the same period in 2013, when they rose by 2.2%.

The drop was driven by shoppers spending less on food as British supermarkets compete with heavy price cuts.

The quarterly picture looked dreary as food sales slumped by 3.5% in the three months to July.

It comes as food inflation remains at a record low.

The BRC's director general Helen Dickinson said: "Food experienced its deepest three-month average decline since at least December 2008, explained partly by the continuing keen price competition between supermarkets, which consumers are taking full advantage of, and record low food inflation."

David McCorquodale, head of retail at KPMG, which formulated the data, added: "The grocers' figures continue to make for gloomy reading for the sector.

"The impact of their prolonged discounting campaigns may be good news for consumers, but must be being felt deeply by the retailers given like for like sales have fallen in value every month for the last 12 months, save for April when Easter helped sales."

He said: "The headache for the grocer investor is the tonic for the consumer: it's likely these price wars are here to stay for the foreseeable future."

But while supermarkets suffered a blow, non-food sales grew by 2.4% in July.

Total retail sales for the month rose by 1.3% to show that consumers are spending, although at a slower rate to last year, when sales grew by 2.3%.

The strongest performing category was furniture, which saw its highest growth since January, while fashion retailers also reported good summer sales.

Mr McCorquodale said: "The tale of two sectors continues with polarisation between food and non-food.

"While non-food retailers had a stellar month, surpassing even last year's record sales performance, the grocers saw sales tumble in value as their competitive pricing continued."

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