Retail headcount falls as sales falter - CBI Quarterly Distributive Trends Survey

Retail sales volumes dipped in the year to May following a return to growth last month, according to the latest CBI Distributive Trades Survey. Retailers expect sales volumes to stabilise next month.

Against the backdrop of poor sales and acute price pressures, retailers reported that headcount in the year to May declined at the quickest rate since February 2009. Investment intentions also deteriorated to the greatest extent since May 2020. Nevertheless, retailers expect a modest improvement in their business situation over the next three months.

The key survey findings included:

• Retail sales volumes fell slightly in the year to May (weighted balance of -10% from +5% in the year to April) but are expected to stabilise next month (0%).
• Retailers reported disappointing sales for the time of year (-18% from +21% in April). Sales volumes are expected to fall short of seasonal norms to a lesser extent next month (-9%).
• Price growth in the year to May remained near multi-decade highs (+77% from +80% in February). Next month, prices are expected to increase at this rapid pace again (+76%).
• Employment in the year to May fell for the third quarter running, and at the fastest pace since February 2009 (-48% from -12% in February). Retailers expect headcount to continue to contract next month (-49%).
• Retailers’ investment intentions have deteriorated further since February, and by the greatest extent since May 2020 (-43% from -16% in February).
• Retailers expect a modest improvement in their business situation over the next three months, the first optimistic outlook since November 2021 (+6% from -6% in February).

Martin Sartorius, CBI Principal Economist, said:

“Retailers continue to face a challenging trading environment, with firms reporting disappointing sales and formidable inflationary pressures. As a result, they are having to cut back on the size of their workforce and investment plans.

“Looking ahead, there are some reasons for retailers to be more optimistic about the outlook. Consumer sentiment has been improving and households’ energy bills are set to decline from July. The resulting boost to incomes should help support retail sales going into in the second half of this year.”

In addition, data showed:

• Internet sales fell in the year to May (-9% from +28%), with online volumes expected to decline at a similarly moderate pace next month (-6%).
• In the year to May, retailers reported that orders placed upon suppliers fell (-30% from +1% in April). Orders look set to contract again next month, but at a slightly slower pace (-25%).
• Retailers reported stocks as elevated relative to expected sales (+25% from -2% in April). Stock positions are expected to ease next month, while still exceeding “adequate” levels (+14%).
• Elsewhere in the distribution sector, wholesale volumes declined marginally in the year to May (-5% from +13% in April). Wholesalers anticipate broadly unchanged sales volumes next month (-3%). Meanwhile, motor trades sales fell at a firm pace in the year to May (-33% from +30% in April). Motor traders expect sales volumes to fall again next month, but at a much slower rate (-5%).