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

By CreditMan Friday, February 20, 2015

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

“With a more supportive economic back drop 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.”