It’s been a second cruel summer in a row for retailers and the hospitality business, but a more prolonged spell of warmth – and the first cut in interest rates in more than four years – may finally heat up the market, if it’s not too late.
From Argos paddling pools and outdoor furniture at garden centres to Heineken beer and Unilever’s ice-cream brands, sales have been dampened by poor weather, which has added to the pressure from high interest rates and energy bills. Sales volumes were down in June and July in the UK, according to the latest CBI distributive trades survey, with retailers expecting more falls in August.
The late arrival of more sunshine and less rain for large parts of the country this month and into next could, finally, boost sales of groceries, summer clothing and seasonal items for the garden, which all benefit from good weather. Pubs also do well when their outdoor spaces are packed with fair-weather drinkers.
Food retailers have generally had a better time than fashion chains this summer as they have benefited from households cooking at home rather than dining out, in an effort to offset higher bills. However, Richard Walker, the chief executive of budget grocery chain Iceland, says it hasn’t had “that traditional seasonality layered over the top”, while shopping patterns have been affected by the Euro 2024 men’s football tournament and other events. Walker said the “proper run of good weather”, which began near the end of July – combined with payday boosting workers’ wallets – had already sent ice-cream sales soaring by 50%, frozen burgers and sausages up 40% and soft drinks 15%.
Scott Bernhardt, the president of retail weather consultants Planalytics, said that the expected run of good weather for many parts of the UK in August was likely to help retailers and some hospitality businesses. He is predicting a 23% uplift in sales of barbecues in the next few weeks, compared with a typical August, and a 4% rise in ice-cream sales.
But there are a few catches. “It’s coming very late in the season,” Bernhardt said, pointing out that many clothing and seasonal goods retailers had already begun discounting their summer wares at the end of last month and so will have to take lower profit margins from any late sales rush.
The likes of New Look, Ted Baker, Boohoo and French Connection are already heavily discounting summer outfits – with Boohoo offering at least 70% off shorts and skirts, for example – after weeks with little opportunity to show some bare leg.
“Fashion has had a really rough 10 months. It’s been in year-on-year volume decline since last September,” said Kien Tan, a senior retail adviser at PricewaterhouseCoopers.
On many items – from garden furniture to picnic foods and sundresses – the window of opportunity to make a sale has diminished as autumn approaches, and some shoppers may decide to go without, given the squeeze on household budgets. “When the weather gets nice, you don’t go out and buy three ice-creams because you didn’t buy two last month,” said Bernhardt.
Moreover, retailers’ year-on-year figures are being compared with a very weak period in July and August last year, when consumer appetites were drenched by endless rain.
September is also expected to be warm, helping to clear final summer stocks, but not like last year’s lengthy heatwave – which came just as retailers had hoped to begin selling knitwear and coats.
While some stores have begun discounting early, others, such as Next and Marks & Spencer, have held their nerve and are more likely to take decent profits from the late summer sun. Tan believes families are still going to be prepared to spend, as most school holidays have only just kicked off, so a new paddling pool or barbecue will get plenty of use. His view is that “the good weather has come just in time”.
There is also evidence that more people have booked holidays abroad this year – a big opportunity for retailers, as many have put off updating their wardrobes for almost a year.
The change of government – and the impact of rising pay, easing inflation and lower national insurance contributions – is also beginning to make households feel more confident about spending, something which the drop in interest rates last week, even though it was small, can only help.
Tan said there would still be “winners and losers”, depending on product sectors. Warmer weather is not helpful for restaurants, for instance.
In the longer term, Walker suggests that businesses are having to adapt to increasingly erratic weather caused by the climate crisis. Iceland is delaying putting out autumn favourites such as pies and pastries by a couple of weeks now, compared with its historical timetable.
“We have decided to push it back because the UK is getting wetter, cooler summers and warmer Septembers,” he said.