Britain’s Late Summer Sunshine Brings Hope for Retailers

Britain's summer finally arrived yesterday, bringing with it hope for beleaguered retailers and the hospitality sector. The first interest rate cut in four years combines with better weather to drive up sales of seasonal goods such as ice cream and outdoor furniture. While there are still some challenges, that change provides a much-needed shot in the arm for the market.

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The past couple of summers have been pretty awful for retailers and the hospitality industry in Britain. Warm weather suddenly arrived, accompanied by a recent cut in interest rates, which together may help put things back on track. As a result of this late burst of sunshine, high street sales were buoyed up to the relief of many.

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Bad weather conditions hit some Argos shops and garden centers, while companies such as Heineken and Unilever were also badly affected. Retailers in the UK had registered poor sales during June and July, and expect even a decline this August. Now that the weather is finally picking up, and the rain has died a bit, there is at last the opportunity for sales to get going—on items from groceries to summer clothes and gardening products. Pubs, too, ought to gain from increased use of outdoor spaces.

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Food group retailers have had an easier ride this summer than clothing house operators. With many cooking at home to save cash, grocery stores have gained. Food sales have been solid, said Richard Walker, the chief executive of Iceland, the budget grocery chain, but they didn't receive their normal summer boost. However, decent weather and payday have already pushed up sales of ice-cream by 50%, frozen burgers and sausages by 40%, and soft drinks by 15%.

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Scott Bernhardt, the president of retail weather consultants Planalytics, said the good weather continuing into August will be helpful to retailers and some hospitality businesses. He predicted a 23% jump in barbecue sales and a 4% rise for ice cream in the coming weeks.

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There are, however some problems. The fine weather has come deep into the season when most retailers are now discounting summer stocks to clear out stocks. This means that they will have to pass up on smaller profits. Stores such as New Look, Ted Baker, Boohoo, and French Connection are already offering large discounts for summer clothing, with some items of things like shorts and skirts marked down by 70%.

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September will also be warm and will clear remaining summer stock. However, it is not expected to be as hot as last year's lengthy heatwave that has hit the sale of autumn and winter clothes like knitwear and coats.

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Fashion retailers have had a hard time lately. Sales have failed to improve since last September. Autumn is already looming and the chance to sell items such as garden furniture, picnic foods, and sundresses that are related to summer is running out. With the tight budgets back home, some shoppers may prefer to forgo such purchases. As Bernhardt said, "When the weather gets nice, you don't go out and buy three-ice creams because you didn't buy two last month."

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Retailers' year-on-year figures are being compared to a weak period last July and August, when heavy rains dampened consumer spending. While some stores have started discounting early others, including Next and Marks & Spencer, have held off in an attempt to cash in on the late summer sun. Kien Tan, a senior retail adviser at PricewaterhouseCoopers, believes families will still spend, especially with the school holidays just beginning. He thinks the good weather has come just in time.

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Moreover, the number of people who have booked holidays overseas this year is higher compared to past years, which is an opportunity that retailers will capitalize on given that many have not updated their wardrobes in quite some time. With the new government at the helm, rising pay, falling inflation, and national insurance contributions, households are fairly relaxed about spending. Even though interest rates declined slightly, this factor also played a part in the phenomenon.

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Tan said there will still be "winners and losers" among retailers, depending on what they sell. For example, warmer weather doesn't bode well for restaurants.

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In the long term, companies will have to deal with the shifting climate. Walker of Iceland said it now holds back autumn lines - pies and pastries by weeks. This is an adjustment to the increasingly unpredictable weather wherein summers in the UK have become wetter and cooler and Septembers warmer.

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Now that the summer sun finally begins to shine, there is a hope of a much-needed boost in retailers and hospitality businesses. With an element of better weather and slight easing of financial pressures, maybe there is a glimmer of hope that this summer might end on a high note.

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