John Lewis sales fall sparks retail fears

Sales figures from the John Lewis department stores show a “substantial softening in trade”, economists have said, as consumer confidence falls and the VAT rise takes effect.

The latest weekly sales data shows a 1.8 per cent year-on-year fall in the week to 12 March and leaves department store sales up just 1.6 per cent in the previous six weeks.

All 29 of the group’s UK department stores saw their year-on-year sales fall.

A separate survey of consumer confidence by building society Nationwide saw consumer sentiment fall to its lowest level since the survey started in 1994, in February.

Global Insight chief economist Howard Archer said the fall was “a serious concern for the economy given that consumer spending accounts for some 65 per cent of GDP.”

“Consumers are increasingly reining in their spending in the face of serious pressures, most notably the appreciable and increasing squeeze on their purchasing power coming from high inflation – fuelled by January’s VAT hike and elevated petrol prices – and ongoing muted wage growth,” he said.

Nationwide’s spending index, which relates to whether or not consumers believe it is a good time to buy big-ticket items and household goods fell to 52 in February from 70 in January and 90 in December.

And excluding VAT, John Lewis’ department store sales fell by 3.8 per cent on the same week in 2010.

Shore Capital analyst Clive Black said if John Lewis, a “best in class” retailer, was experiencing sales slowdown, it “does not read comfortably for the rest of the trade.”