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Mintel’s Month in Retail highlights the breaking news stories that have made headlines in the European retail markets over the past four weeks, with exclusive analysis from Mintel’s expert retail team on potential implications.

UK: Retail sales rise 3.6% in July

Retail sales in the UK rose 3.6% year-on-year during July 2016. The sales growth, excluding fuel, marks an acceleration on the 1.2% rise seen in June and 3.1% in May 2016.

“The BRC data prepared us to expect better figures from July. The weather was more helpful, aiding clothing and footwear, which reported an increase for the first time since November 2015. Food retailers had their best month since November 2014 (leaving aside Easter-distorted periods). Perhaps because of the good weather, consumers shop less across all household goods sectors. The message is that consumers appear to have shrugged off the EU referendum result and got on with running their own lives. Mintel consumer research following the referendum showed a distinct contrast in attitudes towards the impact that Brexit will have on the economy as a whole and the effect that it will have on individual financial situations. At the moment, with real incomes rising and unemployment falling people are clearly more than happy to go out and spend.”

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Spain: Dia delivers 9.7% like-for-like growth

Spanish grocery retailer Dia had a strong first half of 2016, with growth of 12.0% in local currencies totalling €5.4bn in group sales. Like-for-like sales rose 9.7% in Q2 but underlying net profit for the first half of the period fell 5.0% to €96.2m (by 7.3% including currency effects). In Iberia, like-for-like sales grew 1.7% in Q2 as Dia continued to remodel stores.

“Impressive results, though the main driver for growth was the international business which accounted for a third of sales. But the results from Spain are encouraging as well. There was like-for-like growth of 1.7% and while the market has been stronger, DIA’s business there is relatively mature. Also encouraging is the progress made by the fledgling drugstore business, Clarel, which is being built on the former Schlecker chain. Sales are up 7% suggesting that DIA has the makings of a useful second arm to its business.”

UK: Morrisons launches new round of price cuts in wake of Brexit

Morrisons is lowering prices on 1,045 products by an average of 18%. The price cuts are being launched in a bid to reassure shoppers following the Brexit result, as there have been concerns that this may cause food prices to inflate.

“There has been much talk about potential grocery price rises following Brexit, with the fall in the value of sterling impacting imports. However, any impact will take time to work into the system and for now it is down to retailers to reassure customers that at least in the short term it is business as usual. The way the market is moving, away from BOGOFs to EDLP, is something that consumers are demanding: Mintel’s Supermarkets UK 2015 report found that just over three quarters of grocery shoppers would rather have low prices than promotions. Therefore there is an imperative from the major players to remain price competitive, particularly at a time when Mintel’s financial confidence tracker shows that confidence has been hit since the referendum.*”

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Germany: Kaufland to introduce electronic shelf labels

German supermarket, Kaufland, which is part of the Schwarz Group, is set to roll out electronic shelf labels across its entire store estate, which tops 650 outlets. The market for electronic shelf labels has been growing as retailers seek to meet demand for real-time product positioning and strict government mandates on accurate label pricing.

“Electronic shelf edge labelling has been around for some time, but few companies have been sufficiently convinced about the cost benefits to invest. So it is notable that one of the members of the Schwarz group, which also owns Lidl and is focused on keeping costs down, has decided to go ahead with it.”

UK: eBay launches hub for plus-size fashion

eBay has launched a dedicated plus-size fashion section on its site. The Curve Fashion hub offers a range of sizes, from 18 to 36 and includes online styling tips and guides. The area also features a ‘Shop the Look’ image browsing function, which will allow shoppers to match exact items from an image or find similar items available to buy from the online marketplace.

“The last 12 months has seen eBay continue to push its fashion offer in a bid to further establish its position in the market. The demand for plus-size clothing is rising and a large number of fashion brands are introducing larger clothing sizes and collections. As Mintel’s Clothing Retailing UK 2015 report discusses, some three in five UK consumers would like stores to offer a wider choice of sizes. Therefore, eBay’s move to make the plus-size shopping experience easier may well strengthen the retailer’s fashion proposition against its competitors and is likely to be well received by its plus-size customers.”

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France: Takeover of Darty by Fnac cleared

The French competition authority (L’Autorité de la concurrence) has cleared the proposed takeover of Darty by Fnac and required just 6 store closures – fewer than had been expected. The report is yet to be published, but the recommendation is based on a clear understanding of the dynamics of the sector and how they are set to change, taking not just full account of the impact of online retailing, but of how it is likely to develop.

“Electricals are well suited to being sold online. They do not need to be seen or tried out first and they are very often sold on specification. That is especially true of brown and grey goods – Fnac’s core expertise – but also for white goods. We think that the French Competition authorities are absolutely right to have taken online into account and so require only a very small number of store closures in the new, combined group.”

Poland, France and UK: Kingfisher’s UK and Polish divisions drive growth

Kingfisher has reported a 3% jump in like-for-like revenue during the second quarter of 2016, with total sales reaching £3.0bn. The strong Q2 performance was driven by the UK and Poland. In the UK and Ireland, like-for-like sales increased 7.2%, with total growth of 5.1% to £1,357m, benefitting from a continued strong Screwfix performance. In Poland, comparable sales rose 7.3% while in France they fell by 3.2%. Yet, benefitting from the weak pound, reported sales in France grew 10.4% to £1,130m.

“The key for the future of Kingfisher is the One Kingfisher programme bringing together ranges and systems across all countries. But it is far too early to tell whether that will be a success or not. In the meantime, this is an exceptionally good performance from B&Q, with sales edging ahead in spite of the store closure programme and another outstanding performance from Screwfix. The reasons given for the performance in France (strikes and bad weather) are surely justified, but Kingfisher is also right to be cautious about the prospects. As for Brexit, Kingfisher’s comments that the referendum result has had no clear impact are in line with other evidence gathering for the post-referendum period and are also consistent with the results of Mintel’s own consumer research.

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