National variations remained:
- French sales registered the largest monthly rise since June 2006 (the index moved up from 56.2 to 58.8) and have now risen strongly for two months, having declined during the fourth quarter of 2007.
- Germany registered an increase in retail sales for the first time in five months, though the pace of growth was much weaker than that seen in France (the index rose to 52.1, from 44.2).
- Italian sales showed a further steep fall compared to one month previously (the index rose from January's record low of 43.0 to 43.8). Italian sales have now fallen for twelve successive months.
February sales also rose above those of the same period one year ago, with the annual rate of growth hitting a ten-month peak (the year-on-year sales index rose from 51.4 to 53.5). Particularly strong year-on-year sales growth was seen in France and, to a lesser extent, Germany (which saw the first rise in five months). Italy, however, saw another sharp contraction in annual sales.
Sales by sector - strength in food & drink masked weakness elsewhere in retail
In line with the pattern shown for monthly sales, Food & drink was the sector to see year-on-year growth of sales in February. The annual rate of sales growth hit an all-time survey high, again reflecting higher prices. Clothing & footwear saw the steepest decline, with sales falling at a much faster rate than in January. Sharp falls were also recorded for pharmaceuticals (the first decline in four months) and autos & fuel. Sales of household goods, meanwhile, showed a modest fall since one year ago.
Prices and margins - slight rise in inflation, led by food & drink sector
Having eased during the previous two months, the rate of inflation of prices paid for goods by retailers picked up slightly in February, and remained well above the long-run four-year average. The prices index rose from 65.3 to 65.8. Rates of retail sector purchase price inflation rose in Germany and Italy but eased to a four-month low in France. Of note, Italy posted the third-steepest increase in average purchasing costs for retailers in the fifty-month survey history. By sector, prices paid for goods by retailers rose at sharper rates across all five areas covered, with food & drink posting by far the steepest average increase.
Retailers' gross margins continued to deteriorate in February, and to a greater extent than at the start of the year as competitive pressures and promotions limited retailers' scope to pass higher costs on to customers (the margins index dipped from 46.5 to 45.4). Margins fell in all three countries, led by a marked deterioration in Italy.
Sales against targets - targets missed in February
Despite rising on both an annual and monthly basis, February's sales again fell well below retailers' original targets. Moreover, the index of actual sales relative to targeted sales declined from 42.1 to 41.2, registering a greater shortfall than in January. Targets were missed to the largest extent in Italy -- where the shortfall was the largest for over three-and-a-half years -- followed by France. Plans were also missed in Germany, albeit by the smallest degree in the current ten-month period of missed sales targets. By sector across all countries, targets were missed for all sales categories except food & drink, where high prices helped to boost revenues. By far the steepest shortfall in sales against plans was seen for clothing & footwear.
Sales against targets - retailers expect to beat targets in March
Looking ahead, retailers expect targets to be beaten in March, and confidence with regard to the coming month was the highest since last May. The expectations index rose steeply from January's twenty-five month low of 47.7 to a nine-month high of 59.9. Retailers in Italy were pessimistic about beating targets, whereas French and German retailers expect targets to be achieved in March (with the former showing an especially marked degree of optimism). Sales are expected to beat targets across all product sectors with food & drink sales set to exceed targets to the greatest extent, followed by clothing & footwear.
Employment - further modest job creation signaled
Employment in the Eurozone retail sector rose in February, as indicated by the latest index reading of 51.1 (50.7 in January). It was the eleventh instance of workforce growth in the past twelve months, though rates of increase have generally been weak. Again, trends varied by country, with solid employment in France (which saw the strongest rate of job creation for nineteen months) and a marginal rise in Germany offset by shrinking staffing levels at Italian retailers (albeit a marginal overall contraction).
Retailers' buying and stock trends - purchases rose in line with sales
Stocks of unsold goods increased for the twelfth month running in February, and the rate of expansion matched last November's strong pace (the index rose from 54.6 to 55.8). France again recorded the steepest rise of the three countries, linked largely by panelists to deliberate stock-building to meet higher sales. Germany posted the second-strongest expansion, while rising stocks in Italy were primarily caused by weaker-than-expected sales.
While, in recent months, stocks have risen as a result of poor sales, the latest data suggested that retailers had linked their purchases to rising sales during the month. The goods purchased index rose to 51.8, showing the steepest increase in retailers' purchases since last April. The overall expansion again masked national variations, with a marked increase in France contrasting with a marginal rise in Germany and a fourth successive month of falling purchases in Italy.
