The latest survey from the Confederation of British Industry suggests things may not be as bad on the High Street as originally feared.

The findings of the May distributive trades survey by the business lobbying group showed that 39% of the retailers polled registered a year-on-year fall in sales, versus 30% who recorded a rise.

Although more retailers registered a sales slump than a rise, the 9% differential was lower than expected and an improvement to the 14% negative balance in April. Economists had been predicting a May balance of -17%.

However, rising inflation, higher fuel bills, lower consumer confidence and a slowing economy are clearly having an impact on the sector. In the last seven days, general retailers were down 13.8%.

Last Thursday, electrical retailer DSG International saw underlying profit fall 30% and said it is "very cautious" about consumer confidence.

Full year underlying profit before tax came in at £205m from £295m previously. In May, the group said it expected underlying profit will be between £200m and £210m.

"The economic backdrop continues to be difficult and the Group remains very cautious about consumer confidence in many of the markets in which it operates. In this environment the Group's clear priorities are focused on reducing costs further and managing cash flow while continuing to improve customer focus,” it said.

Philip Harris, chairman of carpet retailer Carpetright, also warned that challenging market conditions are expected to continue with the year ahead “set to be one of the most difficult ever seen.”

The group said last Tuesday that full year pre-tax profit fell to £59.5m from £67m. Total group revenue increased by 9.6% to £521.5m for the 53 weeks ended 3 May 2008 with contributions from acquisitions Storey Carpets and Carpetworld. Like-for-like sales saw a decline of 2.7% in the UK & RoI as consumers tightened their purse strings.

Elsewhere, electrical goods retailer Kesa posted a small rise in underlying profits last year but cautioned that conditions are getting tougher as consumers feel the pinch.

"We are seeing a continuing decline in consumer confidence and we anticipate further difficult trading conditions ahead," Jean-Noel Labroue, chief executive, commented.

Clothing retailers also reported their worst showing since the CBI survey was inaugurated in 1983, with a -57% reading. But there are some success stories, most notably online retailers.

Nick Robertson, the chief executive of online retailer ASOS, said this week that the increasing popularity of online shopping will enable it to sustain its stellar growth despite the challenging conditions.

“In the last five years, we have seen 77% compound growth. In the next two years we are confident of growing further,” Robertson told ShareCast.

“There is much more of a migration to online shopping. Retail analysts Verdict Research said that online spend amounts to 4% of total retail shopping and by 2010 that could rise to 10%,” he added.

It is one of the reasons why ASOS has continued to register growth despite the challenging market conditions, which have hit traditional ‘bricks and mortar’ retailers recently.

Home shopping company N Brown, meanwhile, has seen growth speed up since April, led by strong demand for its new catalogues.

Turnover from continuing operations increased by 12.3% in the 17 weeks to 28 June compared with a 12.1% rise in the first 8 weeks of the year. Gross margin fell by 0.6%, which had been largely offset by operational efficiencies, it said.

Supermarkets have also barely suffered. According to the CBI survey, 67% of supermarkets polled reported stronger sales than a year ago, the highest balance since December 2005.

However, cut-price supermarkets such as German exports Aldi and Lidl are clearly on the forefront as shoppers scour the isles for bargains. Aldi hopes to capitalise on this trend and recently revealed plans to open one new store every week.

“The credit crunch is an opportunity for us because more people will think about shopping with us,” Paul Foley, the group’s UK and Ireland managing director, told The Grocer magazine.

Britain’s supermarket giants are responding to the threat with what could well be the start of a major price war. Tesco announced earlier this week it will cut the price of 3,000 items by up to half, while Asda is selling 10 staple items, including bread, eggs and butter, for only 50p each.

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