Sunday 26 March 2017

Year started badly for stores and ended with a chill wind blowing

John Mulligan

John Mulligan

In Ireland, 2010 was another tough year for the retail trade. Edgy consumers who feared for the jobs and the downward spiral of the economy were saving increasingly more of whatever spare cash they had, rather than splurging on the high street.

The year started off badly for retailers as freezing conditions deterred all but the most dedicated bargain hunters.

In the midst of the wintry grip, industry group Retail Ireland said new year sales had been severely disrupted and that retailers had reported a 38pc fall in sales in the first two weeks of January compared to the same period a year earlier, with non-food sales being even harder hit.

Superquinn, however, noted that its online sales rose 40pc during the January freeze as consumers chose to surf for their shopping rather than venture outdoors.

Later, evidence from the Central Statistics Office (CSO) showed that the value of retail sales, excluding the motor trade, slumped 8.3pc in January compared to the corresponding month in 2009, while the volume of sales fell 4.7pc in the month, again excluding the motor sector.

While the rate of decline was still sharp, it had eased somewhat compared to previous months.

"Unfortunately the downward trend reflects the weak consumer sentiment. Sales continue to fall and retailers continue to cut prices," noted Torlach Denihan, director of Retail Ireland at the time.

Disposable incomes

Few knew then what lay ahead as the widening budget deficit and a bailout by the International Monetary Fund and the European Union left taxpayers facing one of the country's most radically negative Budgets ever, severely reducing their disposable income even further for 2011.

For some retailers, the news hadn't been so bad in January, with Tesco having reported record Christmas sales for 2009.

Dunnes Stores, meanwhile, was ranked number 231 in a global ranking of retail firms published by Deloitte, which estimated Dunnes' 2008 turnover at €2.4bn. The ranking was five places higher than its position in 2007.

Although in December 2009 Justice Minister Dermot Ahern signed into law a bill that outlaws upward-only rent reviews, the legislation did little to ease the burden of most retailers that were already tied into onerous leases that were drafted during the boom and reflected what was by now an alien retail environment.

Still, some new international retailers continued to eye the Irish market, opening up new stores or making their first foray into the country, as with the UK-based Superdry chain. Superdry also opened an outlet at Dublin Airport's Terminal 1.

The airport's T2, which began operations in November, also heralded the opening of the single biggest amount of new retail space in the country during the year. It includes almost 40 retailers such as WHSmith and Swatch.

February also brought more bad news on the retail front, as bookstore operator Hughes & Hughes went into receivership. That resulted in the initial layoff of 225 people and the closure of most of its outlets. The company, headed by Derek Hughes, had been hammered, it said, by falling sales at Dublin and Cork airports and by high rents at the locations.

Eason took over the five stores in Dublin Airport and the two in Cork Airport, but the receiver shut the high street operations.

But Derek Hughes re-emerged to fight another day, re-opening five of the stores in shopping malls and high streets and re-employing 60 people. He secured financial backing from retailers Aidan Masterson and Pierce Molony, owners of the Bus Stop newsagents business.

Meanwhile, it was a busy year for the multiples. Tesco continued its march to dominance in the market here, with London-based Shore Capital having recently predicted that the retailer's Irish operations will be one of the star performers within the group over the next few years.

It forecast 4.7pc sales growth this financial year, 9.6pc in the 2012 fiscal period and a further 7pc per annum over the following three years to 2015.

Tesco was on target to post sales in Ireland, excluding VAT, of £2.4bn (€2.75bn) in the current financial year, and earnings before interest, tax, depreciation and amortisation (EBITDA) of £245.3m (€281m).

Superquinn saw the defection of another senior executive in recent months, as the chain's second-in-command James Wilson left the company. He's joining Dunnes Stores in the new year.

Defections

There were further moves between the two rival chains as former Dunnes Stores chief operating officer Andrew Street, who left the company last year, was revealed as the new chief executive of Superquinn, allowing executive chairman Simon Burke to step back from day-to-day-running into a non-executive role.

The other big losers of the year were dozens of owners of so-called 'head shops', which had been doing a brisk trade selling 'legal highs'.

Legislation was rushed through the Dail to have the shutters pulled down on the outlets and banning the sale of items such as mephedrone, even though there's virtually no published empirical scientific data that details its effect on humans.

Just two fatalities have been reported in the entire European Union in which mephedrone appeared to be the sole cause of death.

By the end of the year, another chilly winter was making retailers nervous about their Christmas trade, even as data showed the economy posted its first growth performance in nearly three years.

Gross national product rose 1.1pc in the three months from July to September, while gross national product climbed 0.5pc.

In November, the CSO said that during October the volume of retail sales slipped 0.5pc (excluding the motor trade), while the value of retail sales, again excluding the motor trade, fell 1.6pc year-on-year. The volume of furniture and lighting sales was down 14.1pc, while in bars the figure was 5.9pc lower.

While the declines may have stabilised, many small retailers will still be holding on by the skin of their teeth. The impact of the recent Budget might afford little respite as already hard-pressed consumers feel an even tighter pinch.

Irish Independent

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