Bloodbath on the high street
LAST week's spate of insolvencies and closures demonstrate just how tough conditions have become for Ireland's retailers. With the December Budget tax increases, which cost the average family close to €3,000 a year, kicking in this month, stand by for more retail casualties before 2011 is too much older.
By far the most prominent of last week's retail casualties was Ivan Yates' Celtic Bookmakers, with AIB, which is owed €6m, appointing a receiver to the chain. Celtic, which was jointly owned by the former Fine Gael minister and his wife, Deirdre, had 63 betting shops at its peak.
It had been devastated by the collapse in retail spending and its failure to move any of its business online. Celtic's turnover had halved from €180m in 2007 to just €90m in 2010. Having overpaid for several acquisitions at the top of the market and tied into dozens of expensive leases on its shops, Yates had no choice but to pull the plug on Celtic.
Across the water CDs-to-books retailer HMV revealed that its Christmas sales were down by a massive 13 per cent and announced that it would close 60 stores, including 20 in its Waterstone's bookshop chain. While HMV has not yet revealed which stores it plans to close, staff at its two Dawson Street outlets, Waterstone's and Hodges Figgis, which are situated literally across the street from one another, will be waiting anxiously for any announcements.
Among the other retail casualties this week were hairdressing chain Toni & Guy, which is closing four of its 13 Irish stores, and Superquinn, which is closing its Naas store.
According to the latest CSO figures, the value of non-motor retail sales had fallen by 19 per cent from their early-2008 peak by the end of November. While the December retail sales figures have yet to be published, it has been estimated that retail sales were down by as much as 6 per cent last month, partly due to bad weather, which kept shoppers at home.
With the Budget tax increases set to take another chunk out of consumer spending power, the bloodbath on the high street is set to continue. Not alone is this bad news for retailers and their staff, it is also very bad news for landlords, mainly but not exclusively your pension fund and mine, who will see both rents and capital values fall even further.
This in turn will hit the banks that lent money against retail property at elevated Celtic Tiger values. The banks have been hit by a double-whammy with the security on their loans having effectively disappeared at the same time as the cash flow (in other words, the rent), upon which they were depending to pay the interest on the loan has dried up.
Sunday Indo Business