Clerys lash Cabinet as retailers left to rot
Damning report by retail icons says spending crisis is being prolonged
Published 01/08/2010 | 05:00
Clerys, the iconic retail company, has seriously undermined claims by the Government that its policies have brought into sight an end to the recession, the Sunday Independent can reveal.
In a report attached to its most recent accounts, the directors of Clerys implicitly blame the Government's policies for prolonging the economic crisis.
Clerys cites business failure, massive job losses and uncertainty, tax increases and, specifically, the length of time it is taking the Government to "restore order" to the Exchequer as giving rise to a risk that consumer spending will fall even further in the years ahead.
Perhaps even more startling, Clerys also warns that, in the current economic environment, international groups are unwilling to expand in or into Ireland.
The report, filed in mid-June, lays bare, in direct terms, the scale of the havoc that has been wreaked on the retail sector during the recession, and, more implicitly, what the company believes to be the Government's failure to deal with the crisis.
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It says that, after the property/construction and banking sectors, the retail industry has been "hardest hit" by the recession, with the motoring, furnishings and department store segments "faring worst of all".
The Clerys directors state: "The Irish economy has suffered more than most economies in the developed world over the past year, with the unprecedented global crisis and economic recession.
"Business failure, which has generated massive job-losses and uncertainty, combined with increasing personal taxation and the decimation of personal wealth, has served to fuel the economic recession and further damage consumer confidence."
Later in its report, Clerys directors state: "The deterioration of the State's finances, coupled with significant increases in personal taxation and unemployment, have caused a massive reduction in consumer spending.
"The longevity of the timeframe to restore order to the Exchequer poses the risk of even further reductions in consumer spending in the years ahead."
After they refer to continued deflation, and pressure on retailers to sell increased volumes, the Clerys directors say a recovery in the market for large household items will "depend greatly" on the health of the banking and property and construction sectors.
In its report, Clerys cites Gross National Product (GNP), which many economists believe to be a true indicator of economic health.
"GNP fell by 11.3 per cent in 2009, the biggest decline since records began," it states. The Central Bank last week predicted GNP would contract a further one per cent this year.
When he hailed an end to the recession in June, Finance Minister Brian Lenihan relied on Gross Domestic Product figures, which grew 2.7 per cent in the first three months of the year.
GNP differs from GDP mostly in that it excludes multinationals' profits.
Last week, it emerged that the State-owned Anglo Irish Bank and Ulster Bank are set to take control of Arnotts, another iconic retail department store and property investment group.
The development has been presented as evidence of an ill-fated expansion into the property sector, but Arnotts' most recent accounts, seen by the Sunday Independent, show that the economic crisis leading to what it calls "reduced consumer spending in Ireland" is significantly to blame for its troubles.
Figures published by the Central Statistics Office last week have cast serious doubt on the Government's claim that a corner has been turned in terms of the economic crisis faced by the country.
The figures revealed that, in June, sales declined in May in all major measures, the third consecutive month-on-month decline in the value of core retail sales.
Clerys, in accounts filed in April, show a group loss for the financial year ended January 31 last, was over €1.8m, a deterioration of €1.5m on the previous year.
The principal activity of the business is the operation of retail department stores, including its flagship store on Dublin's O'Connell Street.
The director report states: "The trading environment worsened considerably as 2009 progressed and the financial crisis and recession deepened. Pre-Christmas trade was disappointing, while the crucial post-Christmas sales were hampered by extreme weather conditions.
"While the rate of decline has decelerated in recent weeks, trade remains challenging and we do not anticipate a return to growth until late 2010 or early 2011. All our subsidiaries have been negatively impacted by the slowing demand for household products, with the collapse in the housing market."
It states that Clerys has and will continue to make "significant cost savings", the most significant of which has been the reduction in working hours at all levels of the organisation.
Alarmingly, Clerys states: "Most of our concessionaires are part of international groupings and a number have entered the administration process over the past year.
"While some have emerged from this process successfully, others have not. Many concessionaires would be difficult to replace in the current economic environment, due to a general unwillingness on the part of international groups to expand in or into the Irish market at present."
Meanwhile, against a backdrop of reduced consumer spending, Arnotts, in accounts for the period ended January 25, 2009, said total group turnover was just over €127m, a reduction of almost 17 per cent on the previous year.
Gross margin, at just over 44 per cent, was consistent. But the group's operating loss totalled almost €30m, and loss after taxation was €5m.