Retail chief says 'bloodbath' is on cards for stores
But Harvey Norman 'is staying put in Ireland'
Published 08/08/2010 | 05:00
IRELAND'S retail sector faces a bloodbath during the next few years, according to the co-founder and executive chairman of Harvey Norman, Gerry Harvey.
The straight-talking Aussie is convinced that the Irish economy has now bottomed out -- but he says it will be impossible for many businesses to survive.
"The problem in Ireland has always been too many retailers. They can't all survive but we've got the cash reserves to support our Irish stores," Mr Harvey said.
His gloomy prognosis comes as Anglo Irish Bank admitted it came close to putting Arnotts into receivership, before deciding to take control of the company itself.
"We looked at alternatives -- receivership, liquidation, selling it off in pieces -- and we decided that this was the best thing to do," said Anglo's chief executive Mike Aynsley on Friday.
The fate of Arnott's chairman Richard Nesbitt will be decided next week when the board and senior management of the company are restructured.
There will also be a firesale of prime Dublin city-centre property. The banks want to offload much of the property portfolio that was bought by Arnotts as it embarked on the ruinous Northern Quarter project at the height of the property bubble.
Good news is in short supply for the Irish retail sector but the haemorrhage of cash to the North, which put huge pressure on the economy south of the Border, has slowed dramatically.
Surveys from shopping centres across Northern Ireland are showing the number of cars with southern registrations falling to the lowest level since September 2008.
The surveys, independently produced for Inter Trade Ireland, covered shopping centres in Newry, Enniskillen, Banbridge and Strabane.
In early 2009, at peak hours, almost 70 per cent of cars in the big border-shopping outlets had southern registrations, but this has now fallen to just 45 per cent.
Recent increases in VAT rates in the UK have also closed the tax gap between the two jurisdictions.
Nevertheless, Harvey Norman chief Gerry Harvey believes things will get worse here before they get better.
"The head of our Irish operations, Blaine Callard, recently came to see me in Sydney and asked how I saw the state of our operations in Ireland.
LiVING in a wasteland Pages 20, 21, 25
"I told him that, in my opinion, we would suffer a €50m loss next year, followed by €40m the following year, then €20m and then €10m, before we break even and start making a profit.
"It seems that the Irish economy has bottomed out and we are seeing the first green shoots of recovery. If that recovery is sustained, we will be able to invest in more stores and create more jobs."
He believes that there are simply too many retailers operating in the small Irish market. "They can't all survive but we've got the cash reserves to support our stores.
"If the growth is sustained, we could open more stores (within a year or two) in Ireland but we have to wait for next year's figures first. What we can say for sure is that we are committed to Ireland and we are not leaving."
The businessman said his firm never had plans to leave Ireland -- even when it was suffering enormous losses. But there has been an improvement over the past few months. "Without an improvement, no business could sustain those kinds of losses indefinitely. We're staying in Ireland, so don't let anyone tell you anything different.
"All we could do in the past was pray -- and there were times when we thought Ireland was not getting any better -- but things are different now. We have probably seen the worst of the recession and I think two to three per cent growth is a very attainable target in Ireland next year."