independent

Saturday 19 April 2014

Sales spend shows signs of growth for retailers

It's still early days, but many stores are confident of recovery in 2013

AFTER five long years of penny-pinching frugality, consumers have finally thrown off the shackles of austerity to spend a little bit more at the end of 2012.



The hordes of bargain hunters in the country's department stores on St Stephen's Day was testament to the determination of never-say-die retailers, who have swam tirelessly against the tide of recession to stay afloat.

Dublin retail giant Arnotts confirmed to the Sunday Independent that it has enjoyed a "double digit" jump on last year's sales, after it opened its doors to determined shoppers who had been camped outside the store since late on Christmas day.

The store has battled mounting debts in recent years but hopes to record at least a two per cent growth in turnover when it lodges its annual accounts at the end of next month.

Asked how retailers at the Dundrum Town Centre had fared in the week leading up to Christmas day and over the past week, the centre's director Don Nugent said sales of ladies' fashions were up on last year by between 10 and 30 per cent, while the sale of men's fashions had seen increases of between 12 and 15 per cent.

Mr Nugent said the south Dublin retail mecca was on course to attain its targeted footfall of 19.5m customers for 2012 by the close of business today. Footfall for the Christmas period is up by between 12 and 15 per cent on the same period last year.

Two per cent or "early single-digit" growth is the year-end prediction for many businesses and lobby groups contacted by the Sunday Independent last week, and there was a palpable air of optimism from business owners.

However, gleeful proclamations that consumer confidence has returned should be treated with extreme caution and governing authorities would be foolish to rest on their laurels.

The Central Statistic Office (CSO) retail sales index increased marginally for the three months up to October ahead of the busy shopping period and retailers expect a further increase on the Christmas period.

The Dublin City Business Improvement District (BID) said 128 million people visited the capital this year, an increase of three million on the previous year.

Retail Excellence Ireland (REI) chief executive David Fitzsimons said the small surge in growth is welcome, but it should be viewed in the context of the dismal last four years of trading.

He said: "We are seeing growth for the first time in five years at about two-and-a-half per cent pre-Christmas.

"The sales activity on St Stephen's Day and Thursday is probably up around seven or eight per cent.

"When you are facing like-for-like declines, year on year of 15 to 20 per cent, even marginal growth is great for psychology."

He added: "If you look at the trend over five years, the rate of decline dissipated to a point where the CSO has been reporting like-for-like growth for the last couple of months."

There are a number of factors that have contributed to the slight increase in consumer spending – including good weather during December and a Budget that was, for some, less harsh than expected.

Even the flag controversy in Belfast just before Christmas reaped a retail dividend south of the border, with more shoppers from the north evident this year – though another significant factor is the current exchange rate which makes sterling go further in the Republic.

Retail consultant James Burke suggested people have put off buying essential items for as long as possible and eventually they gave in and dipped into their savings.

"If you look at something like furniture, people may have made a decision four or five years ago that they weren't going to spend on new furniture, but there is only so long you can do that for."

However, Mr Burke also noted that, despite the slight increase in growth, the average spend was actually down in most retail outlets.

"Average spend is down probably across every single sector in retail and a lot of retailers are either level or are getting minimum growth," he said.

"People are not willing to shell out all in one go like they did previously, so they are splitting the shopping up over a number of trips."

Kilkenny Shop director Marian O'Gorman noted a similar trend in average spend despite expecting to record between five and eight per cent growth for 2012.

Ms O'Gorman said: "People are buying a lot less and smaller items. They have a budget in their mind and they are not going over budget.

"Normally you could attract a guy to buy a wallet with a handbag, but now it's just one item and there is no budging them."

According to REI's Mr Fitzsimons, people are still spending less before Christmas and holding out for the bargains in the sales.

He said: "In the good times, all the fashion spending and all the home spending would have been done before Christmas at full price, because the women wanted to look their best at the Christmas party or social occasions.

"When the relatives were coming over on Christmas morning, you wanted the house to be gleaming and you wanted to show off your new oven and your new sofa, your new floor or whatever.

"Now we are absolutely more than comfortable not doing that, and we are more than comfortable postponing that until the sales start."

Arnotts retail director Leesa Kavanagh said the department store was experiencing the same trend from shoppers.

"People are holding out for treat purchases for themselves or for their families or for necessity buys for their homes. They are certainly holding out for the sales and getting value for their money and that has been happening slowly over the last two years, but we have definitely seen it even more now in this sale."

The respite from the seemingly endless spiral of income loss is welcome among the business community but Mr Burke is quick to warn that we are a long way from a return to consumer confidence.

"I don't think the confidence is there. I think the savings are there and there are practical factors that are kicking into place where people can no longer hold out, but there is still a reasonably large cohort of people who are in dire difficulty financially," he said.

His outlook is supported by research released by the Samaritans last week, which showed that 70 per cent of people surveyed put money in their top five worries, an increase of six per cent on the previous year.

The survey showed that concerns over money were higher amongst women (73 per cent) than men (67 per cent) and were especially acute amongst people between the ages of 35 and 44, of whom 77 per cent were most worried about money.

Household budgets have been under sustained attack in recent years following the Government's swinging austerity cuts and increases in stealth taxes, which are also stifling growth in the retail sector.

It is a common theme amongst the business community that December budgets instil fear into the retail economy at a time of year when business traditionally picks up.

Mr Burke said: "Every time there is a major budget, or some other activity like that, it knocks any confidence that is there three or four steps back.

"If we could have a year that was relatively strife free for people, in terms of extra burdens placed on consumers, that would help. Independent retailers have fought like hell over the last five years but they are now saying: 'What's next?'"

His comments are echoed by the REI chief executive who believes the economy is now at a juncture which could lead to a path of recovery, but said it lies in the hands of the Government.

Mr Fitzsimons said: "Unless something catastrophic happens in the coming years, I think we are on the road to recovery. What they need to do is nurture the domestic economy.

"They are very quick to do all this foreign direct investment and fly around to meet potential investors in Ireland, but the domestic economy is where the jobs are at."

Sunday Independent

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