Stores cut prices and staff as bad situation gets even worse
'Bus gate' and the cold snap have helped to push retailers to the brink of collapse, writes Jerome Reilly
Published 24/01/2010 | 05:00
Significant job losses are inevitable across the retail sector in the next few months. More than 170 jobs lost at Debenhams across its 11 Irish stores is just the first of significant redundancies across the sector. The gloomy forecast from Retail Excellence Ireland came as restrictions on private cars in Dublin city centre were reimposed last week.
The reintroduction of the controversial 'bus gate' corridor in the evening means only buses, taxis and cyclists are allowed to travel through College Green in the city centre during rush hour.
Bus gate was suspended in the run-up to Christmas because traders claimed business had become so bad that many would not make it into the new year without a boost to sales.
The restrictions, morning and evening, will continue for about five months until a review of the operation takes place later this year.
Fianna Fail TD Chris Andrews had called for the suspension of bus gate.
He claimed retailers had been hit exceptionally hard by the big freeze over Christmas.
One vital part of the infrastructure, to allow cars better access to the city, is now in place -- the spectacular new Samuel Beckett Bridge across the Liffey. But, while the bridge is open, few are using it and there are few signposts in the vicinity of the bridge to direct traffic from the northside into the heart of the capital's shopping areas and the city centre car parks.
"The Samuel Beckett Bridge is a terrific new addition to the city centre infrastructure but is under-used and the signposting needs to be better so that more people can use it to get across the river," Tom Coffey of the Dublin City Centre Business Association told the Sunday Independent.
Some city traders had hoped the bus gate would not be reimposed for a number of weeks to make up for lower numbers of shoppers during the traditional Christmas sales season.
The decision by Debenhams to reduce its workforce comes against a background of declining sales at the major stores. The Sunday Independent has learned that the value of department store sales fell by a massive 15.5 per cent between January and November last year.
That was made up of a 6.7 per cent fall in the actual volumes of sales (the number of items sold) and a price drop of nine per cent as department stores slashed their profit margins. Department stores are not just selling less but they are selling cheaper.
And, while there was a fillip in sales over the pre-Christmas period, the cold snap in late December, which ran into early January, devastated the traditional sales.
Clerys Department Store asked its 120 direct employees to move to a four-day week for the next 39 weeks to cut costs and avoid the need for redundancies.
Effectively it will mean a 20 per cent pay cut and will also affect staff at Guineys on Talbot Street in Dublin -- a Clerys subsidiary.
The Mandate trade union has indicated that it will recommend that its members accept the proposal to avoid job losses.
In 2007, Clerys made a profit of €1.66m but in the year ending January 2009 they lost €308,613.
Among those affected is Aoiffe Madden -- who starred in The Apprentice and who is trying to be positive about her shorter working hours at Clerys.
She told the Sunday Independent: "Although being cut to a four-day week was an initial shock, it does mean that I will be able to spend more time working on my own personal projects, including my new fashion website. I have also recently signed with both Red Carpet Agency and Talentbase here in Dublin and a four-day week allows me to offer more time to my agents."
Meanwhile, Dave Fitzsimons, of Retail Excellence Ireland, fears that the Debenhams job losses will be the first of many.
"The Debenhams situation is slightly different because there is a strong element of rationalisation at play. We believe that job cuts that will arise over the next few months will be more about business failure rather than cost-cutting or rationalisation.
"Our feeling is that the job losses will come about because smaller retailers will fail," he said.
He said the January sales were "okay", mainly because a lot of retailers were carrying a lot less stock than they did in 2008 when many got badly burned.
"Also, the pre-Christmas sales activity, to a certain extent, undermined the post-Christmas traditional sales.
"The first week was okay, then the weather hit, the big freeze. There was absolutely no activity in retail during that period, although since last Wednesday week there has been a significant pick-up -- mainly because a lot of deferred purchasing is going on. People who were buying a new TV or a sofa didn't come into the store during the cold snap but now they are going ahead with their original purchasing decision," he added.
He expects a pick-up during the middle of the year.
"The rate of sales decline has now flattened out and we are waiting for it to go the other way. Of course, in six months' time, if things start to pick up, people are still down 30 to 40 per cent compared with 2007 and are still losing money."
Retail Ireland director, Torlach Denihan recently added to the gloomy prognosis for retailers based on the first 11 months of trading last year.
"A major problem for the retail business is the fact that with retail prices falling by 4.8 per cent in the period, overall retail turnover values fell by an annual 10.7 per cent," he said
He added that furniture and lighting suffered the greatest volume declines in the 11-month period, falling by an annual 25 per cent and in value by 30 per cent.
Sales in the hardware, paints and glass sector declined year-on-year by almost 17 per cent in the 11 months to November and electrical goods fell by 10.5 per cent.
Meanwhile, a Debenhams' spokesman said that the firm hoped the majority of job losses would be secured through voluntary redundancies.
Debenhams is not considering store closures but he said the firm "wants to open more stores and create more jobs" and has spent more than €45m in Ireland during the last five years.
In all, 2,400 people work in Debenhams stores in Ireland, although some work for franchises located in its stores with 1,700 staff employed directly by Debenhams.