Retail review reveals disappointing sales
Recent research from Retail Excellence Ireland (REI) revealed a disappointing third quarter for retail sales. David Fitzsimons, CEO of REI explained more about the results
Print16 November 2012
According to Retail Excellence Ireland’s Irish Retail Industry Performance Review Q3 2012, retail sales continued to disappoint during the third quarter of 2012. The worst performing sectors were IT / computing (down -19.90% on Q3 in 2011), garden centres (down -8.54% on Q3 in 2011) and photography (down -7.10% on Q3 in 2011). The inclement summer weather was said to have negatively impacted garden centre activity and ladies fashions.
The best performing sectors included consumer electronics, helped for the most part by the digital switchover, and small home appliances.
The figures from Retail Excellence Ireland showed that this became the 14th consecutive quarter of sales decline. September proved to be the most challenging month of the quarter, with sales falling by -1.48% year-on-year.
The retail industry as a whole has seen a dip in quarter three but grocery was not affected. Why do you think this is so?
Overall, year-on-year sales levels fell by an average of -1.04% during the third quarter of 2012. Grocery is non-discretionary so we’d normally find that the grocery, hot beverage and pharmacy numbers bounce along the bottom and don’t do anything too amazing either negatively or positively while other sectors affected by key fundamentals like the property market, weather and key milestone branded launch events, would be like yoyos. So yes, grocery is quite robust. We saw some marginal like-for-like increase in the sector over the quarter three period.
September was the most challenging month of this quarter. Why was this?
The quarter started relatively well and got progressively worse, probably principally to do with budget speculation and commentary which always increases as we get closer to this time. Ongoing speculation around Budget 2013 will continue to affect retail sales and consumer sentiment pre-Christmas. What needs to happen is for ministers not to comment and make their mind up at Cabinet and then to announce those budget measures with transparency and absolute authority rather than speculating that this could happen and that could happen.
Do you expect any of the sectors to recover for the fourth quarter?
Well it’s going to be a challenge. Quarter four will be defined by budget speculation prior to the announcement on 5 December. It’ll also be affected by whether we see a marginal return to some sort of functioning property market which in fairness we are starting to see happening in the Dublin market, primarily around the three and four bedroom more premium family homes which are starting to shift.
The weather is also a key fundamental but we always do Christmas well in Ireland no matter what and look, whatever the speculation around the budget and whatever Micheal Noonan announces on budget day, we’ll shake it off and get back to what we know best around Christmas which is gifting and celebrations.
I’d say technically there will be potential for us to exit recession by Q3 next year. There are good signs and the rate of decline has dissipated completely. My contention would be that the majority of retailers have reached the bottom or are enjoying some marginal growth.
Which area of retail has been most affected throughout the recession?
Over the four years it’s been the big ticket home related items like DIY hardware, furniture and flooring, kitchen and bath and that kind of stock. They are down over 50% from the peak. And the worst affected within that category are the poor guys who were offering credit at the time to builders so they’ve a way to go because even if it does recover and there is some sort of fluidity brought back to the residential market, people are still very keen to seek out value.
We are seeing a return to growth in the luxury market and a return to growth in the value end, but it’s the middle market especially in fashion that is struggling because it is over provided for. If you look at Clery’s and those types of stores, there is a lot of discounting in the market so it’s challenging. Dunnes is not having a good time in the textile market at all.
What is the retail rental market like now?
The properties in cities that are owned by pension funds and banks are not moving on rents but the more rural you go, the more localised the landlord and the more engagement as they often personally know their tenant whereas obviously if you’re renting a building from Canada Life or Irish life or any of these guys you are dealing with a faceless entity and its very challenging and difficult to get any common sense approach.
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