Retail sector set to take brunt of downturn

THE country’s retail sector continues to be ravaged by the downturn after sales plunged to a 25-year low in 2009.

This year the sector looks set to take the brunt of the downturn as the banks, having dealt with the construction sector, are turning their attention to the struggling retail sector, which witnessed the collapse of Arnotts in recent weeks and the appointment or a receiver to a group of pharmacies spread across Munster, said David Fitzsimons, chief executive, Retail Excellence Ireland.

Last week, a receiver and manager was appointed to a total of 14 pharmacies which are part of the high-profile IPOS pharmacy network.

The group is thought to owe Bank of Scotland (Ireland) more than €40 million.

The move has been blamed on difficult trading conditions and reduced margins.

The early months of 2010 saw a modest rebound in sales, but that has “lost steam,” according to Fitzsimons.

“Our numbers showed that from January to March of this year things got better but in April, May and June the curve turned the other way.

“We had expected a return to like-for-like growth in Q3 2010 but that’s now unlikely to happen.”

Newly constructed shopping centres stand partially, or even wholly empty, while “to let” signs litter high streets up and down the country, he said.

“The retail industry has not only had to contend with a massive dip in consumer spending, but the huge increase in bad debt in the sector has led to a reduction in trade credit insurance, forcing many retailers to pay cash up front for goods.”

Arnotts having once generated sales of €200m, this dropped to just €128m last year.

It fell foul of the collapsing property market as its planned €800m development of the Northern Quarter extending to Dublin’s O’Connell Street collapsed, forcing the group into the hands of its bankers – Anglo Irish Bank and Ulster Bank last Monday under a debt restructuring plan.

Retail Excellence, which represents the trade, is currently doing a trawl of the partially built and half-empty shopping centres around the country and will shortly publish details of its findings.

The figures will not look good, Fitzsimons said.

Due to an overhang of retail space rental levels have fallen back sharply and it is becoming obvious also that social welfare salary payments are increasingly dictating the days that people shop, he said.

Last year an estimated 30,000 jobs were lost in the retail sector as consumers ravaged by pay cuts and higher taxes saved more and spent less.

Eight months into 2010 and the outlook has improved little, he said.