Retail sector struggles during Q1

LADIES fashion was the worst performing sector in the retail industry in the first four months of 2011, while garden centres performed well.

Consumers flocked to garden centres in March to replace plants that suffered during the big freeze. As a result, sales rose 5.5%, making garden centres the only section to record growth in the retail industry.

Restrictions on the sale of codeine and dispensary price reductions saw the pharmacy sector experience a challenging start to 2011, as sales fell 6%.

Ladieswear was the worst performing retail sector in terms of sales for the second quarter in a row, reporting a 6.5% drop compared with the same period in 2010.

This proves that women are demonstrating a more delayed reaction to the conditions of recession, according to Retail Excellence Ireland (REI), which compiled the figures.

Overall retail sales fell 3% in the first three months of the year. REI said more stores are likely to close over the course of the year, estimating that more than 40,000 retail jobs have already been lost since 2008.

REI chief executive, David Fitzsimons said that while the rate of reduction in sales declined in late 2010, the introduction of the Universal Social Charge (USC) in February negatively impacted on retail in early 2011.

“Overall, the quarter traded reasonably. However, the fact that sales continue to decline, for the 37th consecutive month now, indicates the distressed state of the Irish retail industry.

“March 2011 recovered following a poor February as consumers, now adapting to the USC reductions, cautiously returned to the high street. Considering that the industry enjoyed Easter and Mother’s Day occasions in March 2010, the March 2011 performance of -2.6% can best be described as robust,” said Mr Fitzsimons.

Sales fell 2% in January, 4.4% in February and 2.6% in March. The menswear and electrical sectors both saw sales decline by over 4%. Furniture and flooring, grocery and optical all saw declines of over 3%.

The Average Transaction Value continued to fall in the first three months of the year and is now €43.39 compared with €53.48 in quarter one 2008, showing a total fall of over 19% over the last three years.

Sales per square foot fell by 4.5% when compared to the same period last year. The reduction was most pronounced in the grocery sector, with sales per square foot falling 9.7%, illustrating the aggressive nature of price competition and promotional activity in the sector, with FMCG brands bearing the brunt of these falls.

On a positive note, 70% of REI members expect year-on-year sales volumes to start to rise again by quarter four 2011. This is largely a result of having seen volumes fall by over 30% to date.