Widespread retail closures feared

WIDESPREAD retail closures now seem inevitable following successive sales declines in April, May and June, according to Retail Excellence Ireland’s (REI) latest quarterly review.

REI analysts described the sales declines of 2.02% in April, 4.94% in May and 5.47% in June as deeply worrying, and accepted that predictions issued earlier this year of a possible early return to sales growth were optimistic and premature.

Nonetheless, REI’s member stores are at least thankful that the rate of sales decline has eased to 5% for the second quarter of 2010 versus last year. Jewellery enjoyed a 0.07% overall growth, but menswear, footwear and the grocery trade were all down.

REI chief executive, David Fitzsimons, said: “Predictions made earlier this year about the imminent return of growth were overly optimistic. Even in grocery, where sales volumes have held up, price reductions and price wars led to a 7% decline in value for the quarter.

“Retailers are telling us it’s not looking good for July either. The back-to-school rush will create opportunities for some, but disadvantages for others. The price of school books etc hasn’t reduced, so that will undermine the consumer’s ability to spend on other items.

“As for business closures, we really haven’t even started yet. The Revenue is talking about retailers having difficulty to pay their VAT and taxes. The liquidation rates have doubled since last year, but that only takes into account the PLCs. Most retailers are sole traders. Footwear and jewellery did okay last quarter, but that is only versus awful comparables for last year.”

Jewellery recorded overall growth of 0.07% during the past three months. Footwear’s gains of 3.48% in April and 0.34% in May were wiped out by a sales decline of -12.57% in June.

On a positive note, wage costs as a percentage of sales improved to 15.79%, versus 18.43% in Q2 2009. Rent cost as a percentage of sales began to modify in Q2 at 12.47% as opposed to 13.16% this time last year.

However, David Fitzsimons notes: “The smaller landlords have been willing to negotiate rent reductions, but many big landlords and property management institutions are not helping. Even the deals with the smaller landlords are a year old. They will now want to negotiate those rates back up.”


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