Retail recovering but clouds on horizon

Retail recovery remains on track, although the poor weather of recent weeks may lead to clouds on the horizon.

According to the Retail Ireland Monitor for the second quarter, general trends in the sector have been positive this year. Price-sensitive shoppers and intense competition have kept prices down but, in contrast to recent years, consumers are more confident and willing to make larger purchases.

However, the report noted that “punitive” tax rises over recent years have dramatically reduced the spending power of many, while the mixed summer weather hits retailers.

The outlook remains good for department stores, with the value of sales up 4.5% when compared to the second quarter of last year. The volume of sales was up 7.8%.

Fashion and footwear sales are up 7% compared to last year, while the volume of sales increased by 10.6%, as standalone fashion and footwear stores ended the quarter as one of the best performing retail categories.

The total value of computers, electrical, and electronics sales was up 4.3% on 2014, while the volume of sales rose by 9.4%.

The market in books, news, and stationery has recovered from a deficit of 1.2% at the end of the first quarter and is up 1.7% in the year to date.

A mixed performance was recorded in service stations during the second quarter, with sales falling by 4.1% compared to the same quarter last year, while the volume of sales rose 2.1%.

Front-of-shop sales in pharmacies have maintained their positive start to the year. However, Retail Ireland noted that issues concerning the falling cost of medicine have had a negative impact on pharmacy operators.

Retail Ireland director Thomas Burke said, despite the more positive outlook for the retail sector, a full recovery is “a long way off”.

“Retail sales rose 2.3% in the year to the end of June 2015 and are 2.8% ahead of the same period last year. However, they still remain 14% behind pre-crash levels. A full recovery is a long way off. Future success is contingent on Government making the right budgetary and policy decisions now. Retail is labour intensive and has the ability to create thousands of quality jobs over the coming years. But getting the business environment right is vital,” he said.

In its budget submission, published today, Retail Ireland called on the Government to implement a range of measures to further aid the recovery of the sector.

These include reducing the marginal rate of tax as it is “way out of line internationally”. The group said the Government should cut the rate by 1% and increase the entry point to the marginal rate by €1,500 for a single person, with a corresponding increase for married couples.

Retail Ireland wants the reinstatement of the reduced employer PRSI rate of 4.25% to make it more attractive to take on new staff.

The group is seeking measures to be adopted which make it easier for retailers to succeed online, such as allowing them to offset the cost of web developments against their Vat costs. Retail Ireland also called for a pilot scheme to allow towns and cities to access regeneration and development funds.