Desperate times call for desperate measures

The old adage that Christmas seems to come earlier each year was proved true, writes Joe Downes at BusinessWorld.

Today, Friday, September 3, Brown Thomas on Grafton St opens its Christmas store “complete with Santas, reindeer, twinkling lights and un-seasonal music at its Grafton Street store”. Cork and Limerick stores will be heralding the arrival of baubles and fake snow on Saturday.

But why?

Can it really be true there is customer demand now for Christmas shopping? Of course, Brown Thomas believes there is. They’d better believe it. They have to believe it. After all, doing business is all about banking on your ability to get it right.

Despite the fact it’s still summer (evidenced by shorts, T-shirts, light summer dresses, sun tans etc), Brown Thomas managing director Stephen Sealey believes it.

“From experience we know that this opening date is very popular with our customers, especially those who wish to get first option on the very best Christmas product available,” he said

But he must also spin his sales story too:

“For those of us who each year vow to be super-organised and get the very best and most beautiful decorations when they first arrive to the stores, only to frantically root out the dregs last minute, this is your chance!”

“This is your chance” he says, but between the lines he means is “this is our chance” because for the retail trade here, Christmas may be the last chance for many firms. The statistics don’t look good.

The latest retail figures from the CSO show that the recovery in retail sales evident since the start of this year is stalling, according to Retail Ireland, the IBEC group that represents the Irish retail sector.

The volume of core retail sales, excluding car and bar sales, fell by 0.6pc in May compared with April but increased by 1.9pc when compared with May 2009.

More importantly the value of sales fell in May by 0.7pc compared with April and by 1.7pc when compared with May 2009. This means that the value of sales for the first five months of the year is below  the corresponding 2009 figures due to price reductions.

“It is very troubling that the July figures are so negative. The underlying trend of stabilisation and recovery in retail sales that was emerging earlier this year seems to be stalling. This underlines the fragile state of consumer spending and the retail sector generally,” said Retail Ireland director Torlach Denihan.

“The retail sector is in survival-mode, dealing with a huge decline in sales and a very high cost base. Retailers urgently need sensible behaviour when it comes to pay, rents and service charges,” he added.

After growing for the first three months of 2010, core retail sales experienced a renewed bout of weakness over the following four months.

Dermot O’Leary, an economist with AIB-owned Goodbody Stockbrokers said: “Important too for retail businesses is the fact that the value of retail sales continues to fall as price deflation (-2.5pc annually), albeit at a slowing pace, is widespread. In value terms, core sales are down 4.9pc, but are now close to the low in the downturn, some 18pc below the peak level.”

Only Motor Trades and Fuel showed year-on-year value increases in July 2010. All other sectors showed year-on-year declines in the value of retail sales – these included: Non Specialised Stores, which includes supermarkets, (-1.5pc); Department Stores (-7.3pc); Pharmaceutical Medical and Cosmetics (-10.6pc); Clothing, Footwear and Textiles (-5.7pc); Other Retail (-8.8pc) and Bars (-13.8pc).

As Ian Galvin wrote in the Sunday Tribune: “Not only has the economic recession left us with empty hotels and housing estates, the iconic appearances of some of Dublin’s high streets are also becoming unrecognisable

“The question now is whether something like the Dundrum shopping centre is better positioned to ride out the economic crisis at the expense of Dublin’s traditional high streets?”

“Across Dublin city, the retail locations are losing their appeal, whereas shopping centres such as Dundrum are able to buck the trend by offering their visitors a broad range of tenant mix, providing customers with more choice. The ability of shopping centre landlords to influence the tenant mix to ensure the customer has a balanced and wider choice has enabled them to prosper in comparison to the traditional Dublin shopping destinations,” he said

There is some statistical evidence to back this theory up. Occupancy rates at Ireland’s shopping centres have increased in the past 15 months while rent has reduced by over 4pc on average, according to Retail Excellence Ireland.

However, the report stated that the slight improvement in occupancy levels is a direct result of new tenancy, “somewhatmasking the true closure rate suffered by many scheme owners in the last 15 months”.

“Landlords are compromising existing tenants by letting available units to a weaker tenant mix, resulting in a diluted and confused retail offer to customers,” it said.

The REI Shopping Centre Productivity Review 2010 said this has caused a two tier lease system at most shopping centres throughout the country, with long-term lease holders paying boom-time rent while new leaseholders enjoy current market prices.

Roger Brownlie for Vistage