Retail sales continue steady decline

Retail sales continued to decline last month, falling by 1.9 per cent in the year to February, new data from the Central Statistics Office showed today.

The decline came as consumers cut back across a range of areas, with sales in books and fuel falling and furniture sales also shrinking over the year.

Department stores were also feeling the pinch as sales volume dropped by 5.6 per cent over the year, despite an 8.5 per cent rise compared with January.

Over the month, sales volume was down 0.3 per cent from January, with bar sales down 3.3 per cent, books and newspapers falling by 3.2 per cent, and the motor trade down 2.9 per cent. This was partly offset by a 6.3 per cent rise in the volume of electrical goods sales.

Excluding the volatile motor trade, core retail sales were down 2.1 per cent over the year and 1 per cent on a monthly basis.

The value of retail sales was down marginally over the month, falling by 0.1 per cent in February, and was 1.8 per cent lower over the year.

Excluding the motor sector, the value of sales was 1 per cent lower over the month and fell by 1.7 per cent over the year.

Davy's chief economist Conall Mac Coille said the decline was not unexpected.

"We interpreted the strength of retail sales in Q4 as a temporary phase associated with the rise in VAT," he said. "So today's poor retail sales data are not a surprise, consistent with the Davy forecast that Irish consumer spending will contract by 1.7 per cent in 2012."

Ireland’s retail sector has struggled since the downturn began as consumers cut back on personal spending.

The effect of the recent VAT rise has also been blamed for the sliding retail sales, with Ibec group Retail Ireland calling for the Government to to re-examine the decision if the current downward trend continued.

Last week, the company behind Currys and PC World, DSG Retail Ireland, said it had made a pretax loss of €5 million last year as revenues from the sale of its electronics continued to slide.

There have been several high profile casualties on the high street. Waterstones closed its Irish stores last year. Earlier this week, retailer Game closed all of its stores in the Republic after the group was placed in administration.

Other retailers are adapting their strategy for the Irish market. British retailer Marks & Spencer is planning to launch an online shopping site specifically for the Irish market in the coming months, following similar moves by British retailers Next and Debenhams.

Department store Arnotts recently expanded its website too.

"Overall, there is little to be optimistic about as regards the Irish consumer or personal spending in the immediate future," Bloxham chief economist Alan McQuaid said.

"The Government has acknowledged that exports will remain the only significant source of positive momentum in the economy over the next couple of years, and safeguarding and expanding the economy's export base will remain a critically important objective of official policy. However, given budgetary constraints, if money is being put into protecting the export sector, then that cash will have to be found elsewhere, in other words from the domestic side of the economy."

Retail Excellence Ireland called for the Government to cut local authority rates to help struggling retailers, and warned of further risks ahead.

"The outlook is mixed with many retailers concerned that the upcoming fiscal compact referendum will further undermine sentiment over the coming months," said chief executive David Fitzsimons.

"However a number of positives exist, including the possible further reduction in the ECB rate, the current spell of good weather and the summer's major sporting events."

Small business group Isme said retailers were also fighting the black economy and called for stronger action from the  Government to stamp out rogue traders.

“The effect of illicit trade has a much broader impact on the smaller retail outlets, with less footfall, loss of sales and margin threatening their very existence and the jobs involved," said Isme chief executive Mark Fielding. "The Government’s Action Plan for Jobs will be a total waste, if immediate action is not taken to stop the increase in illegitimate trade."

However, new research from the Dublin City Business Improvement District (BID) said it had evidence to suggest that Dublin city centre at least was beginning to show early signs of a recovery in consumer confidence.

The organisation, which represents 2,500 businesses in the capital's centre, said the area was recording consistent footfall growth for the first time since 2006.