Fears for smaller shops as retail sales fall 1.6%

RETAIL GROUPS described as dismal and disappointing figures yesterday which show that core retail sales volumes, excluding the volatile motor trade, fell by 1.6 per cent between December and January. When the 21.3 per cent fall in the volume of sales by the motor trade is included, the monthly decline stands at 3.7 per cent.

On an annualised basis, core retail sales were down 2.7 per cent by volume. Including motor sales, the figure was 0.3 per cent weaker than at the same time in 2011.

The Central Statistics Office figures show that department store sales in January were down by 18.4 per cent, with electrical goods 12 per cent weaker and sales of clothing, footwear and textiles falling by 5.7 per cent.

Other sectors that experienced a downturn in sales included the hardware, paintware and glass sector and the bar trade.

Sectors which experienced volume growth included pharmaceutical, medical and cosmetic products sold in specialist stores, which rose by 4.1 per cent, and food, beverages and tobacco in specialised stores, up 2 per cent.

Ibec industry group Retail Ireland said the CSO figures highlighted a “pretty dismal” start to the year for retailers and suggested many consumers had made purchases in November and December to avoid the January VAT rise.

Retail Ireland director Stephen Lynam said that, despite relatively robust sales in November and December, consumers appeared to have shunned the January sales. Consumer sentiment remained weak and the outlook uncertain.

“The high cost of rents, rates, tax and labour are causing retailers real difficulties and depressing consumer demand. Action is needed on all these fronts.”

Mr Lynam said that if, by the end of the first quarter, the Government was not on track to meet its target of €670 million in VAT for the year, it should repeal the VAT increase.

The Irish Small Medium Enterprises Association (Isme) said the Government must take the crisis in the retail trade more seriously, adding that high costs, inconsistent policies and VAT increases had led to consumer pessimism and reduced spending.

Chief executive Mark Fielding said the sector would usually see a bounce in January.

He noted that the 1.6 per cent fall in core retail sales volumes contrasted with a 2.7 per cent increase in the equivalent figure for January 2011, which, he said, was indicative that consumer confidence was down.

“It is difficult to see how small businesses are going to hold on. We had upwards of 400 shops close in the first six weeks of last year and the danger is, with the downturn in January sales, that figure could be matched or exceeded in the current year,” Mr Fielding said.

David Fitzsimons, chief executive of Retail Excellence Ireland, described the fall in retail sales as “very disappointing”.

In its analysis, Goodbody Stockbrokers noted that, despite the fall in sales volumes, there was not a significant increase in prices as a result of the VAT increase introduced in January.“The retail sales deflator only went from 0.3 per cent to 0.4 per cent, indicating the retailers overall found it difficult to pass on the VAT effect to a price-sensitive Irish consumer,” Dermot O’Leary, chief economist with Goodbody, said.