Retailers worry as year-end sales fluctuate

RETAIL SALES before and after Christmas appear to be higher than last year but retailers are more pessimistic about 2012, according to Ibec group Retail Ireland, which represents the sector.

Retail sales rose early in the month but fell again in mid-December, the industry group said.

“Christmas week and the current week appear to be better than last year, but it is likely that total retail sales for the whole of 2011 will end up at around the same as those in 2010, said Retail Ireland director Stephen Lynam.

“The good pre- and post-Christmas figures are welcome but this year’s sales are being compared with a disastrous Christmas last year. It is also possible that many shoppers are trying to beat the 2 per cent VAT increase which comes into force next week.”

The group has called on the Government to reverse the 2 per cent VAT increase if the expected yield in tax is not reached following a review of receipts in March.

Retail sales have fallen by more than 20 per cent since the start of the recession, the group says, and shops are struggling with high rents, increased local authority charges and high wage costs compared with European standards.

The group has also asked the Government to draw up proposals to reform the rules for the appointment of examiners to ease difficulties caused by upward-only rent reviews for retail businesses.

A brisk start to post-Christmas sales across Europe is unlikely to save retailers from more profit warnings and insolvencies as cash-strapped shoppers are only tempted to open their purses by margin-crushing discounts.

Crowded stores in major economies such as Britain and Germany will ease fears that the debt crisis could see consumers cut back on everything other than essentials.

However, analysts warn that Europeans are only being persuaded to spend by price cuts of up to 70 per cent, which are erasing profit margins for companies.

“Interest in the sales could fall away pretty quickly once the best of the bargains have gone,” said Howard Archer, chief UK and European economist at IHS Global Insight. “This would put pressure on retailers to cut prices even more, thereby further hurting their margins.” – (Additional reporting: Reuters)