Retail’s slow growth lags behind general recovery
Retail Ireland, the Ibec group that represents the retail sector, today published it’s Retail Ireland Monitor for Q1
(see attached pdf) with key indicators pointing to a concerning lack of real growth in the Irish retail sector during the first three months of the year.
Director of Retail Ireland Tom Burke warned, “despite improvement in key economic indicators across the general economy, the retail sector continues to lag behind. While sales volumes have improved, sales values remain sluggish, finishing just 0.9% ahead of the same period last year”.
Mr Burke said: “It would appear that shoppers are still extremely price conscious so while sales volumes are up 5.1%, the increase in the value of sales is significantly below that. This suggests that Irish retailers are discounting heavily to drive footfall and sales in store. Interestingly, the report highlights that certain categories such as furniture and home-wares are outperforming the general retail sector largely as a result of the release of pent up demand, while others including supermarkets, books, news and stationery continue to struggle”.
Other key retail trends set out in the Retail Monitor include:
- Supermarkets and convenience stores: Deflation and brutal competition have greatly impacted value growth, which slowed from 1.5% to just 0.2% over the same period. Supermarket value growth in the same period was effectively flat.
- Service stations: Price pressures in the sector continue to hamper growth with sales volumes marginally up in Q1, driven mainly by increased diesel sales, as consumers continued their switch to diesel-powered vehicles.
- Pharmacies: Sales continue to be driven by front of shop growth offsetting a decline in prescription revenues. Over the counter medicines have seen a strong start to the year, driven by a high incidence of coughs and colds. Meanwhile, beauty sales have risen in line with a recovering economy, with a strong Mother’s Day closing out the quarter.
- Furniture: Mirroring an increase in home renovations and rising activity in the property market, furniture and homewares continue to lead retail’s recovery, with sales values now exceeding 2007’s previous peak.
- Books, newspapers: A weaker euro continues to significantly impact the sales of books and magazines in a category which is heavily exposed to such pressures.
- Fashion & Footwear: Luxury goods and jewellery are performing well, whilst interestingly, menswear is outperforming womenswear
“The retail sector continues to struggle. Despite strong economic growth, value for money is still the key determinant for Irish consumers. In addition, retailers face increasing cost pressures. Firstly, a weak euro has resulted in higher import costs for those retailers sourcing products from outside the eurozone. Secondly, retailers are very concerned about proposed increases in other costs, specifically wage increases. With recovery in retail still fragile, Retail Ireland warns that any increased costs could further destabilise a sector which has endured a torrid last six years and remains significantly challenged”, concluded Mr Burke.