Christmas cheer for Irish retail - Christmas Retail Monitor 2018 - December 2018 - Retail Ireland
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Christmas Retail Monitor 2018 Festive cheer to make tills ring After what has been a tumultuous year of highs and lows for Irish retailers, we have now reached a crucial juncture in terms of determining the end of year position for the sector. With year to date sales growth of 2.8% and an array of positive macroeconomic indicators all pointing to growing consumer spending power, you would be forgiven for thinking that all was rosy in the garden for the sector. Unfortunately, however, challenges remain. This year we have seen storms and heatwaves derail sales for extended periods in certain categories and sales performance more generally has been patchy during 2018. Overall, erratic data has made it challenging for retailers and analysts alike to draw any determined trend from the monthly sales numbers. However, strong footfall numbers from Black Friday weekend suggest that the consumer is ready to celebrate the festive season and with this now key promotional event out of the way, retailers are getting down to the serious business of driving towards end of year targets. A minor dip in sales in October on the previous month, while concerning, should not derail this optimism. Despite the choppy nature of sales in the year to date, the overall trend remains positive with the sector likely to build on the consistent sales growth of the last four years. The persistent gap between sales values and volumes during that four-year period has continued to close to a point where there is now almost like for like growth in both sales’ quantities and values. This suggests a return to more normal margins in the sector and a move away from the heavy discounting of previous Christmas seasons. While concerns around the migration to digital platforms and the impact of Brexit on consumer sentiment remain in the background, retailers are hoping that for the next four weeks at least these challenges can be set aside, and consumers will embrace the festival of shopping that the Christmas season brings. There is no doubt the spending power is there, the challenge now for retailers is to best position themselves over this key trading period to convince consumers to part with that hard- earned cash in their stores and through their various other sales channels. Season’s greetings from Retail Ireland. Thomas Burke Director thomas.burke@ibec.ie 01 605 1558
Christmas Retail Monitor 2018 All retail sales – as at October 2018 2.8% -0.5% 3.9% On a year-to-date basis, the Comparing sales during On an annualised basis, the combined value of Irish retail October to those a month total value of Irish retail sales sales is up 2.8% versus 2017, earlier in September, total (excluding sales of cars and with volume up by 4.3% over sales values fell by 0.5%, with sales in bars) was up 3.9% the same period. volumes posting a 0.9% drop. compared with October 2017, with a 4.8% increase in volume over the same period. Retailers look to sustain steady growth during Christmas period As we enter the most important trading period of the year, Irish retailers remain confident that the steady growth in retail sales throughout 2018 can be sustained into the Christmas trading cycle. With growing disposable income, rising wage levels and continually falling prices, the spending power of Irish consumers is greater now than at any stage in the last decade. For this reason, retailers have good cause for such optimism, but they remain acutely aware of the delicate nature of Irish consumer confidence which has experienced peaks and troughs during the last year. A slight dip in sales in October should not give raise to unnecessary concern for traders, but it does act as a timely reminder of the continuing fragility of the sector. Core retail sales (ex Cars & Bars) (y-on-y, % ch) 10% 8% 6% 4% 2% 0% -2% -4% 2011 2012 2013 2014 2015 2016 2017 2018 YTD Values Volumes
Christmas Retail Monitor 2018 Macro trends Labour market hits record high Employment Growth There was an annual increase in employment of 3.0% or 6% 66,700 in the year to the third quarter of 2018, bringing total 4% employment to 2,273,200. This compares with an annual 2% increase of 3.4% or 74,100 in employment in the previous quarter and an increase of 2.2% or 48,500 in the year to 0% Q3 2017. Unemployment decreased by 19,700 (-12.1%) in -2% the year to Q3 2018 bringing the total number of persons unemployed to 143,800. This is the twenty fifth quarter in -4% succession where unemployment has declined on an annual -6% basis. While the tightening labour market is presenting -8% retailers with a challenge in terms of staff recruitment and retention, it is certainly positive news from a trading -10% 2018F 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 perspective as more people working results in greater consumer spending power. Retailers battle for share of Real Disposable Income growing disposable incomes 10% 8% The total value of consumer spending in the economy 6% is on course to grow by 5% in 2018, with volumes 4% 2% likely to grow by 3.8%. Unlike the previous peak in 0% consumer spending between 2005 and 2008, this -2% -4% growth is not credit driven. During that period Irish -6% households were borrowing about €2 billion per month -8% -10% to fund spending. The challenge for Irish retailers at present is to capture a larger portion of that growing 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2011Q1 2011Q2 2011Q3 2011Q4 disposable income, which is currently going to service housing costs and to the entertainment sectors. Record breaking Christmas in store Consumer spending (excluding housing) 102 Current indicators show that total consumer 100 spending in December will be 3% higher when 98 compared to December 2017. On average Irish 96 households will spend €2,690 this Christmas. This 94 Index: 2008=100 is €866 more than any other month of the year and 92 90 is up from €2,654 in 2017 and €2,587 in 2016. While 88 there has undoubtedly been some Brexit related 86 consumer nervousness in recent weeks, this is 84 unlikely to disrupt consumers spending to any great 82 extent during the festive period. This will, however, 80 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 be monitored closely by retailers in Q1 of 2019 as we inch closer to exit day for the UK.
Christmas Retail Monitor 2018 Macro trends Cost of living falls back to 2008 levels Inflation Oct YTD 4% Inflation levels remain very low in Ireland with the overall 3% cost of living now on par with 2008. Further depreciation in 2% 1% sterling which reduced import prices, falling oil prices and 0% intense competition in the retail sector has kept inflation -1% -2% levels in check during 2018. Irish consumer goods prices -3% grew by just 0.2% in the year to the end of October 2018, -4% while Ibec predicts full year inflation of just 0.6%. This is -5% Total Housing and utilities Alcohol Restaurants Education Transport Health Communications Recreation Clothing Food Miscellaneous Furniture significantly below the year to date EU average of 2.2%. Key drivers of falling retail prices include electrical products, footwear and food. While the relative levels of discounting have eased in recent months, retailers remain sensitive to consumer demand for low prices. Ireland EU Consumer sentiment Customer Sentiment Index remains unpredictable 110 Consumer sentiment has been inconsistent throughout 100 2018, largely due to continued uncertainty around Brexit 90 and the general geopolitical and economic uncertainty that have arisen. While a further drop in sentiment in Index 80 October saw the index dip to a 46-month low, retailers 70 remain positive and this is reflected in Q3 sales numbers where value growth increased by 3.9% compared to 60 the same quarter in 2017. Retailers will hope that this 50 emerging positivity will be carried into Christmas 2018 2012 2013 2014 2015 2016 2017 2018 and the downward trajectory of the consumer sentiment index can be reversed. Online remains the fastest E-commerce sales growing channel 1,800,000 With sterling remaining weak, we have continued to see 1,600,000 high levels of online transactions with websites outside 1,400,000 the State throughout 2018. According to the Central 1,200,000 Bank of Ireland, on an annual basis, total e-commerce 1,000,000 € expenditure continued to grow at a robust pace in 800,000 600,000 Q3 2018, rising by 16% to just over €4.6 billion. Of 400,000 this, €3.3 billion and €1.3 billion is attributable to debit 200,000 cards and credit cards respectively. In September, total 0 e-commerce expenditure rose by 11% year-on-year to €1.5 billion. Total e-commerce spend is now likely to exceed €16 billion in the full year of 2018.
Retail Ireland 84/86 Lower Baggot Street Dublin 2 T: + 353 1 605 1500 E: retail@ibec.ie W: www.retailireland.ie Ibec Head Office Galway Cork Brussels 84/86 Lower Baggot Street Ross House Knockrea House Avenue de Cortenbergh Dublin 2 Victoria Place Douglas Road 89, Box 2 T: + 353 1 605 1500 Galway Cork B-1000 Brussels E: membership@ibec.ie T: + 353 91 561109 T: + 353 21 4295511 BELGIUM W: www.ibec.ie/membership E: galway@ibec.ie E: cork@ibec.ie T: + 32 (0)2 512.33.33 W: www.ibec.ie/west W: www.ibec.ie/cork F: + 32 (0)2 512.13.53 E: europe@ibec.ie W: www.ibec.ie/europe Limerick Donegal Waterford Gardner House Bank 3rd Floor, Pier One Quay Street Waterford Business Park Place Charlotte Quay Limerick Donegal Town Donegal Cork Road Waterford T: + 353 61 410411 T: + 353 74 9722474 T: + 353 51 331260 E: midwest@ibec.ie E: northwest@ibec.ie E: southeast@ibec.ie W: www.ibec.ie/midwest W: www.ibec.ie/northwest W: www.ibec.ie/southeast Extend Ireland’s global reach. Join the conversation. @ibec_irl www.linkedin.com/company/ibec www.ibec.ie
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