Whisper it but, facing into 2015, there has been an outbreak of hope within the retail industry. After seven years of fretting across the retail spectrum, there appears to be some light at the end of the long, insolvency-littered tunnel through which the industry has just crawled. And not an oncoming train in sight.
The overall recovery has been under way in earnest for well over a year but domestic consumer demand has been the slowcoach of the economy – first to fall when the proverbial hit the fan and last to get back on its feet when the fiscal storms stopped raging. It is reasonably upright now.
This Christmas was the best for the industry since 2007, indicative of the lightening although still somewhat restrained mood of consumers heading into 2015.
Over the first 11 months of 2014 retail sales, excluding cars, rose by 2.1 per cent in value, according to the Central Statistics Office. Economists such as Davy’s Conall Mac Coille expect a similarly modest improvement in domestic spending over the next 12 months.
Not a party but certainly not funereal. Let’s see how water charges and the consumer-friendly Budget 2015 affect things.
Economics aside, it will be interesting in 2015 to observe the fortunes of several individual retailers.
First up: the grocery market and its leader Tesco, which has just had an annus horribilis. The behemoth, beset by an accounting scandal and the onslaught of discounters, has shown signs of stabilisation in recent weeks. According to Kantar data it holds just under a quarter share of the Irish grocery market, which is growing at 1.1 per cent. But its alarming sales decline is slowing.
Will Tesco hold on to its crown as the number one grocer in the State in 2015? SuperValu, which is on about 24.5 per cent, may have something to say about it. The latest supermarket ad tracker data from Nielsen and Checkout magazine shows Tesco has upped its advertising massively in the Irish market – by more than 100 per cent – so it won't lose top billing without a fight.
Group chief executive Dave Lewis is working on a turnaround strategy based upon price and store feel, which will be geared towards slowing the advance of Aldi and Lidl. Ireland is its most important European market outside of Britain, so Lewis is likely to spend a lot of time here.
The German discounters are both likely to tweak their offerings this year to adapt to the lightening mood of consumers, some of whom no longer self-flagellate with austerity-era food and even splash out on the odd treat.
Hectic growth
Might we see more fresh bakeries or, heaven forbid, even a few meat counters in the discounters? Both will slip more well-known brands and “deluxe” ranges on to their shelves. Both will keep growing at a hectic pace.
Dunnes Stores, the biggest indigenous retailer, is likely to continue issuing vouchers to buy market share, although the general pick-up in home furnishing sales caused by the rising property market will help it pay the price.
In the world of department stores, keep a steady eye on Arnotts, the old lady of Dublin retailing. New York investment firm Apollo Management owns a 50 per cent stake in the store, while Canadian billionaire Galen Weston and the Square developer Noel Smyth own the rest. Each side wants to buy out the other, and management wants the standoff resolved.
Esso sale
In fuel and forecourts, Denis O’Brien is likely strengthen his position in the market if, as expected, his €3-billion-a- year Topaz chain buys rival network Esso. The Competition and Consumer Protection Commission may yet have some influence here.
Another company to keep an eye on this year is discount fashion retailer Primark, still known as Penneys on its home turf. The company, owned by Associated British Foods but run from Dublin, will open its first US store in Boston towards the end of the year. It is on the lookout for more deals for mall space, such as the agreement for up to seven stores it struck with Sears in October. It is a long shot, but don't rule out its owners spinning out Primark for a separate listing.
Looking back at the year that just was, insolvencies were a fixture in the retail industry, as they have been every year since 2008.
Elverys, which has more than 50 sportswear stores and 700 staff, was bought out of examinership by its management in April with backing from CapNua and AIB. With Nama as a major creditor of the Staunton brothers from Mayo who founded the chain, its sale in 2014 was inevitable. Management saw off stiff competition from Newcastle United owner Mike Ashley to land the deal.
Female fashion retailer A-Wear also shut its doors in 2014, after no suitable buyer emerged for its assets, which were put on the market by receiver Ken Fennell. The brand lives on in the digital world as an online store.
Another fashion retailer to slip into insolvency was the Irish outlets of Karen Millen, along with the associated Coast and Warehouse stores, which altogether have about 42 stores and concessions. An examiner was confirmed last month for the companies, which have a deficit of about €32 million. A buyer is currently being sought.
The year also saw the end of one of the best-known and loved brands of Irish retailing. Superquinn's 24 stores were rebranded in February by their owner Musgrave as SuperValu. The well-heeled denizens of south Dublin may never recover, although Cork-headquartered Musgrave is striving to keep up the stores' "posh" reputation.
In the convenience-store sector one of the biggest stories of 2014 was the buyout by Spar South Africa of an 80 per cent stake in BWG, which owns the Spar franchise in the Republic. The Irish company's management team retained a 20 per cent stake in the business, which has sales of €1.2 billion.
The BWG deal was all about the repayment of boom-time property debt, the banana skin that felled several other retailers in recent years. Hopefully that trend will peter out in 2015.
