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Irish retail: Are the green shoots appearing?

Drapers speaks to those trading on the emerald isle to see if the Celtic Tiger is ready to roar again.

Dubbed the age of the Celtic Tiger, Ireland enjoyed a decade-long boom from the mid-1990s, characterised by rapid economic growth and a property bubble, both of which eventually grew to bursting point in 2007 when the global financial crisis hit. But after seven years of deep recession the country is finally starting to find its feet once more, as the green shoots of recovery begin to take root.

The global financial crisis hit the country with full force, making Ireland the first eurozone country to enter recession on September 25, 2008. Consumer expenditure slumped 2.3% during the fourth quarter of 2008 to €24.5bn (£17.6bn), versus the same period in 2007, with gross domestic product (GDP) plummeting 9.3% to €45.8bn (£32.9bn). By December 2008, the residential property price index had also fallen 11.2% year on year, according to the Central Statistics Office of Ireland (CSO).

Brown Thomas

Brown Thomas

However today, after seven years of pain and decline, the retail sector is showing encouraging signs of growth and retailers are starting to feel more positive. Take Dublin’s two key department stores – Brown Thomas and Arnotts. In March, luxury department store Brown Thomas unveiled a €9m (£6.6m) revamp of the ground floor of its 110,000 sq ft Dublin flagship, designed to double the space devoted to accessories from the likes of Prada and Céline.

Ireland’s largest department store, Arnotts, enjoyed a 2.5% sales increase for the year to January 26, 2014, rising to €120m (£86m). During the same period the department store’s operating profit hit €2.5m (£1.8m), a complete turnaround from the €2.9m (£2m) loss suffered just a year earlier.

Then in June, Arnotts was acquired for £70m by Irish businessman Noel Smyth and his firm Fitzwilliam Finance Partners, which stated its intention to develop Arnotts as an “iconic retail destination and look for opportunities to develop the adjacent property portfolio as market conditions continue to improve”.

CSO statistics hint recovery could indeed be on the way. The volume of sales at Irish department stores rose by a healthy 5.7% year on year in May, with clothing, footwear and textile sales in general up 7.9% in volume terms [see box for further economy stats].

Contrast Ireland’s apparent recovery with fellow eurozone nation Greece, which fell into recession during the final quarter of 2008. Plunged ever-deeper into crisis, Greece has this month been offered a last-minute debt restructuring package by the European Commission in an effort to save the country from exiting the eurozone. However, Greece’s €3bn (£2.2bn) debt crisis remains unresolved, meaning the country could still be forced to exit the eurozone, taking on further debt.

While the situation is bleak for Greece, Ireland has managed to get back on its feet and the economy has picked up over the past couple of months, although retail is usually the last sector to feel the uplift, notes Thomas Burke, director of Retail Ireland, an organisation representing the entire Irish retail industry.

“The Consumer Confidence Index is the highest it has been for eight years, but it’s very dependent on the sector. While we’re still a long way away from the peak retail situation in 2008, things are starting to gain momentum. Retail has bounced back first in demand for high ticket items like furniture and household items, which were worst hit during the recession,” Burke explains.

“We’re now seeing an uplift across retail in general, including fashion, with major cities like Dublin, Cork and Waterford, and to a certain extent Galway and Limerick, recovering quicker. The retail presence is also developing in smaller regional towns like Athlone or Port Laoise [both in central Ireland]. We find retailers are concentrating more on tailoring the offering to the surrounding environment.”

According to Burke, the recovery is taking root in the larger populated towns and cities, rather than across the country as a whole. From a property perspective, demographic and retail market information specialist CACI has seen the majority of investment concentrated on big centres such as Dublin, or within 50km of the city, and Cork and Waterford in the southeast. Over the past six months enquiries have ramped up from developers researching new retail sites in Ireland, reports CACI associate partner Alex McCulloch.

“When we went through the recession a lot of retailers went bust so vacant space in shopping centres had to be filled first, before new developments can be built, which also points to why interest is starting to increase now,” says McCulloch.

“Companies are, however, being more conservative in terms of the size of the development, researching first the scale of the opportunity and then building an appropriate development, not necessarily the biggest. Developers are looking at similar centres and investigating which retailers would suit the local customer,”

The Irish high street continues to boast a healthy mix of independent retailers, indigenous brands and multinational chains, says Burke, although trade can prove tougher for smaller indies, whichmust ensure they create a personal bond with consumers who can prove fickle in today’s competitive, value-driven market.

Galvin Tullamore

Galvin Tullamore

Paul Galvin, owner of premium menswear independent Galvin Tullamore in County Offaly, east of Dublin, believes Irish retail started turning the corner halfway through 2014. “No one is talking about the madness of Celtic Tiger, and nor do we want to, but Dublin seems to be booming and being just 55 miles away, the city’s success lifts us,” he says.

Sales at Galvin Tullamore rose 14% over Christmas and have been up 25% year-on-year since the festive period. Last year, Galvin decided to invest €300,000 (£215,472) completely revamping the interior of his 7,500 sq ft store, which reopened in October. He also saw the opportunity to introduce premium brands Ted Baker, Calvin Klein and Scotch & Soda for spring 15, with Armani Jeans set to launch for autumn 15. 

“We’ve definitely seen customer confidence grow, particularly people in the 35 to 40 years demographic, who have more disposal income. While during the recession Irish consumers cut their cloth according to how much they could afford, when they have money they like to spend on quality,” says Galvin.

A similar feel-good factor has been detected by Patrick Bourke, founder of the eponymous premium menswear independent in Ennis, County Clare in western Ireland, who will be introducing both Ted Baker and Hugo Boss for autumn 15. “With the uplift in the market now’s the time to get new brands in at the higher end and we decided those two were the most relevant to the Irish market,” remarks Bourke.

“Weddings, however, are our number one business and we’re finding even younger customers are opting for three-piece suits. They’re upgrading more often and are showing more interest in the styling and cut,” he adds.

Salingers Bespoke in Cork

Salingers Bespoke in Cork

New businesses are also springing up across the country. In April 2014, Wayne Greene-Salm opened Salingers Bespoke in Cork, a premium menswear independent specialising in bespoke suits and brands such as Matinique and Nigel Hall, located in one of Ireland’s oldest shopping arcades, the Winthrop Arcade. “We decided to take a position off the high street as we wanted a boutique feel that reflects our brand. 2014 felt like the right time to launch because we could see people were ready to spend more,” he says.

“Also shoppers have changed. They are less interested in just buying brands and more focused on fabric and fit, while demand for made-to-measure is definitely growing and customers have a real appetite to know more about the product.”

Gerry Graham, who runs Danish suit brand Bertoni’s two Dublin stores, has a more cautious perspective. Pre-2008, Graham operated six stores but as the recession hit, the business contracted and he downsized to two Dublin locations. “Overheads are a big thing for independent retailers. We closed our locations that weren’t working in order to maximise our two stores. For us it’s all about trying to offer something different. Consumer confidence is a bit better and we’re seeing an uplift in the number of tourists,” he says.

Arnotts director of fashion, beauty and accessories Deidre Devaney started to notice greater consumer confidence at the end of last year and the run up to Christmas. “While spring can be tricky in Ireland due to the weather, we’ve definitely bounced back this second quarter and trading is positive versus last year. The fourth quarter is crucial for us and we’re already investing in people and product to prepare us for this time,” she says.

“We’ve benefitted from airlines like Etihad increasing their number of flights into Dublin, bringing in tourists from China and the Middle East. In response we launched a VIP shopping tax refund for overseas customers during the first half of this year, which is supported by our loyalty programme, which launched in September. It’s all about personal recognition and rewarding customers with points every time they buy.”

Arnotts

However, while Arnotts’ future looks bright, the situation remains bleak for fellow Dublin department store Clerys, which lost €4.3m (£3.1m) between August 2012 and January 2015, according to the Irish Times. The store’s failure was blamed on a more mid-market brand selection compared with rivals like Arnotts and Brown Thomas. To prevent adding to its mounting debt, the department store entered liquidation and was ordered to immediately cease trading on June 12. The store remains closed.

While its owner Natrium, a Guernsey-based real estate company that acquired the failing department store from Apollo Asset Management on June 12 for an undisclosed sum, has stated it will “significantly invest” in the rejuvenation of the Clerys building and adjacent properties, generating a minimum of 1,700 new jobs, Clery’s 130 direct employees and the 330 staff working for concessions remain sceptical.

The situation with Clerys puts into context the fact that the recovery is still in its early days. During the three months to the end of June, corporate insolvencies in the Irish retail sector rose by 52%, according to data from Deloitte, a situation blamed on legacy issues such as existing debt and muted consumer spend.

Burke believes that ultimately, the consumer has changed forever since the heady days of the Celtic Tiger. “They are much savvier and there’s an insatiable appetite for value,” he says. “That being said, while it has been an extremely difficult few years and there is a long way to go to the levels seen in 2008, retail spend is slowly starting to trickle down and we hope the recovery has taken hold.”

How is Ireland performing?

Source: Central Statistics Office Ireland

May 2015: Clothing, footwear and textiles

Value of sales – down 2.1% on April 2015, but up 4.3% on May 2014

Index: 86.6 (where the baseline is 100 and was set in 2005)

Volume of sales – down 1.5% on April 2015, but up 7.9% on May 2014

Index: 131.1

May 2015: Department stores

Value of sales – down 3.9% on April 2015, but up 4.3% on May 2014

Index: 87.7

Volume of sales – down 3.9% on April 2015, but up 5.7% on May 2014

Index: 123.2

Unemployment

June 2015: 9.7%

May 2015: 9.7%

June 2014: 11.4%

Youth unemployment rate

June 2015: 19.8%

May 2015: 20%

June 2014: 24.1%

In 2014

Gross domestic product (volume terms) rose 4.8%

Gross national product grew 5.2%

Personal consumption up 1.1%

Imports rose 13.2%

Exports up 12.6%

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