Doom and gloom among British multiples at the sharp downturn in the UK retail market has led to speculation that problems at home might halt expansion in Ireland. Clothing retailers, in particular, have had a bad time in the troubled UK market. Analysts say this is partly due to an expected recession in the British clothing industry. Some companies simply failed to provide what the customer wanted. The trouble is serious. Marks & Spencer is expected to turn in roughly half its expected profits this year, with stock errors accounting for a staggering £150 million sterling in losses. At Mothercare, trading problems were exacerbated by failure in buying and merchandising which led to understocking in the most popular lines. This caused a fall in third quarter sales for its parent company, Storehouse. Overall, Mothercare's sales fell by almost 5 per cent in the seven weeks to January 2nd.
Suffering was not confined to retail clothing companies. Game, the games and software chain, reported an unexpected decline in UK Christmas sales. Boots' chemist business showed growth but leisure and gift ranges fell flat and shares dropped. Great Universal Stores (which owns Argos) and House of Fraser were relieved to see their pre-tax profits left unchanged despite a highly competitive marketplace.
Will there be a pulling-in of horns in Ireland because of the UK slow-down? Significantly, Boots in Ireland is managed by its UK director of marketing, Richard Holmes, and not the company's international retail division. But there, it seems, the similarity ends. Boots has grown from seven outlets to 26 in Ireland North and South with the buy-outs of Hayes Conyngham & Robinson and the Connors group. Last year's hectic pace is unlikely to be repeated, but a particularly strong performance in Ireland will ensure expansion will continue, says the director of communications, Ian Wright.
"We will be looking mostly at organic expansion. I don't rule out the possibility of acquiring licences from individual pharmacies and setting up in newly-constructed stores," says Mr Wright. He acknowledges the company is looking at one or two areas and once "the right arrangements" are in place, it could be on the expansion trail again.
According to Fintan Tierney, retail director of the Lambert Smith Hampton agency, incoming multiples tend to approach relocation on a geographic basis, researching the customer profile of each outlet and pitching stock accordingly.
Mr Tierney has not seen any cutbacks in requirements among UK retailers operating here. Boots has plans to open stores in Waterford and Galway in the coming months. Argos is competing for retail space in Galway, Sligo and Tralee and card chain Birthdays is currently negotiating for a further five properties around the country.
What now of rumours that Marks & Spencer may take space in either the new Pye centre in Dundrum or Stillorgan Shopping Centre? M & S's announcement late last year that it was limiting European expansion was bad news for developers and it is early days yet to judge the performance of its Liffey Valley Centre outlet.
"Our progress here is spot on and not affected by the UK - it's a different economy," says Stephen Costello, regional manager of Marks & Spencer in Ireland. M & S increased its floor space in Ireland to 300,000 sq ft with an extension to the Mary Street store and the opening of their new Liffey Valley outlet.
"Growth has been phenomenal in Ireland. M & S Ireland has had the fastest sales growth in the world for the past three years," said Mr Costello. "We are actively looking but have no plans to sign up in the near future."
Along with M & S in the middle-income market is the Next clothing chain, which targets the high-spending 25 to 45 age group. The UK chain expanded rapidly shortly after its first store opened in Grafton Street in the mid-1980s. The company then treaded water until the economic boom in the 1990s, when further expansion occurred.
Next's selling space overall increased in 1998 by 11 per cent and sales figures rose by almost 14 per cent. According to a head office spokeswoman, Christine Gerard, the company is "in the early stages" of acquiring some additional sites. Because retail vacancy rates are low in Ireland, it would seem from the competition for space that UK multiples are hell-bent on expansion. But with no major shopping centres scheduled to open in 1999, a true picture of how the UK multiples view their Irish business is not likely to emerge until the next millennium.
Stephen Murray, of Jones Lang Wootton, is optimistic about Ireland's ability to capitalise on the UK's retailing misfortunes. "Retailing is experiencing problems in the UK because of a stagnant and declining market while Ireland is still showing growth. Most UK retailers have been renting space here for many years. Now they are taking the opportunity to expand their presence."
