As the autumn collection arrives, department stores are bracing themselves for another season of depressed sales but, managed correctly, Ireland’s department stores can do well in difficult times
GROUND FLOOR: perfumery, stationery and leather goods, wigs and haberdashery, kitchenware and food . . .” There may be fewer wigs and ribbons knocking about but have department stores changed all that much since the days of the lift announcer in Are You Being Served? – do shoppers want them to?
At first glance, recent events suggest Irish department stores are struggling to maintain their relevance in an overcrowded, under-shopped retail sector.
First, there was the spectre of the 167-year-old Arnotts falling into the hands of surprised taxpayers, then the directors of loss-making Clerys gave a dismal summation of the economy, following up a pointed reference to “the decimation of personal wealth” by highlighting the risk of further falls in consumer spending.
In fact, the Central Statistics Office (CSO) retail sales index suggests department stores are escaping the brunt of the carnage.
While the value of core retail sales is down 4.8 per cent over the year to June, the figure for department stores alone is a drop of 1.7 per cent. The year before saw steeper declines, but again department stores outperformed.
“They’re slightly better off,” says David FitzSimons, chief executive of industry group Retail Excellence Ireland. They are “subject to the vagaries” of retail categories: some of the goods to see the most dramatic sales declines (jewellery, menswear, homewares) are bastions of the traditional department store. But as a model of convenience, these shops remain “fiercely popular” with both consumers and the bit-part players who sell their wares in-store, he says.
Department stores are an invention of Victorian Britain. The first in the world was Bainbridge in Newcastle (now a John Lewis), which opened its doors in 1838, and the concept soon spread to Ireland. Regular facelifts and a more relaxed service culture have moved indigenous department stores on from the fictional Grace Brothers, which even in the 1970s was an anachronism. Still, there are times you can’t help thinking it would be no harm to have Mary “queen of shops” Portas on speed-dial.
“Look at Shaws, look at Clerys, look at Arnotts. Arnotts tried to be something it wasn’t: it tried to be Brown Thomas. I don’t think Shaws and Clerys have moved enough,” says Eddie Shanahan, a retail consultant and former director of merchandising and marketing at Arnotts. “Debenhams – I just don’t know what Debenhams is apart from one continuous sale.”
The challenge, says Shanahan, is to “be distinctive and consistent”. Within a small radius on Dublin’s northside, shoppers can go from Clerys to Arnotts to Debenhams and find Oasis and Warehouse concession stores in all three: not very distinctive. “What’s the point? They should be after the labels that aren’t in Ireland, like Cos and American Eagle. Not the same-old, same-old.” It’s a fine line between eclecticism and a confused jumble.
Managed correctly, department stores can do well in difficult times, as proven by companies as varied in size as Brown Thomas (“very much in tune with their customers”, says Shanahan) and McElhinneys of Ballybofey, Co Donegal. It’s easier for department stores to cut prices, too. Smaller retailers cannibalise their revenues when they go into sale mode, selling to people who were crossing the threshold anyway, says FitzSimons. “Department stores can shout and scream and attract people.”
Dunnes Stores
Known for its long-term advertising slogan “better value beats them all”, Ireland’s largest retailer is an astonishing success story.
Started by Ben Dunne in a vacant shop in Patrick Street, Cork, in 1944, the privately owned Dunnes spread to 155 stores. The group has moved towards larger format units in recent years, although the smashing of the property bubble put the kibosh on its plans for growth.
The company is secretive about its financial performance: the Central Statistics Office (CSO) had to go to the High Court to obtain its trade data. It publishes accounts for its UK arm, which made a profit before tax of £2.2 million in the year to the end of January 2009, despite a 17 per cent dip in sales, due to strict control of its costs.
Like Marks & Spencer, Dunnes focuses on producing its own lines rather than playing host to other retailers’ concessions.
While the company will have lost food customers in the Republic to cross-border shopping, its branches in Northern Ireland may have picked up some of the migrating custom.
Pros:Savida fashion range; a cross-border presence.
Cons:Its target customers have been hard hit by recession.
Arnotts
Opened on Henry Street in Dublin in 1843, Arnotts survived the famine, an 1894 fire and the 1916 rising. The landmark status it acquired over the years indicates it will outlive the bursting of its debt bubble too.
Its financial difficulties spring from its plans to redevelop the area surrounding the store into the so-called Northern Quarter, a €750 million project. The short-lived occupancy of the Jervis Centre,
part of its planned expansion, saw Arnotts reach out to “the 15- to 41-year-old demographic” just as their disposable income was evaporating.
The evacuation of Jervis meant the original building was somewhat overcrowded with concessions, although some rejigging has taken place over the shop’s many mezzanine levels in recent weeks.
While badly timed ambition was Arnotts’ undoing, the retailer was not immune to the retrenchment in consumer spending. Company accounts for the year to January 2009 show its turnover slipped 17 per cent to €127 million, pushing it into a loss before tax of €3.7 million. A €10 million injection of working capital from the banks might help Mark Schwartz, the retail specialist last week appointed chairman of Arnotts, to set tills ringing.
Pros: Sportswear; Jasper Conran; Paperchase; location and heritage; an iPad vendor.
Cons:Debt
Marks & Spencer
The British retailer identified Ireland (and Greece) as laggards in terms of their sales performance in a May trading update to shareholders. Its stores in both countries have been “heavily impacted by the economic downturn”, MS noted, adding that it continued to watch its pricing and implement tight stock control.
While MS traditionally operates in the mid-market, its apparel pricing became more obviously competitive during 2009 when it passed on the benefit of a weak sterling to Irish consumers where many of its competitors did not.
Like Dunnes, Marks Spencer’s expansion plans were put on hold when a number of planned new shopping centres or centre extensions (including a clutch in Limerick, where it has no presence) fell by the wayside due to the boom’s ignominious end.
In the UK, the retailer has reported that after a tough recession, its customers “have begun to show signs that they feel more confident about spending on their wardrobes again”. It has responded to this trend by increasing the proportion of its higher-priced ranges (such as Autograph and Collezione) in its stock.
Pros: Foodhall "dine in" offer; Limited Collection; lingerie.
Cons: Style credentials can be inconsistent.
Brown Thomas
Luxury retailers across the globe are already shaking off the sales-shrinking effect of the recession and anecdotal evidence suggests the definitively upmarket Brown Thomas Group will join them.
Its most recent accounts are for the year to February 2009, which show its profits before tax fell a whopping 73 per cent. But, crucially, where its rivals plunged into the red over this period, it still made a profit – almost €22 million – from turnover of €180 million (down 11 per cent on the previous year).
Since then, former managing director Paul Kelly has been reinstalled at the head of the group by its owner, Canadian billionaire Galen Weston. (Former managing director Nigel Blow was most recently seen acting as a consultant to Arnotts.)
The group has stuck to its high-end philosophy at its department stores in Dublin, Cork, Galway and Limerick, as well as at three BT2 fashion outlets for younger customers. Judging from the Central Statistics Office (CSO) unemployment data, this group may be slower to recover their spending power.
Pros: Buyers are quick to respond to up-and-coming labels; refurbished Luxury Hall; service
Cons:BT2
Debenhams
The British-owned retail group began 2010 by making 170 staff redundant from its 11 Irish stores. This followed a 65 per cent fall in its Irish profits in the year to the end of August 2009, in which it took home a net profit of €5.1 million.
As the group is listed on the London Stock Exchange, it is obliged to give regular company-wide trading updates. The most recent, in July, highlighted sluggish summer sales and said consumers were “distracted” by the World Cup.
The retailer, which popularised the “guerrilla sale” (regular one- to four-day discount events) as well as “no purchase necessary” cutlery demonstrations in Ireland, is beginning to move away from its strategy of hosting concessions, focusing instead on its Designers at Debenhams lines. It is the second biggest department store chain in the UK and expanded rapidly here when it bought the leases for nine Roches stores in 2006.
The group went into the global recession with £1 billion of debt on its books, which it has since reduced. Last month, it refinanced £650 million in borrowing facilities, claiming this put the group on a “strong footing for the future”.
Pros: Affordable occasionwear; bright store layouts.
Cons: The price-by-weight Henry St canteen is not cheap.
Clerys
The Clerys clock has an even greater iconic status than the yellow Arnotts sign, but Clerys, which targets similar customers to Arnotts, is a much more modest business. Its gross transaction value (turnover including VAT and sales at its concessions) was €51.2 million in the year to the end of January 2010, down 26 per cent on the previous year. It lost almost €1.9 million over that period.
In the report accompanying their accounts, recently filed at the Companies Office, the directors of Clery Co (1941) were downbeat, describing a trading environment that “worsened considerably as 2009 progressed”, a “disappointing” pre-Christmas trade and “general unwillingness” of international retailers to set up new concessions in Ireland.
They did, however, add that the rate of decline in sales had decelerated and forecast a return to growth in late 2010 or early 2011.
To cope with recession, Clerys has curtailed opening hours – on weekdays it now opens at 10am – and reduced working hours for staff, many of whom have moved to a four-day week.
Clerys still favours the odd retro touch, including its tea rooms, its ladies’ accessories selection and an instore pick ’n’ mix.
Pros: Much-improved homewares; women's concessions; tourist custom.
Cons: Few unique offers.
House of Fraser
This British department store has benefited from strong footfall and spending levels at the Dundrum Town Centre since its launch in 2005.
The group, which has 62 stores in the UK and Ireland, also opened a 200,000sq ft anchor store in Victoria Square in Belfast in late 2008.
House of Fraser was particularly hit by the collapse of Icelandic retail investment firm Baugur, which was a shareholder in its owner, Highland Group Holdings. After Baugur went into administration in early 2009, its 35 per cent share passed to the Icelandic bank Landsbanki, which has retained the stake.
House of Fraser trades in the higher end of the market, although price points vary across its ranges. Last year, the Dundrum store joined the Dublin city centre department stores in opening on St Stephen’s Day. Despite a strong Christmas on a group-wide basis (no Irish figures are available), chairman Don McCarthy said he was “cautious” about 2010.
Pros: House brands Linea, Episode and "Topshop of the 1960s" Biba.
Cons: Hard to get to if you don't live on the southside of Dublin or north of the border.
