Spending figures flatline in run-up to Christmas

Major retailers reported flat sales growth in the weeks before Christmas, highlighting the stagnant economic situation in the Czech Republic after months of downbeat statistics.

Supermarket chains Tesco and Albert both said sales figures last month were about the same as those in December 2011, reflecting the struggles of an economy that has faced several successive quarters of contraction.

Some retailers have since launched heavy discounts as they try to spark an uptick in sales in the new year.

According to Jan Dvořák, Czech Republic corporate affairs manager for Tesco, sales in the last few days before Christmas were 80 percent higher than on an average day, but overall pre-Christmas sales "remained at the same level" compared with the equivalent period in 2011.

At Albert supermarkets, owned by Dutch-based Ahold, sales were "comparable with last year, about the same," according to Communication Manager Dagmar Krausová.

The lack of growth, she said, was "connected with" the poor overall economic situation, which saw the country slip into recession again in 2012 as a contraction was recorded in the first, second and third quarters of the year.

David Marek, a Prague-based analyst with Patria Finance, blamed rising unemployment and a decline in real wages for last month's indifferent performance by major retailers, although he said detailed figures were not available yet.

"It could be partly compensated by aggressive discounts or sales provided by retailers, but the negative factors - unemployment and wages - are dominant for retail sales in recent months, and I would expect that the last Christmas season was weaker than the previous one," he said.

He predicted that final figures would show a 2 percent decline in retail sales in the Christmas period, after adjustments for the number of working days and other variables.

"The reason is that weak demand increases the pressure on retailers to decrease prices to attract buyers, and this trend of increasing pressure on prices was visible before Christmas," Marek added.

Overall retail sales in the Czech Republic in 2012 were likely to be about 1 percent down on the year before, according to the analyst.

In further downbeat news, a recent survey by EPSI Research found declining economic sentiment among the more than 1,000 Czech residents polled, with people overall having a "very low" level of optimism.

"They don't feel self-confident. They don't feel confident about their own situation, what they can pay from their own pocket," said Jitka Jakubcová from EPSI Research Central Europe.

The British supermarket chain Tesco reported that chocolates and sweets sales were up 15 times, while sparkling wine sold at nearly eight times the usual rate.

Other popular goods included mayonnaise, nuts, toys and gift bags, while Tesco said electrical items such as computer games and small household appliances also sold well.

Amid the flat sales growth at major supermarkets, some other retailers reported more positive results.

At the Palladium shopping center, the largest mall in the Czech Republic, footfall in December 2012 was 3.5 percent up on the same month in 2011, according to marketing coordinator Helena Watson. She said new store openings only partly accounted for the increase.

"The footfall in the week prior to the Christmas holidays reached more than 70,000 visitors per day on some days. The average was 56,000 visitors per day in December," she said.

Sales figures from actual stores are not yet available, but in the first 10 months of 2012, these showed year-on-year increases of between 6 percent and 11 percent, according to Watson.

There was also positive news from Česká spořitelna bank, which reported that Dec. 21 saw a record 780,200 payment card transactions worth a total of 778 million Kč.

The company said this was the highest figure yet recorded for both the number of transactions and their total worth, and was 19.7 percent higher than 2011's record in terms of the number of transactions and 18.1 percent in terms of their total value.

Retailers have introduced heavy discounts as they aim to achieve a post-Christmas bounce in sales, with Tesco for example starting its sale Dec. 26, cutting prices on about 2,000 items, with reductions ranging as high as 75 percent. Many other retailers have also introduced heavy discounts amid pessimism from analysts.

Marek said he expected retail sales in the Czech Republic to fall 0.4 percent in 2013, following what is likely to be an overall drop in 2012.

"It could be the second year in a row of declining retail sales," he said.

Daniel Bardsley can be reached at
business@praguepost.com