By and  on May 26, 2005

PARIS — The European retail scene has been as chilly as its spring weather.

High unemployment, political uncertainty and a strong currency are all contributing to one of the worst selling seasons in Europe in a decade, with little signs of an upturn ahead. And while executives said luxury continues to sputter on, sales are much slower than hoped, as tourists remain deterred by the high value of the euro against other currencies, particularly the dollar.

The poor retail scene in Europe contrasts with that in the U.S., which has seen a relatively buoyant spring despite spiraling gas prices and cooler-than-normal temperatures in the Northeast. Same-store sales in April rose 3.1 percent in department stores, 3.9 percent in specialty stores and 0.2 percent at mass retailers, which have been most affected by higher fuel prices.

Poor consumer demand in Europe stems generally from the weak economies in France, Germany and Italy, observers said. "If only there were more economic certainty," complained one Paris department store executive, who asked not to be named.

But the dull retail environment is being exacerbated by political turmoil related to upcoming referendums on a European constitution, with votes in France on Sunday and in the Netherlands on the following Wednesday. In addition, German Chancellor Gerhard Schroeder surprised politicians by calling an early general election for September.

In France, sales of women's ready-to-wear dropped 3 percent in April, according to the Institut Francaise de la Mode. Overall, sales of clothing, including men's, women's and children's, have declined 2.6 percent since the beginning of the year.

Nonetheless, there are pockets of luster. Though less robust than hoped, sales at French department stores have improved slightly so far this year, up 2.7 percent. Suffering more are the discount-oriented hypermarkets and supermarkets.

German apparel retailers remain under pressure as they enter their 10th year of falling sales. The country's economy shows no signs of improvement. The weak economy and political turmoil, plus rising unemployment figures and cuts in social benefits, have made German consumers more nervous, insecure and tight-pocketed than ever.

Karstadt, the country's largest department store group, is in the midst of a massive restructuring program that includes the sale of 77 smaller branches and the divestment of its specialty store chains. First-quarter sales at Karstadt fell 6.8 percent, while sales at the Kaufhof department store chain were down 4.3 percent for the quarter. Specialty stores report divergent results, but the mood is anything but up.

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