"The situation is catastrophic even in the leading shopping malls," a senior retail market source told "Globes" this week. "March signals the beginning of summer sales, and the chains already change their merchandise during this month. This year, however, March was especially wintry. Who's going to buy a t-shirt or a bathing suit when it's pouring with rain outside? It resulted in the prolonging of big bargains on winter merchandise."
The source added that the fact that Passover is in April this year "kept people receiving holiday gifts at work from spending what they got."
Shortly before the elections and the publication of 2018 financial statements by the publicly listed fashion groups and shopping malls, it appears that the first quarter of 2019 will not be a good one for the chains, and consequently not for the malls. Furthermore, the Retail Information Systems Israel (RIS) company, which gathers information from the cash registers of fashion chain about proceeds at shopping malls, published a report this week. Extraordinarily, it did not include give a numerical analysis for March.
At the same time, sources inform "Globes" that last month, the daily proceeds per square meter in shopping malls and power centers (in same stores) dropped 30% in March, the fall in fashion and footwear sales being even steeper. First quarter sales were down 13%, after falling 2.6-3.8% in January and 1.5-2% in February.
Actually, the trend is even more extreme. The full figures from RIS show that in the 12 months ending at the end of March, proceeds per square meter were down nearly 5% in malls and power centers. This goes beyond any statistical error or change in holiday dates; it is a real decline.
Not just the winter
In any case, RIS's figures for the fashion market in the first quarter are no fluke; they are confirmed by analyses of the financial statements of the public fashion chains and the real estate companies that own shopping malls.
The shopping mall groups' results for last year clearly show a downtrend in proceeds from fashion. Melisron, whose average monthly proceeds from fashion per square meter from in its regional malls fell 1.7% in 2018, also experienced a drop in proceeds in jewelry, personal care products, health and beauty, and supermarkets.
While the trend had a marginal effect on the commercial real estate companies' results, it took center stage in the reports by public fashion companies. When the numbers are analyzed, we see that there is a rather broad trend in which same-store sales are falling. We saw this trend well in the reports by Castro, which reported a 7.7% fall in same-store sales in clothing. The decline at Fox and Golf was more moderate.
Even if the groups had growth in sales and profits in 2018, it was a result of imports of new foreign brands, opening new stores at a high cost, or acquiring chains in Israel. Actually, growth came from new investments and streamlining. Existing business shrank, and this should be a warning signal for those active in the sector , who are already feeling the effect in the first quarter of the year, which was probably affected not only by the date of the Passover holiday and the long-lasting winter, but also to at least some extent constitutes continuation of a trend that began in 2018.
The market is waiting for the elections
As election day approaches, which is a day off from work for all Israelis, expectation is rising of special bargains that the fashion and other retail chains will offer the public. The aim is clear: to maximize revenue.
Published by Globes, Israel business news - en.globes.co.il - on April 7, 2019
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