Retailers Eye End of Spending Bubble

A perceived slowdown in the Israeli economy has major retailers worried, Haaretz says.

Tamir Ben Shahar of the Czamanski & Ben Shahar consulting firm says there is simply less money for consumers to spend.

“We’re beginning to feel a slowdown in the economy,” said Ben Shahar. “Wages after inflation aren’t rising and household expenses for items like housing and regular expenses are growing. That leaves less money for spending on retail items such as food and clothing.” When you look at overall spending compared to the overall average income of Israeli households, you find that for other than the top 30%, expenses exceed income, Ben Shahar said. “And now the spending bubble is bursting.”

The Central Bureau of Statistics substantiated the gloom on Sunday with a report that consumer spending during the first quarter fell by 2% on an annualized basis and by 4% on a per capita basis. Inflation in April, a month usually characterized by a spike in prices due to Pesach spending, rose by just 0.1%, an indication of relatively weak consumer spending power.

“When it rains, it rains on everyone,” said the owner of a well-known cafe chain who spoke of a 5% to 8% decline in sales since the beginning of the year. “When there are fewer people in the malls, you also see fewer people at cafes. Daily traffic is down, and people are sitting at cafes less.”

Retail Information Systems Israel said that data from 3,500 stores shows sales volume at malls in general declined by 5.2% during the first four months of the year, compared with the same time last year.

In its latest financial statements, the Fox apparel chain reported a 72% decline in first-quarter net profits and a 12% drop in revenues, but added that it isn’t seeing a drop in overall consumer demand.

The retail food sector is being hit. According to the StoreNext market data firm, in the two-week run-up to Pesach, supermarket sales were down by 1.6%, compared with last year. Beverage sales were down 5.1%, cosmetics and toiletries 2.9% and food sales 0.9%. First-quarter financial results for Super-Sol, the country’s largest supermarket chain and the only one to release those results this year, show a relatively dismal picture. The company attributes part of that to the timing of Pesach, but its sales would have declined 2.5% even if the influence of Pesach is factored out.

This article appeared in print on page 22 of the May 21st, 2014 edition of Hamodia.