Retail News Update

Au Printemps and Galeries Lafayette, France’s biggest department stores, said summer sales are rising at less than half last year’s rate even after discounts of as much as 50 percent on shoes, bags and dresses.

The country’s semi-annual, so-called Grand Sale failed to spur demand after consumer confidence fell to a record low last month and inflation quickened to the fastest pace in 12 years. Smaller retailers Jonak and Maje say they cut prices by as much as 70 percent from the start of the six-week summer sale.

“We started with aggressive discounts from the beginning,” said Cecile Deuez, who runs a Jonak shoe store off Avenue de l’Opera in Paris. “People are definitely holding back this year. We practically had to shock them into buying.”

Revenue at Galeries Lafayette in Paris rose 5 percent in the first week of the sales, down from last year’s 10 percent gain, according to spokeswoman Aziza Bouster. Sales at the Printemps store on Boulevard Haussmann in the capital rose 3.8 percent from 10 percent in 2007, director Pierre Pelarry said.

“Spending is clearly on a downward trend,” said Jean- Christophe Caffet, an economist at Natixis in Paris who expects the French economy to have grown 0.1 percent in the second quarter, down from 0.5 percent in the first.

Still, the cuts have lured throngs of shoppers after a three-week “drought” before the sales began, Deuez said. Last year, the pre-sale hiatus in shopping only lasted a week, she said. Almost 75 percent of French shoppers typically wait for the sales to buy most of their clothes and household goods, Paris-based pollster Ifop said in January.

`Deteriorating Climate’

The sales account for about a quarter of the annual revenue at Galeries Lafayette and Printemps, and for about 20 percent at smaller retailers such as Maje, an upscale clothing store in central Paris, the companies said.

On a day last week in Paris, summer bargains included dress heels with silver straps selling for 45 euros ($70), compared to the original price of 149.99 euros.

“The consumer climate is clearly deteriorating,” Jean- Noel Vielle, a fund manager at KBL France Gestion in Paris said in an interview. “While we don’t yet have hard numbers, it’s clear that the climate is very difficult for retailers, especially non-food retailers. I don’t think the sales are helping them a great deal.”

Sales have been “lukewarm,” Charlotte Cornilleau, who runs a Maje outlet, said as she eyed customers browsing in her store. “We can really feel consumer confidence is slumping. It’s quite evident.”

`Not Enough’

A poor showing at the summer sales damps hopes for a revival in consumer spending, the main engine of French growth. In March, France’s government cut its growth forecast for 2008 to between 1.7 percent to 2.0 percent from 2 percent. Earlier, it had been expecting 2.25 percent.

The government plans to allow retailers to hold sales and offer discounts more often. The measure is part of its new law designed to kick-start the economy.

Retailers would be allowed to hold sales four times annually and offer discounts throughout the year as long as they don’t sell below cost, Finance Minister Christine Lagarde said at the June 25 official opening of the summer sales.

“The law is not enough,” said Serge, director of a Yumi Mazao fashion store in Paris, who declined to give his full name. “Retailers should be able to set the prices they want throughout the year.”

The new rules will shorten summer and winter sales periods to five weeks and introduce two two-week periods in which retailers can cut prices.

The law “will only encourage people to wait even more for sales and spend less in between,” said Maje’s Cornilleau. “The only thing that’s going to help is higher salaries.”