Jan 15, 2014
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Bleak start for French winter sales amid economic torpor

Jan 15, 2014

PARIS, France - French shoppers shunned the start of the winter clearance sales season this year against a background of a stalled economy, unseasonably mild weather and competition from year-round promotions.

Retailers interviewed by Reuters said clothing sales fell 10 percent in the first week of the five-week winter ritual that began on January 8 and typically sees hopeful shoppers queue on the first day outside big department stores like Galeries Lafayette in the early morning before the main doors are thrown open.

The sales started on January 8 in France | Source: Reuters

The sales, whose timing is strictly regulated in France and which run through February 12, will test consumer confidence as households avoid big purchases amid high unemployment and dwindling purchasing power.

France has some of the strictest trading laws in Europe, limiting sales to two five-week long periods in winter and summer, in an effort to protect smaller retailers.

The euro zone's second biggest economy is showing tentative signs of improvement, but mixed data releases suggest it is recovering less quickly than some other European countries, such as Germany and the United Kingdom.

Consumer spending, which on manufactured goods rose just 0.1 percent in November, is an important motor of the French economy. France is set to eke out growth too weak to get unemployment falling as President Francois Hollande has pledged.

"It's not good. Consumption remained sluggish and the weather did not help," said Jean-Marc Genis, head of the FEH clothing retail federation, which represents chains including Etam, Zara (ITX.MC) and H&M (HMb.ST).

Five-day revenue was down 5-10 percent on the year, he said.

The sales traditionally provide an important boost for clothing stores, which often have a stock of winter clothes to sell.

Discounts offered in the first days of sale were as high as 50 percent but year-round promotions have also taken the shine off the clearance season.

"Since September, retailers have been beefing up their revenue with promotions. This left shoppers with no room to keep on spending in January," said retail analyst Aude de Moussac from research firm Kurt Salmon.

Mild weather in December and early January also lowered demand for heavy clothing, such as coats and jackets.

Bernard Morvan, head of the Federation Nationale de l'Habillement, which represents nearly 45,000 independent clothing stores, said sales in the women's ready-to-wear sector fell more than 10 percent year-on-year in the first week.

At French department stores - which in big cities are more resilient to the bleak climate due to their attractiveness to foreign tourists and their focus on luxury goods - sales were flat, said Claude Boulle, head of the UCV union that represents stores such as Galeries Lafayette and Le Printemps.

At the Printemps Haussmann department store, where 40 percent of sales come from wealthy tourists from China and Russia, sales were "ok, nothing more," Printemps group CEO Paolo de Cesare said.

The Bank of France estimated this month that the economy rebounded in the final quarter of 2013 after a slight contraction in the previous three months. However, monthly purchasing managers surveys suggest the private sector is still seeing business activity weaken.

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