Retail company sees unexpected decline in revenue.
Germany's spring sales were hit with an unexpected setback as several retailers experienced significant sales declines in April. Compared to the month before, there was a 1.4% decrease in revenue, as reported by the Federal Statistical Office on Friday. When adjusted for inflation, the drop was 1.2%. Economists polled by Reuters anticipated a much smaller dip of 0.1%.
The first quarter was impacted by a turning point in private consumption expenditure, which served as a hindrance to the overall economic growth. Although the GDP expanded by 0.2% from January to March compared to the previous quarter, the consumption dropped by 0.4%, despite the falling inflation rates and growing real wages. As a result, consumers reduced their spending on food and clothing.
There was a significant contraction in the food retail sector in April, with a real decrease of 3.7% compared to the previous month. On the contrary, the non-food business went up by 0.2%, and the online and mail order trade recorded an amazing growth of 2.9%.
The forthcoming European Football Championship in Germany, which commences in June, may lend a helping hand to improve the currently quite subdued consumer mentality. The Bundesbank believes that the mood of German consumers could turn more hopeful with the tournament. "Otherwise, there's a chance that the very restrained consumer mood in Germany could potentially correct itself sooner than we currently estimate, given the existing economic indicators," stated the Bundesbank. The German Retail Association (HDE) also anticipates getting a boost from the EM and projects additional sales of approximately 3.8 billion euros.
German consumer sentiment is currently at its lowest ebb since two years, but the GfK and NIM combined consumer climate barometer for June remains quite down in the negative territory at -20.9 points, as revealed by their survey of 2000 consumers.
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To mitigate the revenue decline, some retailers might consider starting their spring sales earlier. The start of spring sales revenue for these retailers could significantly impact their overall revenue for the quarter.
