- Sales fell sharply in Germany for the second successive month following the strong growth seen late last year, attributed primarily to the ongoing impact of January's increase in sales tax. In a sign that the impact of the VAT rise is fading, the drop in German sales was less steep than seen in January (an index of 45.0, up from 43.9).
-Only very modest growth of sales was again seen in Italy (the index fell from 50.6 to 50.4) as consumers remained cautious in the face of political and economic uncertainty. However, the recent modest growth represents an improvement on the sales declines seen late last year.
- In contrast, sales growth picked up markedly in France, accelerating for the first time in four months to hit a four-month high and showing the strongest growth of the three countries for the first time since last October (the index rose from 50.3 in January to 54.7).
Sales were higher compared with the same month one year ago, the year-on-year index rising from January's 10-month low of 50.3 to 53.2. A sharply improved rate of growth of year-on-year sales in France, plus a return to growth in Italy for the first time in five months, contrasted with a slight decline in year-on-year sales in Germany for the second month running.
Sales by sector
The strongest sales compared with the same period a year ago were seen for toiletries & cosmetics, followed by household goods and then food & drink. Clothing & footwear and autos both saw sales slip on a year ago, with autos seeing by far the weakest performance. Although car sales in Italy were again boosted by the government's financial incentives to upgrade cars to more efficient new models, sales fell at an increased rate in Germany due to the sales tax increase.
Sales against targets
Sales fell short of targets to the greatest extent for seven months in February (an index of 42.4 from 45.3 in January). Italy saw the largest shortfall, closely followed by Germany. Targets were missed in all sectors, with the biggest disappointment seen for autos (notably in Germany).
Having correctly signaled the weakness of sales in January and February, retailers' expectations of beating planned targets in the coming month improved sharply, registering the strongest level of optimism for three months to suggest that sales growth will recover in March. The index rose from 54.9 to 59.6. Sentiment about beating sales targets rose strongly in both Germany and France, but fell steeply in Italy.
Prices and margins
Prices paid for goods by retailers rose at a markedly weaker rate than previous months, the rate of inflation slipping sharply further from November's survey record high to a 13-month low in February. The prices index recorded 56.6, down from 59.1 in January. The slower rate of inflation largely reflected a substantial easing in the rate of price increases in Germany, with previous months' growth having been boosted by the VAT rise.
Retailers' gross margins deteriorated at the fastest rate for six months in February (the index dropped from 45.4 to 44.3), reflecting rising input prices, poor sales and weak pricing power in all countries, exacerbated in Germany by the need for many retailers to absorb the recent VAT rise.
Employment
Eurozone retail sector employment fell marginally for the second month running in February, contrasting with the steady (but modest) growth seen in the nine months to December. The index recorded 49.5 from 49.4 in January. Slight rises in staffing levels in France and Italy were offset by an increased rate of decline in Germany, where pressure on margins and the sales downturn following January's VAT rise prompted retailers to cut staff costs.
Retailers' buying and stock trends
The amount of goods bought for resale by Eurozone retailers fell for the second month in a row in February, having risen in the prior ten months, attributable to a further marked fall in Germany. However, the rate of decline eased on January's 19-month high (an index of 48.7 from 47.0). The drop in buying caused euro area retailer stock holdings to also fall for the second successive month, although the stocks index rose from January's three-year low of 48.6 to 49.4, indicating only a very modest reduction in stock levels.
