Christmas yet to weave its magic

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In a television advertisment for El Corte Inglés, an actress depicting a young worker at Spain’s biggest department store group changes a stray dog into a horse and carriage to whisk her home after a long day.

Executives at the company, and its competitors, might be wishing that similar magic could be performed on the Spanish consumer, as the country’s first recession in 15 years casts a dark cloud over the Christmas period.

Unemployment is 12 per cent and rising fast, putting a damper on shoppers’ spirits.

After more than a decade of year-on-year growth, retail associations expect a 5 per cent to 10 per cent drop in Christmas sales this year, with most segments being affected.

In spite of the downturn, El Corte Inglés has resisted the urge to pre-empt the deep discounting of Spain’s traditional January sales – a marketing tactic being used by some retailers in the country.

However, it has used the 40th anniversary of its store loyalty card to offer pre-Christmas discounts of up to 15 per cent on electronics, children’s clothes and white goods.

It is also offering interest-free payment schemes to its 10.2m cardholders as part of its crisis-beating campaign.

Finally, last week it launched a week of online specials, with discounts of up to 40 per cent on a limited number of items.

The company, which reported profits for 2007 of €747m, up 5 per cent, is playing down the importance of so much discounting at once.

“All these promotions have been used before,” the company said.

However, most Spanish retailers are looking to the holiday season to smooth out the results of a bumpy trading year.

Clothes retailers have been hit particularly hard: same-store Spanish sales at Inditex, which owns the Zara brand, fell 5 per cent year-on-year in the three months to end-October, according to analysts, who expect the trend to continue into the crucial fourth quarter to the end of January.

Globally, however, Inditex is holding up better than many of its competitors, with like-for-like growth for the period of about 1 per cent.

Its Swedish rival Hennes & Mauritz, by contrast, recently reported a 4 per cent year-on-year fall in same-store sales for November, after 2 per cent declines in October and September.

Cortefiel, a Spanish fashion retailer hit hard by the consumer downturn, is offering discounts of up to 50 per cent in the lead-up to Christmas.

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