Retailers over-optimistic of Olympic surge in sales, warns top credit insurer

An oversupply of stock and difficult trading conditions could leave small high street retailers with a severe post-Olympic hangover, according to a leading credit insurer.

Euler Hermes says those businesses that have failed to manage their stock levels accurately, or who have over-estimated the uplift in retail sales expected from the Olympic surge, are those that pose the greatest risk.

Notwithstanding the latest CBI figures* that suggest retail sales are improving, Kieron Franks, risk account manager for Euler Hermes, believes any spike relating to the Olympics has been somewhat overstated.

“Many of our clients supplying retail have not reported any significant uplift in sales and neither are they now expecting it,” he said.

Hopes the Olympics may help to kick-start retailers’ fortunes may also be somewhat over-optimistic.

“Many visitors to the Games will be more interested in sport than tourism, and so their behaviour may mirror businessmen attending a convention who tend to spend little on leisure and entertainment,” said Franks.

Businesses themselves are beginning to question the benefit of the Olympics, citing the likely impact as being unknown. Although most admit to a feel good factor resulting from the Games, Euro 2012 and the Diamond Jubilee, Franks believes this has yet to translate into sustained additional sales.

“We believe that any boost will be temporary,” he said.  

“Estimates suggest the Olympics is likely to generate retail sales of around £200m in Q3 2012, but that is less than 1%of total spending across the year,” he said. “Gains will inevitably be biased towards London.”

*CBI Distributive Trades Survey – 27 June 2012.