Turkish retail sector facing ‘most catastrophic’ times amid lira plunge

ISTANBUL

A leading retailer has said the sector has been experiencing its “most catastrophic” times due to heavy losses in the value of the Turkish Lira, which has hit purchasing power, and a number of new regulations, noting that revenue losses have hit up to 40 percent. 

Tekin Acar, the chair of Tekin Acar Cosmetics and vice chair of the Category Merchandising Association, said there was a rising number of financially distressed retailers and various uncertainties will likely trigger an outflow of foreign investments. 

“We have never faced such uncertain times. We don’t even know which new regulation will come out next. No investor will pour money into a country where anything can happen at any time. I am not just talking about the foreign exchange pressure or high rents,” Acar told reporters on Jan. 20, as quoted by Reuters. 

He noted that many local retailers have gone out of business while a number of foreign brands have quit the Turkish market. 

Acar also added that retailers with serious financial problems are unable to declare bankruptcy due to the ongoing state of emergency after the July 2016 coup attempt.

According to Acar, the reasons behind the negative outlook in the sector are skyrocketing costs due to the sharp increase in foreign exchange rates and the euro-based mall rents, the decreasing trend in people’s purchasing power, the restriction in the number of installments in credit card payments, the additional customs duties on non-EU products, and the dramatic fall in tourist numbers. 

“All these factors have pushed down revenue by 30 to 40 percent … There are many retailers who can only just pay their rents … Our business activity has plunged,” he said. 

“Consumers used to be able to buy cosmetics products through nine installments by credit card. They cannot do that anymore. There has been a decline of around 40 to 50 percent in our sector’s revenue. Douglas has exited the Turkish market, and I am closing down my own stores one by one, like many others,” Acar said. 

The head of the Mall Investors Association (AYD), Hulusi Belgü, said the association has been in contact with several banks to ease forex pressure on retailers due to store rents in malls. 

“The support from the malls to retailers has increased by up to 16-18 percent in order to decrease the negative impact of the additional taxes, the minimum wage increases, and the forex hikes,” Belgü said in another press meeting on Jan. 20, as quoted by Reuters. 

He also noted that the return period for mall investments had extended from 15 to 16 years to 20 to 22 years. 

“This will likely push down the investor appetite in Turkey,” Belgü added. 

According to the association data, malls closed the year with 100 billion liras in revenue, adding that the 2017 expectation was 110 billion liras.