Portuguese Retail Group Expects Lower Consumer Spending in 2013

Portuguese retail sales are set to decline again this year as consumers in the southern European country trim spending on everyday products to deal with higher taxes and unemployment, a trade group said.

Portuguese retail sales will continue to decline after they fell an estimated 2 percent in 2012 to 15.4 billion euros ($20.5 billion), Ana Trigo Morais, head of the Portuguese Association of Retail Companies, said in a phone interview. Retailers need to rely on discounts and other promotions to avoid a bigger drop in spending this year, she also said.

Prime Minister Pedro Passos Coelho has increased taxes by 3.7 billion euros this year through measures that include levies on tobacco and luxury goods as well as a 3.5 percent surcharge on income. His government forecasts the economy will contract 1 percent in 2013 after shrinking an estimated 3 percent in 2012, while the unemployment rate will rise to 16.4 percent from 15.5 percent last year.

“Portugal runs the risk of being perceived as an unfriendly country for investors in the retail sector,” said Morais. “There is big uncertainty as to how people will react to this huge tax increase,” she said.

To counter a slump in spending in Portugal, Jeronimo Martins (JMT) SGPS, the country’s biggest publicly traded retailer by market value, said on Jan. 10 it has focused on “aggressive” food pricing at its Pingo Doce supermarket chain in the country. The company is also expanding in Poland and relying on Colombia as its third market this year.

Sonae (SON) SGPS SA, another Portuguese retailer, formed a partnership in 2011 with an Angolan company to open a chain of hypermarkets in the African country while Groupe Auchan SA of France announced last year it would close one of its Jumbo hypermarkets in Portugal, news agency Lusa reported on March 26, citing Auchan.

To contact the reporter on this story: Henrique Almeida in Lisbon at halmeida5@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net

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