Bad weather comes at the right time for retailers

Bad weather comes at the right time for retailers

By Cameron Brewer - Newmarket Business Association

New Zealand retailers are showing some good resilience when you consider we’re into the seventh quarter of an international economic recession. In Auckland’s leading shopping district of Newmarket we have lost some businesses at the edges but interestingly we haven’t had any real shock exits from any big or established names. In fact there are plenty of retailers across the country still reporting comparable figures to previous years.

Interestingly, Eftpos provider Paymark reported that the value of retail spending nationwide was up 3.1% over Queen’s Birthday Weekend this year compared to the previous. It appears a lot of Kiwis are staying home this winter and shopping locally. What’s more the number of Kiwis permanently returning home from overseas is also up, a boost to both the housing and retail sectors say the economists.

Statistics New Zealand’s latest retail figures also show that an early and cold winter has helped those retailers selling the likes of winter woollies, gas heaters, and electric blankets.

The fact that the clothing and softgoods retail category had a record 12.6% monthly lift from April to May was consistent with the feedback we've had from fashion retailers.
With winter coming out of the blocks at the start of May this year it has been positive for the apparel sector and their winter ranges.

In past years winter has come much later meaning the consumer struggles to see the point of buying new clothes when spring is just around the corner. An early and cold winter, after a succession of Indian summers and mild winters, has motivated people to upgrade their winter wardrobes. A nice cold winter is also good for the shopping malls.

However we’re not kidding ourselves. It’s arguably as tough for New Zealand business, if not tougher, than it was during the 1997 Asian Economic Crisis or when New Zealand recorded 11.1% unemployment in 1992.

Fonterra is anticipating a challenging 2009/10 season for its 11,000 dairy farmers. While the New Zealand Institute of Economic Research predicts 60,000 job losses over the next 12 months – that’s over 1,000 Kiwis losing their jobs every week. In fact it could be more with one week in July seeing 1,342 people signing up for the dole.

For shopping precincts like Newmarket, the unemployment rate is critical simply because when people are out of work, their discretionary spending quickly evaporates. The Household Labour Force Survey, announcing the much anticipated June quarter unemployment rate, will make fascinating reading when it’s released on 6 August.

However let’s not forget that while Statistics New Zealand reported unemployment at 5% in the March quarter, the US and UK unemployment rates are fast approaching double figures.
Interestingly late last year the US reported the worst pre-Christmas spending figures in nearly 40 years. While Paymark in New Zealand reported that Christmas Eve broke “every single record” with spending during the whole of December also up on previous Decembers.

Admittedly a lot has changed since Christmas but I believe New Zealand retail is standing up against the storm relatively well. Interestingly the latest retail figures for May showed that 13 of the 20 core retail categories actually recorded increased sales, with overall core retail sales rising 1.6%. What’s more for 16 of the categories any sales movements were nominal.

Consistent with the fact that the country has been in an economic recession for the past 18 months, Statistics New Zealand concludes that “the total retail sales trend has been falling since January 2008” but most interestingly “has flattened in the past four months.”

It is not surprising that New Zealanders’ spending is flat-lining more than freefalling when you consider the different ways the consumer has benefitted in recent months. If you’re one of the 2.1million Kiwis currently employed, life is arguably better than it was.

The likes of interest rates on credit cards have fallen, the price of consumerables is down hence inflation has slowed to 1.9%, and we had two rounds of tax cuts in October and April. The end result is that most salary and wage earners arguably have more discretionary income than 12 months ago. However the missing ingredient is of course consumer confidence.
It is a challenging winter for retailers, but ironically the above-average rainfall and the well below-average temperatures have been one of the positives.

ENDS

© Scoop Media