Cash registers ring up good sales for listed retailers

By Peter V O'Brien

Friday 20th September 2002

Listed retailers continue to outperform average statistics for their industry.

Retail sales in the June quarter rose 1.2% on a seasonally adjusted basis but only 0.8% after removal of motor vehicle sales and servicing.

Latest figures from listed retailers, some of which go back before the three months ended June, show their sales were ahead of national statistics. Statistics New Zealand's figures are subdivided into store-type groups but on that basis the big companies still did well.

There was nothing unusual in the situation, because listed companies are much bigger than most of units comprising the sector. They have marketing and pricing clout to outperform one or two outlet operations.

Share-price performance in the past six months was excellent in most cases and mediocre in only two.

The table shows changes in share prices and percent profit gains/declines since The National Business Review last reviewed the sector in March.

As mentioned in March, New Zealand retail sales do not tell the full story for listed companies because several operate in Australia where intense competition and a different economic environment affect consolidated figures.

Clothing specialist Hallenstein Glasson's interim report for the six months ended February 1 (the final is due soon) said, for example, that a disappointing season in Australia was reflected in a 2.7% fall in half-year profit when compared with the corresponding period of the previous year.

Total sales revenue was 5.3% higher at $88.19 million (2001, $83.73 million). Australia sales increased only 3.4%, below expectations. Retail jeweller Michael Hill International also operates in Australia.

Sales in Australia for the year ended June were $NZ133.46 million, an increase of 10.4% on the $NZ120.85 million recorded in the previous year.

They were 62.3% of total revenue (63.9% in the previous year). Sales in New Zealand increased at a faster annual rate of 18% to account for 37.7% of the total, compared with 36.1% in 2001.

Those figures disguised the opening of an additional five stores in Australia during the year and only two in New Zealand.

The company said Australia provided a "pleasing result," given difficult trading conditions in the first five months and a margin erosion in that period.

Many New Zealand companies yearn to expand beyond this small market. The yearners include retailers but all groups going outside the country, irrespective of the sector, find the environment different from home.

Michael Hill's yearnings are taking it further than relatively familiar Australian territory. The company will open four new stores in Vancouver, Canada, this year, with a goal of having three operational by November.

"The plan is to open four stores each year for the next four years."

Michael Hill envisaged the Canadian subsidiary would break even in the second year. It said growth potential for Canadian stores was "enormous."

"In excess of 100 stores is a possibility over the next 10-15 years."

Maybe but the sharemarket might be cautious about the jeweller's ambitions until evidence is in the accounts that the decision was sound.

Experienced investors realise the Stock Exchange's retail "sector" is only a convenient grouping of organisations with substantially different operations. Hallenstein Glasson sells apparel, Michael Hill retails jewellery, Arthur Barnett and Kirkcaldie & Stains are department stores, Pacific Retail is involved in appliance and computers, Restaurant Brands moves food and The Warehouse seems to sell everything here and in Australia at discount prices.

Separating consumers from their money is all the companies have in common. Their success depends heavily on the consumers' discretion

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