Discretionary spending drives NZ retail sales

Blurred Defocused Background Of People Walking On The Road With Vintage Multicolored FilterNew Zealand shoppers relaxed their purse strings in 2015, indulging on blockbuster movies, holidays, telecommunications, personal grooming, food, home electronics and fashion.

Kiwi Property CEO Chris Gudgeon says that after several years of spending restraint, New Zealand consumers enjoyed themselves, as evidenced by a pick-up in discretionary spending over the course of 2015, capped off by a very solid month for retail sales in December.

“Economists forecast that consumer spending would show robust growth in 2015, buoyed by improving household incomes, low mortgage rates, strong house prices and net migration – and we were certainly pleased to see that forecast realised,” said Gudgeon.

Analysing retail sales data on a like-for-like basis across Kiwi Property’s six New Zealand shopping centres, the big category winners of 2015 were cinema operators, with sales surging 9.6 per cent, along with commercial services (most notably travel and telecommunications) up 9.4 per cent, pharmacy and cosmetics up 6.8 per cent, personal services up 5.1 per cent and fashion, a subdued performer in previous years, showing growth of 1.6 per cent.

“While the year was undoubtedly a stronger year for many retailers, the standout month for retail sales came in December; this was a Christmas our retailers could celebrate,” Gudgeon said.

Kiwi Property’s total portfolio sales were up by 5.3 per cent in December compared to the same month in 2014 for its centres in Auckland, Hamilton, Palmerston North, Wellington and Christchurch (3.8 per cent on a like-for-like basis).

“What we have seen over the past year – and even more pronounced during the Christmas period – is consumers approaching their discretionary spend with less caution than we have seen in recent years,” Gudgeon said.

On a like-for-like basis, NZ retail sales for the year to December across Kiwi Property’s retail centres, which include LynnMall and Sylvia Park in Auckland, showed:

  • Department stores were up 6 per cent for the year, driven predominantly by double digit growth from Kmart, where shoppers responded positively to its store upgrade and merchandise rationalisation program.
  • Cinemas were up 9.6 per cent for the year, helped along by cinematic bonanzas such as Star Wars and Spectre, while food was up 3.5 per cent, in step with the increasing importance of dining and entertainment in an overall shopping centre experience.
  • Overall, specialty retail sales were up 2.7 per cent for the year.

“The real emerging opportunity – and it has been on our agenda for some years now – is the potential for shopping malls to be a social enabler,” Gudgeon said.

“We are continually refining our retail mix, with our emphasis in recent years on providing our shoppers with greater diversity of food – including both indoor and outdoor dining options – as well as improving the availability of leisure and entertainment facilities.”

In November last year, Kiwi Property launched the $39 million redevelopment of LynnMall, opening its successful ‘The Brickworks’ outdoor dining lane and a new cinema precinct, returning cinemas to New Lynn after a 15-year absence.

“Projects like this help to redefine the way communities meet and socialise, and we’ve been impressed by the success of this project as our West Auckland shoppers enjoy an urban dining experience they may have previously had to come into the city for,” Gudgeon said.

Just one month after opening, LynnMall sales growth of 11.9 per cent was recorded for December 2015 compared to the same month in the prior year. Similarly, Centre Place, which Kiwi Property redeveloped in 2013 to add an outdoor dining lane, improved retail mix and refreshed cinema offer, grew 14.3 per cent in the December period.

Gudgeon said the New Zealand economy had entered 2016 with positive momentum in terms of consumer spending, and expected retail sales to trend in line with nominal GDP growth over the course of the year.

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