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NZ retailers say December quarter was challenging

Only half of NZ businesses were able to hit their sales target for the last quarter, recently released data showed.

The latest Retail NZ Retail Radar Report revealed that despite the busy Black Friday, Christmas and Boxing Day sales periods, only 45 per cent of retailers hit their sales targets for the quarter ending December 31.  

While some retailers were performing well, there was a large proportion of businesses that were consistently underperforming, according to the Retail NZ report. 

The report also revealed that while there were positive results reported in pre-Christmas spending in December, and strong sales reported for Black Friday at the end of November, overall, October and November 2019 were not good sales months for many retailers.

The Retail NZ Sales Index showed that sales were down by 7.6 per cent in October and 2.8 per cent in November compared to the previous corresponding period, but up 4.1 per cent overall in December.

While Black Friday and Christmas saw increases in spending, survey respondents indicated that margins were depressed by cut-throat competition, and retailers continue to report a lack of customer confidence, driven negative perceptions about the economy and the direction of government economic policy.

“This suggests that consumer spending patterns are shifting to take advantage of the great deals on offer around key sales dates and that, overall, spending growth is modest,” said Greg Harford, Retail NZ chief executive.

Harford said there is strong competition in the market both from domestic Kiwi businesses and foreign websites, and he said there is real pressure on margins because of discounting across the sector. 

Twenty-seven per cent of retailers said they are planning to reduce staff numbers over the next quarter.

“While it is not unusual for retailers to shed some staff after the busy Christmas period, the proportion is high,” Harford said. “Retail is a low-margin business, and retailers are being driven to improve productivity and reduce staff numbers on the back of higher wage rates.”

According to Harford, feedback from retailers suggest that substantial increases in the minimum wage, and the flow-on effect into other wage rates is not sustainable in an environment where there is real pressure on margins and sales growth is slow.

Despite the underperformance reported last quarter, nearly a third of retailers said they are expecting the first quarter of 2020 to be brighter, because of the summer period, peak tourist season and an expected improvement in house prices, especially in Auckland.

There is, however, significant concern about foreign competition, wage increases and continued economic uncertainty.

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