The Business Herald’s markets and banking reporter.

Hopes high for better Christmas

Consumer spending may be picking up and Christmas will provide a welcome boost to retailers' coffers. Photo / Sarah Ivey
Consumer spending may be picking up and Christmas will provide a welcome boost to retailers' coffers. Photo / Sarah Ivey

Early December is a nerve-racking time for retailers as they prepare for crucial holiday season trading.

High streets are decked out in festive season cheer, but people often leave their Christmas shopping to the last minute.

Retailers say it's hard to pick when the big rush will be, and whether it will deliver as much to the bottom line as they hope.

Retailers Association chief executive John Albertson says last Christmas was not great for the sector.

Spending last December rose 3.9 per cent, although 1 percentage point of that rise was the result of last year's GST increase, according to electronic transaction processor Paymark.

Albertson says the All Blacks' World Cup win, as well as the tidy completion of the general election, could drive festive season spending this year.

"The last thing we wanted was uncertainty around an election result and we're not going to go through that," he says.

The Warehouse chief executive Mark Powell won't say how he expects the country's biggest general merchandise retailer to perform after a disappointment in the last two months of last year, when revenue fell 2.7 per cent compared with the same period in 2009.

"We're optimistic, but it's a challenging market at the same time," Powell says.

"Christmas [trading] ain't over until December 24, so I'll hesitate to make any statements on the trend."

Kathmandu chief executive Peter Halkett says the NZX-listed outdoor apparel retailer is expecting difficult Christmas trading after a relatively strong performance by the company last festive season.

"I think things are [getting] tougher and tougher with what's happening on the global front."

In November the ANZ-Roy Morgan consumer confidence index fell for the third consecutive month to its lowest level since May.

ANZ's head of market economics, Khoon Goh, said the survey had been done after the Rugby World Cup final.

"Either the celebrations were short-lived and the hangover period has begun, or the ongoing uncertainty in the global economy is starting to put a dampener on things," Goh said at the time.

"We suspect it's more the latter."

Fear of the economic woes of Europe and the United States sending the world into another recession could make shoppers less keen to spend up large.

Another challenge for businesses is the buying power of the New Zealand dollar, which puts the squeeze on local retailers by making overseas shopping websites a compelling option for many buyers.

BNZ economist Craig Ebert says consumer confidence is still looking reasonably robust and the job market is moving forward.

"The two counterweights are what's happening globally and the extent to which people have got their debt under control," Ebert says. "Those will be the two main headwinds [for retailers this Christmas]."

And he says the World Cup's impact on consumer spending has made it difficult to identify a trend in the monthly retail statistics.

Seasonally adjusted electronic card transactions at retailers rose 1.5 per cent in October, the biggest gain since April while the actual value of sales rose 6.3 per cent when compared with the same month last year, according to Statistics New Zealand.

Ebert says there is a danger in attributing all of that increase to the World Cup.

"In fact, the underlying truth might simply be that consumer spending is picking up," he says.

Barbara McCamish, who owns YmamaY, a children's clothing label that runs a concept store in Newmarket, says she was feeling a little gloomy about the outlook for festive season spending last week, but business had picked up over the past five days.

"A lot of [the increase in business] is Christmas shopping," McCamish says.

Briscoe Group managing director Rod Duke is upbeat about his expectations for the listed company's retail chains - Rebel Sport, Briscoes and Living & Giving.

"We're cautiously optimistic that we'll do okay.

"However, I think the market generally is going to be a bit subdued," Duke says.

Terry Cornelius, executive director of Auckland department store Smith & Caughey's, says last Christmas was tough, but this year is looking more positive.

"I think people are a bit sick of being down in the mouth and want to enjoy themselves again and treat themselves a bit," Cornelius says.

Toy manufacturer Mattel polled 1000 people last month and found one-third had already completed their Christmas shopping through buying gifts during the year.

Another 23 per cent began their shopping in mid-November, while the rest said they would start this month.

- NZ Herald

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