Chill adds heat to retail sales

Unusually low temperatures mean stronger turnovers for retailers but economists say the broad trend for retail is still weak.

The coldest winter in 34 years has retailers' tills ringing as Kiwis flock to the shops for winter clothes and heaters.

On Friday clothing retailer Hallenstein Glasson said bumper winter sales meant it would report a rise in profits for the year. Others are expected to reveal similar boosts as they head into the reporting season.

Last month was the coldest June since 1972 and in parts of the South Island it was the coldest in half a century.

But with rising costs beginning to squeeze margins, some are wishing the cold snap had arrived sooner.

Macquarie Equities retail analyst Warren Doak said the lack of clearance sales among the big retailers so far was a positive sign for the season.

"It's all about selling product at full margins and you haven't seen anyone with a clearance.

"The Warehouse have had nothing off apparel and it's sold well - every sale at full margin.

"Stock levels will be pretty low so they'll clear out the stuff then really be looking to see what comes in for Christmas."

Although winter was fairly important in the calender, it lagged the Christmas quarter, said Doak.

"So really the question is, do we get a decent early start to summer and what is the economy going to do during that period?"

Retail sales bounced back 1.3 per cent in May after falls in March and April - mostly on the back of higher fuel prices - but economists said the broad trend for retail was still weak.

The Warehouse has hinted at strong May and June sales, raising its after-tax earnings forecast for the full year to July 30 by 12 per cent to $95 million-$99 million from $83 million-$88 million. Despite the slow start to winter, sales for May and June were 5.9 per cent ahead of the same time last year, with seasonal products such as manchester, apparel and appliances top sellers in the colder weather.

Postie Plus, due to report in September, is likely to have been playing catch-up since May when it said disappointing April trading had put its full-year net profit forecast of more than $5 million under threat.

Chief executive Ron Boskell was confident of sales recovering in the fourth quarter and intended marketing seasonal products strongly at its Postie Plus, Arbuckles and Baby City stores.

Briscoe Group chief executive Rod Duke has called for a "normal, cold winter", to help boost the season's sales at its homeware stores and his comments last week - that the weather had been good - augur well for the group's half-year to August 31.

Despite the winter boost, trading conditions were tightening as costs rose, said Goldman Sachs JBWere economist Shamubeel Eaqub.

"They're still getting the margin squeeze from costs increasing at a much faster pace than prices and they're not able to pass on costs because demand conditions are obviously weaker than they were."

Macquarie's Doak believes The Warehouse could be the beneficiaries of that.

"You can't go lower and it is without a shadow of a doubt a far better shopping proposition today than it was a year ago. And people will see that.

"So [although] no one's immune to a down market [The Warehouse] ought to be more immune to it than most."

The Retailers Association's northern regional manager, Russell Sinclair, said the broader retail market had flattened off generally in the past two months.

"Consumers are aware their rates are increasing, mortgage rates are going up and fuel prices are having an impact on their discretionary income.

"All of those things are making consumers cautious about things they don't need in terms of spending."

Some of the offers being made in appliance and furniture stores - no deposit and interest free pushed out to two years - suggested retailers were feeling the downturn and wanting to move product, he said.

The $2 shops and book stores had not been noticeably affected and stories of good growth were still coming from bike shops and pet stores.

Although winter was traditionally a quieter time of the year, trading had dropped beyond what many were expecting.

He said it would have been better if the cold snap had come a bit sooner.