A further 23 per cent said they were "on knife-edge" and their business' survival could go either way.
Sales in early August were up across the country but took a dive as Auckland returned to alert level 3.
Retail NZ chief executive Greg Harford said the survival of 10,000 retail businesses could be at serious risk over the next 12 months after the second lockdown.
"Retailer confidence had significantly improved through June and July, but took a hammering through August. Auckland retailers were able to sell online during the level 3 lockdown, [but] this still represents a small proportion of sales overall, and a big reduction in sales in the second half of August has been a key driver of the decline in confidence.
"Retailers operate on extremely tight margins. The average net margin in retail is just 3.6 per cent, which means that enforced closures have a massive impact on the sector overall. The wage subsidy has helped keep people employed over the past few months, but the absence of continued government support for retailers is likely to see job losses and business failures over the coming months."
The report outlined that the resurgence of community transmission of Covid-19 and trading restrictions in recent weeks had resulted in the drop in confidence.
Overall sales since the first lockdown in March are down 6.4 per cent on the same period last year.
About 73 per cent of businesses had also reported issues with their international supply chain in the report, and that sourcing stock was becoming an issue for many businesses.
"The major choke points for retailers are shipping products from overseas, and freight
entering New Zealand."
