Analysts say it could be an "average" Christmas period for retail sales. Photo / Fiona Goodall
Analysts say it could be an "average" Christmas period for retail sales. Photo / Fiona Goodall
Predicting retail sales is much like predicting the weather in this country.
The two are entwined - and can change unexpectedly.
The country's largest retailers are hoping for good weather and an increase in sales over the all-important Christmas trading period. The last quarter is considered crucial for retailers, whosetrading activity in the last three months of the year make up a sizeable chunk of their annual result.
With consumers now feeling more confident than they were earlier in the year and warmer weather starting to arrive, coupled with low interest rates, some of the country's NZX-listed retail companies say conditions are good for a positive sales period ahead.
While Briscoe Group, The Warehouse Group and Michael Hill International are quietly confident of growth and profit to be made in the quarter, Milford Asset Management senior analyst Frances Sweetman anticpates the trading season will be "average".
With Black Friday growing in popularity among consumers due to frequented sales, and the US commercial holiday the day after Thanksgiving now considered to officially kick off the Christmas spending season, this means lower margins for retailers albeit savings for the consumer, are coming earlier than they used to.
Black Friday falls on the last Friday in November this year, which means that the spending season is more compact with one fewer weekend between Black Friday and Christmas.
"The New Zealand consumer is robust but still very price-sensitive so it really depends on how the retailers respond across this key sales period," Sweetman said.
Rod Duke, managing director of Briscoe Group, said sales momentum was an important indicator it used to anticipating sales growth over the Christmas quarter.
"At this point in time given our third-quarter sales were pretty buoyant were actually looking at our last quarter which is the Christmas period a little more positively than we might have been six months ago," Duke told the Herald.
Warm weather was good for business, and it encouraged people to get out and about and spend. He said he anticipated an increase in sales compared with the company's last quarter in the prior year, and increase in online sales.
"Our non-bricks and mortar sales these days are about 11 per cent of total revenue ... I don't know whether that is going to change positively, a lot, but we have expectations that it will certainly be greater than last year and probably over that period a higher proportion of sales."
Duke said the company wrote about 40 per cent of its revenue between October and the end of January. The company was hoping for "normal weather" in the next few months to encourage sales, he said.
Briscoe Group managing director Rod Duke. Photo / File
Warehouse Group chief executive Nick Grayston said the quarter ahead would be an "interesting one" for the company, which had changed its pricing model and launched an e-commerce business in the year.
He said Black Friday was now considered the start of the Christmas sales season.
"The trend has been towards Black Friday becoming more and more important. As someone that went through the weaponisation of Black Friday in the US, I'm sad to see it becoming so important here," Grayston said.
"It can become a bit of an arms race about who can out-discount each other and who has the deepest pockets and it is a zero-sum game, but customers are excited about it and it really kicks off the Christmas season."
He said it was hard to predict whether there would be a increase in spend in the quarter for the company compared with the year earlier.
"The other intangible is the weather.
"We had good first-quarter sales and so that is encouraging, we're in a better condition to be able to be better in terms of everything we do compared to this time last year."
Warehouse Group subsidiary TheMarket is gearing up for its first Christmas trading period. Company chief executive Justus Wilde said the website's key indicators of a strong Christmas quarter were increased traffic and research activity within October and November, and spikes in early sales events.
"We expect Christmas shopping to shift earlier with increasing chunks of traditional December spend moving to November," Wilde said.
Daniel Bracken, chief executive of dual NZX/ASX-listed Michael Hill International. Photo / Supplied
Michael Hill chief executive Daniel Bracken said the jewellery retailer was prepared for the Christmas season and confident of a "strong performance". He agreed that the season had begun earlier than usual.
The key metrics the company monitored at this time of the year to indicate a strong sales period was footfall, average transaction value, conversion and items per transaction.
Michael Hill had already experienced an increase in online traffic, Bracken said.
Kathmandu and Hallenstein Glasson Holding were contacted for comment. Kathmandu declined to comment, Hallenstein Glasson did not respond.
Milford Asset Management's Sweetman said Christmas was not such an important trading period for Kathmandu, which did a large chunk of its sales over Easter and in winter.
Though, she said, a warm and long summer would be good for sales of its outdoor and camping equipment.
She said Hallenstein Glasson was under pressure from increased competition with new retailers entering the New Zealand market for the first time.
"They are operating in a tough market, but they are managing to perform quite well."
Sweetman said she believed the Christmas trading season would be largely dependent on the weather.
"When I look at all the indicators, I think it will be an average sales season.
"We've seen a little bit of wage growth with minimum wages growing throughout the year so the consumer is in good condition, but as to if they are prepared to go out and spend a lot this Christmas, I'm unsure."
The removal of GST threshold to include tax on all items $50 or over, which comes into effect on Sunday, could work in New Zealand retailers' favour this Christmas, she said.
