Australia's retail environment appears to be even more difficult now than it was during the onset of the global financial crisis, says the chief executive of Michael Hill International, Mike Parsell.
The Brisbane-based, NZX-listed jewellery retailer released a trading update last week, saying business conditions across the Tasman, its largest market, were challenging and were putting pressure on margins.
That pressure would adversely impact half-year profit, the company said.
Parsell said the trading environment in Australia began to tighten up for Michael Hill in November.
"Over the Christmas period people were still shopping.
"But they were spending less, and certainly being cautious with purchasing on credit," he said.
"From a consumer point of view, there's just a lack of confidence [in Australia] at the moment."
In the trading update the company said same-store sales across the Tasman had fallen 0.5 per cent during the six months to December 31, to $177 million.
Conversely, same-store sales saw "solid" growth in New Zealand, Canada and the United States.
American retailers had a bumper 2011, although sales dipped last month, according to US Government figures just released.
Total retail sales in the US reached a record US$4.7 trillion, a rise of almost 8 per cent on 2010 and the biggest percentage increase in 13 years.
But Parsell said the situation in Australia was a concern.
"Really, the challenge for us is how we stimulate [Australian] consumers to continue to purchase our products," he said.
He said Michael Hill, which will release its full half-year result on February 16, would place special focus on giving customers a good experience in its Australian stores.
"We have to ensure that we're providing the products at the price-points that people want."
But he said extra discounting would not be a strategy used to deal with tightening consumer spending across the Tasman.
"I don't think it's about cutting prices - it's more about creating value and demand and inspiring people to buy your products."
Parsell said half-year profit, despite the impact of margin pressure in Australia, was still expected to be up on the prior comparable period.
"We're still in pretty good shape."
Half-year earnings before interest and tax were expected to be in the range of $33 million to $35 million, compared with $32.3 million in the corresponding period last year, the company said in its trading update.
Michael Hill shares closed down 4.49 per cent, or 4c, at 85c on Friday.
A trading update released by Kathmandu just before Christmas - which revealed lower than expected festive season sales, particularly in Australia - prompted a more than 25 per cent drop in the outdoor apparel retailer's shares, which are listed on both sides of the Tasman.
Risk-averse Aussie investors have been dumping retail stocks that show any signs of danger.
Shares in ASX-listed surfwear retailer Billabong shed more than half their value in December after the company revealed first-half profit may fall as much as 26 per cent.
And JB Hi-Fi stock, also listed on the ASX, took a big tumble after the electronics retailer issued a pre-Christmas downgrade.