Changing Dynamics of Retail Industry in New Zealand

According to Retail NZ, the retail industry is an important part of the economy and has an impact on almost every New Zealander, every day. It is a market that is highly dynamic; constantly changing to meet consumer demand and competitive pressures. The industry is highly diverse, covering everything from the family grocer to high-end fashion, cars, fuel, and building supplies.

As per Retail NZ, in 2018, a significant part of the retail industry is online and stands at around 8 per cent of total retail sales when comparing like for like categories (excluding motor vehicles and parts, fuel, accommodation, food and beverage services). If we exclude groceries and liquor, online sales account for 11 per cent of total sales. In comparison to other similar countries, NZ’s online shopping penetration is approximately average. Australians also do 8% of the shopping online, and in the US, it is 9%. However, UK and China have higher penetration at 19% and 23%, respectively.

In 2018, NZ’s total annual online retail spending amounted to $4.4 Bn. Of that, about 32 per cent is spent with offshore merchants. By transactions, offshore merchants account for around 45 per cent of trade, but this is expected to increase over time.

New Data from Retail NZ Shows Disruption in Retail Sector

The sales during the month of April was down by 79.8%, as per the latest Retail NZ Sales Index. The survey of retailers also shows that things are not good under the Alert Level 3 restrictions. The online sales under Alert Level 3 has increased by 350%. However, the overall sales are down by about 80 per cent on an average.

The sales throughout the sector have collapsed and, even the online trading, which has been recently permitted, is not delivering the sales which can recover the retailers from the economic disruption of the last few weeks. While the sales are down, on an average, by 80%, fixed costs which are incurred by retailers continue to increase. The coronavirus restrictions would mean that survival of many retail businesses would be difficult.

Let us have a look at some of the listed retailers of New Zealand.

Briscoe Group Limited (NZX: BGP)

Briscoe Group Limited’s stores operate within 2 retail sectors i.e. sporting goods and homeware, under 3 brand names: 1) Briscoes Homeware, 2) Living & Giving and 3) Rebel Sport.

Market Update and First Quarter Sales

For the first quarter ended 26th April 2020, the company reported total unaudited sales of $97.0 million, down by 35.6% than the same quarter last year.

Previously, the Managing Director of the company, Rod Duke decided to not to take any salary until at least the end of July 2020, and the senior management also decided to freeze their salary hike for the same period of time. The Board as well as senior management of the company have decided to strengthen the commitment by agreeing to a temporary reduction in fees and salaries of 20%, effective from the month of May 2020.

There happens to be uncertainty with respect to the length of time store closures would continue and the ongoing economic as well as social implications due to coronavirus. As a result, it is difficult to accurately forecast full financial impact on the company.

The Warehouse Group Limited (NZX: WHS)

The Warehouse Group Limited (NZX: WHS) has evolved from a single The Warehouse store to become one of the leading retailing groups in NZ.

Update on Q3 Sales

The Warehouse Group (NZX: WHS) has made an announcement that its unaudited retail sales for Q3 ended 26th April 2020 amounted to $586.3 Mn, down by $128.1 Mn or 17.9% as compared to same quarter of the last year.

Following are the key points:

  • The Warehouse recorded sales amounting to $297.3 Mn, reflecting a fall by 23.0% on same quarter of the last year
  • Warehouse Stationery posted sales amounting to $64.5 Mn, down by 9.8% as compared to same quarter of the last year
  • Noel Leeming recorded sales amounting to $193.5 Mn, which were down by 10.9% on same quarter last year
  • Torpedo7 posted sales amounting to $32.0 million, a fall by 18.3% on same quarter of the last year.

After an initial period of the complete closure upon entering Level 4, there was gradual increase which was witnessed in online sales activity, starting initially with the essential items only in The Warehouse, Warehouse Stationery as well as Noel Leeming and then expanding to essential items in all the brands.

Resultantly, online sales witnessed an increase by 74.8% as compared to same quarter of the last year. Notably, for Q3, online sales accounted for 15.9% of the total retail sales.

The release also stated that government has confirmed that retail stores would be reopening under alert level 2 and the company’s planning is well-advanced.

Even though there are expectations that opening of stores would see a substantial rise in the sales, there is uncertainty around the impact of operating constraints, customer demand levels as well as longer term impacts of coronavirus.



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