Solid results tipped for Kiwi retailers
Trading updates due over next two months
Early feedback on Christmas spending suggests 2016 was solid but not spectacular for retailers as a group, according to Forsyth Barr. This was true of both New Zealand and Australia, the key markets for New Zealand-listed retailers.
Sales looked to have been skewed towards late December, which might result in weaker gross margins for fashion retailers. Anecdotal feedback suggested November was a challenging month across retail, Forsyth Barr broker Suzanne Kinnaird said.
Early data releases from Statistics New Zealand, Marketview and Paymark showed solid spending growth in New Zealand on the previous year but with some weakness in growth from November to December in seasonally adjusted terms.
Spending growth was strongest in accommodation, hospitality and hardware. Growth in apparel spending remained modest, Kinnaird said.
December data in Australia had not been released but anecdotal feedback suggested a solid Christmas, but nothing spectacular.
Weather in Australia and New Zealand had been less favourable for retailers through the holiday period. At best, the weather could be described as volatile. The slow start to summer in New Zealand was not helpful for retailers wanting to sell products at the start of summer, when margins were typically better.
December was marginally colder than in 2015 and January had provided some encouraging signs for Kiwis of summer temperatures actually arriving, Kinnaird said.
Mixed weather had been a feature across Australia and January was starting to show signs of an Australian summer.
Listed New Zealand retailers would provide various forms of trading updates from January to March and “confession season” started early this year, when The Warehouse Group downgraded before Christmas.
Briscoe Group was the most likely to surprise on the positive side during the reporting season.
Briscoe Group
Briscoe Group had not provided 2017 financial year guidance but it was expected to be another strong year of double-digit profit growth, Kinnaird said.
Early industry data pointed to another strong quarter of sales growth for both Briscoe and Rebel Sport. Fourth-quarter sales data would be provided on February 7.
Hallenstein Glasson
Hallenstein Glasson provided a trading update on December 13, highlighting a strong start to 2017 sales, underpinned by a turnaround in Glassons.
Recent industry data suggested the market backdrop remained positive. The weather had not been supportive, with a late start to summer. Forsyth Barr expected a weak result from menswear to be outweighed by strong sales and earnings growth in womenswear, off a weak base.
A market update was expected late in January, Kinnaird said.
Michael Hill
Christmas trading was mixed for Michael Hill International. Secondquarter sales were up 4 per cent for Michael Hill stores and 72 per cent for its new brand Emma & Roe. Canada was the standout division, where strong growth was underpinned by same-store sales and margin expansion. Footprint growth offset negative same-store sales in Australasia. No guidance was provided but commentary suggested stable margins in Australasia as Michael Hill resisted competing on price. The company will report its interim result on February 17.
Kathmandu
Kathmandu typically released a trading update in early February, before the first-half result in March, Kinnaird said. Earnings were weighted to the second half, particularly the winter sale, which was still to come.
Guidance was for a flat first-half result. Industry data in New Zealand pointed to an improved trend in the December quarter with surprisingly strong growth expected to be boosted by categories such as bikes and motocross.
“Stripping this out, we expect industry growth rates for the core outdoor adventure retailers were more modest but still ahead of the previous six months.”
Volatile weather might also have helped Kathmandu.
The Warehouse Group
The Warehouse Group had already signalled a disappointing first half after a weaker-than-expected performance before Christmas, largely in the Red Sheds and financial services. First-half guidance was for adjusted reported profit of $38.5 million to $41m, a fall of 15 to 10 per cent. The result is due on March 9. Given the improvement in spending growth through the latter part of December, the group suggested a result was likely towards the higher end of guidance.