Haley Van Leeuwen
Warmer June weather hurt apparel spending, a key sector
for New Zealand listed retailers, Forsyth Barr broker Haley Van
Leeuwen said yesterday.
The electronic card transactions data, released this week by
Statistics New Zealand, showed core retail sales up 3.2% in
the year ended June, the weakest year-on-year growth in about
The New Zealand consumer economy continued to show gradual
growth, although most retailers remained cautious on the
outlook, Mrs van Leeuwen said.
The Warehouse Group and Kathmandu highlighted the
warmer-than-usual winter weather which had hurt spending.
''This is reinforced in the electronic card transactions
data, with June particularly weak for apparel retailers.''
To date, July was tracking in line with five-year averages.
However, temperatures were materially colder than July 2013,
While it was still early in the month, the colder weather was
positive for retail sales. However, sales would come at lower
margins given retailers were already well into winter sale
The New Zealand winter had been milder than usual, with May
and June temperatures above last year and five-year averages.
Maximum daily temperatures averaged 17.7degC in May and
15.6degC in June, compared with the five-year average of
16.4degC in May and 14degC in June.
Mrs Van Leeuwen said the rapid growth of online retailing was
driving major changes to the traditional retail model.
''We expect further strong growth in online retailing in the
medium-term, particularly as technology improves and
geographical barriers continue to be eroded.''
Kathmandu was the retailer best-placed listed to benefit from
online retailing, while Hallenstein Glasson was most at risk,
Online spending in New Zealand amounted to about $3.8 billion
in 2013, up more than 15% on the previous corresponding
period. Online spending continued to report rapid growth and
had averaged more than 15% growth over the past four years,
compared with just 3% growth for traditional retail.
About 60% of online retail purchases were made from domestic
retailers and the remaining 40% from offshore pure play and
Purchases from offshore retailers were growing rapidly, Mrs
Van Leeuwen said.
''We expect this higher rate of growth is being driven by the
strength of the New Zealand dollar, better choice through
offshore sites, increased consumer online literacy and
marketing tactics such as free shipping and no-obligation
Forsyth Barr's preferred picks in the retail sector were
Michael Hill International and Restaurant Brands, with an
outperform rating. Both companies had a high risk rating to
reflect the near-term risk involved.
Briscoe Group and Kathmandu were rated neutral, with both
companies fully priced. The rating on The Warehouse, which
had yet to demonstrate material positive returns from its
major store reinvestment programme, was underperform.