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Michael Luke: Milford Asset Management expert on the economic struggles impacting the retail sector · The SME Stream

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  Speaker 1: Let's get to markets now. Michael Luke from Milford is
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  Speaker 1: with us.
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  Speaker 2: Hello, good evening.
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  Speaker 1: So retail companies tell us about them that, I mean,
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  Speaker 1: we all know they've been struggling with the economy the
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  Speaker 1: way it is. What have you seen out there?
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  Speaker 2: Yeah, Look, I think it's fair to say a lot
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  Speaker 2: of our retailers, including the listed ones like the Warehouse
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  Speaker 2: and camp Mind, have been hit pretty hard over the
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  Speaker 2: last few years with the weak economy. Retailers that they've
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  Speaker 2: got very large kind of fixed cost spaces from operating
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  Speaker 2: these stores, for example, rent, utilities, staffing, that's all fixed.
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  Speaker 2: So lower sales through the door can have a very large,
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  Speaker 2: kind of outsized impact on innings. And that's evidence with
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  Speaker 2: the Warehouse Group, who did over three billion dollars of
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  Speaker 2: sales last year but actually lost five million dollars of profit. Now,
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  Speaker 2: recent trading updates we've seen suggest that the retail environment
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  Speaker 2: still remains challenging. A couple of weeks ago, the Warehouse
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  Speaker 2: reported their first quarter of sales revenue was up about
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  Speaker 2: one percent. Within that volume of units sold was actually
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  Speaker 2: up nearly three percent, but prices were down with activity.
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  Speaker 2: We also had Hellenstein's they had their AGM today, which
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  Speaker 2: highlighted an impressive fourteen percent sales growth for the past
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  Speaker 2: eighteen weeks, but that was led by Australia and they
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  Speaker 2: called out that trading in New Zealand and still remains
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  Speaker 2: very challenging, although it was ahead of last year. Now,
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  Speaker 2: December is a very large month for retailers given Christmas
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  Speaker 2: and Boxing Day sales, so I'm sure retailers will be
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  Speaker 2: certainly hoping for an improvement compared to last year.
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  Speaker 1: Yeah, they absolutely will be. How will company, you know,
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  Speaker 1: our kres come on the scene the big opening, everyone's
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  Speaker 1: talking about it. How do you think that companies like
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  Speaker 1: the Warehouse are going to fear Yeah, we.
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  Speaker 2: Think it will definitely add more competitive pressure to those
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  Speaker 2: retailers selling similar products, which does include companies like the
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  Speaker 2: Warehouse or Camut in the area. I Care has a
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  Speaker 2: pretty broad range of products, so they could win some
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  Speaker 2: sales off for a number of different companies, including areas
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  Speaker 2: like kit set kitchens where they could win some shares
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  Speaker 2: off a like of Bunnings, et cetera. That I Care
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  Speaker 2: store had been long awaited by consumers, and it looks
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  Speaker 2: like the openings gone pretty well. Like we saw off
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  Speaker 2: the opening of Costco a few years ago. Now some
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  Speaker 2: companies have actually benefited though, like Mainfreight who helps off
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  Speaker 2: the logistics, and the ICHA store will bring a lot
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  Speaker 2: more people to stores in the area like Sylvia Park,
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  Speaker 2: so some of those stores will benefit as well.
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  Speaker 1: Let's look ahead, what twenty twenty six better year for retailers?
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  Speaker 1: Do we think? Better year for the economy?
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  Speaker 2: More generally, we think so, well, it's been a pretty
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  Speaker 2: tough few years. We do think the New Zealand economy
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  Speaker 2: is likely bottomed and we are expecting a gradual recovery
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  Speaker 2: next year. Now. We expect that's going to be driven
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  Speaker 2: by the large reduction and interest rates which is flowing
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  Speaker 2: through to mortgage holders, businesses and boosted confidence and we
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  Speaker 2: have seen that in some of the recent data. Now
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  Speaker 2: in November consumer confidence surveys showed they actually lifted to
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  Speaker 2: the highest level since June. So confidence is starting to
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  Speaker 2: improve and we're actually starting to see that a little
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  Speaker 2: bit in some of the spending data, such as am
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  Speaker 2: Z car data for November which showed that spending was
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  Speaker 2: up four percent compared to life. Now, given those fixed
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  Speaker 2: costs with those retail stores, a small improvement in sales
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  Speaker 2: will definitely help the bottom line next year. So yeah,
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  Speaker 2: certainly hoping for a better year next year, and we
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  Speaker 2: do think that regardless of the broad economic backdrop, there
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  Speaker 2: will be retailers with a compelling consumer proposition like the
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  Speaker 2: ias that will continue to do well.
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  Speaker 1: Michael, appreciate that update. Michael Luke Milford with US tonight.
• 3:25
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