KEY POINTS:
Retailer Briscoe Group is expecting the current slowdown to be protracted, with retail being the hardest hit of any sector and taking the longest to recover.
Managing director Rod Duke told today's annual meeting that the return of inflation, pressure on supply of basic products and growing costs of doing business were structural rather than cyclical pressures.
The group he runs operates retailers Briscoes Homewares, Living & Giving, Urban Loft and Rebel Sports.
First quarter sales results, for the period to April 27, were down 6.4 per cent from the corresponding period a year earlier at $90.3 million. On a same store basis, group sales were 9.7 per cent behind the first quarter last year.
Mr Duke said he agreed with Jose Luis Duran, chief executive of French food giant Carrefour, who had said the structural changes emerging in retail were on a scale not seen in decades or even our lifetimes.
For Briscoe, the cost of doing business in this country had never been as high and that was not expected to change anytime soon, Mr Duke said.
"We've been hit by significant staff cost increases ... Store rents are increasing right across the country, transport costs are through the roof, as are our operating costs such as power, heat and light."
Briscoe was targeting every sector of its business with the goal of taking "every ounce of waste out". Some "fairly hefty" cost reduction targets had been agreed.
"We are focused on retaining market share of all of our retail brands but believe there are some activities we can reduce or defer without impacting sales in the short term. In other instances we can be more efficient to avoid cost," Mr Duke said.
Examples were store labour, repairs and maintenance, travel expenses, contracted services, stationery and consumables, power usage and supply chain costs.
Another significant influence on Briscoe was the "China factor", with the group sourcing a large amount of its merchandise from China, "a country once known for cheap goods - no longer".
Major changes to China's labour laws had increased the cost of labour by at least 20 per cent.
At the same time, the Chinese currency was appreciating at a rate of 5 per cent a quarter against the US dollar, and raw material and distribution costs had increased substantially.
"Inevitably, retail prices will lift noticeably, which could eventually cause demand to burn off."
Despite the "doom and gloom", on the whole, he was more excited and optimistic than ever, Mr Duke said.
Briscoe shares were up 3c at lunchtime to $1.09, having ranged between $1.78 and $1.05 in the past year.
- NZPA
