What lies ahead: Retailing

Retail sales were holding up well in the run-up to Christmas but the unseasonably cool weather had already dented the prospects of operators such as Postie Plus and The Warehouse.

This and the prospect of slowing employment and population growth as well as falling house prices dampening enthusiasm for spending sets retailers up for a challenging year.

The Warehouse's new chief executive, Ian Morrice, is counting on a revamp of the Red Sheds to turn around a surprise decline in sales in the three months to October.

He will reduce the clutter, lift the quality of the brands for sale in store and find better locations for the stores. Investors will also be looking for evidence he has turned around the troubled Australian operation.

Meanwhile, before Christmas, Rod Duke's homeware and sporting goods retailer Briscoe Group warned profits in the year to January 31 would probably fall to $17.5 million from $23.6 million a year earlier.

It blamed a "highly competitive market" and the cost of opening new stores. Analysts say the retailer has quit the price war with other retailers to improve its margins. The question remains whether the strategy will work.

Perhaps the biggest story in retailing, however, is playing out across the Tasman. Australia's Metcash, a liquor and grocery wholesaler, has bid A$846 million ($910 million) for Foodland Associated, parent company of New Zealand's Progressive Enterprises.

As part of this bid, Metcash has promised to spin off Progressive, which owns the Woolworths, Countdown and Foodtown supermarkets. Local fund managers say the division, which shares the New Zealand market with Foodstuffs, would be an attractive investment opportunity.