KEY POINTS:
Tough economic times means the retail sector will feel the pinch after Christmas as landlords look for more rent and consumer confidence is hit by further job losses, says the head of Hallenstein Glassons.
However, retail spaces not previously available will become available to businesses "with a bit of money behind them", said chairman Warren Bell in his address to the annual meeting of shareholders in Christchurch today.
The company has already reported a 25.5 per cent reduced profit of $15.9 million and group sales down 3.2 per cent to $193.7m.
Profits might be down but the heart of the business remained very sound and had the financial ability to ride out these times, said Bell.
"In the past, we have sometimes been criticised for carrying excess cash on our balance sheet. It is times like these that the benefits of that strategy bear fruit. "The impact of annual rent increases based on at least (the) CPI that are being demanded by the major retail landlords cannot be underestimated.
"In some situations rents are ratcheting to unsustainable levels and we anticipate there will be likely fallout in some shopping centres where tenants that lack financial resources will find it impossible to continue.
"This will bring to the market new sites that hitherto have been difficult to secure, and we have the financial strength to capitalise on these opportunities as appropriate."
Bell said the company anticipated that post Christmas would see an increased incidence of stress in the retail sector as the recession bit.
Further job losses in the New Zealand economy would adversely hit consumer confidence.
The company had planned to move the Glassons buying team to Melbourne in 2009 but instead changed its mind and settled on Auckland.
It was a reaction to extraordinary economic times, said Bell.
On a positive note, the fledging Storm chain continued to develop potential with a further site in Milford, Auckland opened in October.
Further sites were under active consideration.
With 113 stores in New Zealand and Australia during the year the company closed four stores and had opened another four since August. Sales for the period 2 August to 14 December 2008 were down 4 per cent.
"We have seen a slight pick up of sales during November as falling fuel prices in particular reach our consumers pockets, but the intense battle for the consumer's dollar has meant sales have been achieved on a lower gross margin."
Margin for the half to date is running some 2.5 per cent below last year.
However, December trading was the real key particularly the "lead up" to Christmas.
"Given current sales trends, coupled with a drop in gross margin the profit will be significantly down on last year."
- NZPA
