Retailers still finding it tough

Consumers' fondness for discounted prices is being blamed for some of the 0.6 per cent seasonally adjusted fall in retail sales in February from January.

The $32 million total fall in sales, compared to January, included a 3.3 per cent or $10m fall in department store sales, a 4.2 per cent or $9m fall in appliance retailing, and a 0.7 per cent or $9m fall in supermarket and grocery stores.

Cafes and restaurants fell 2.1 per cent or $7m, sales of recreational goods dropped 3.1 per cent or $6m and vehicle sales were down 1 per cent or $6m, Statistics New Zealand (SNZ) figures published today show.

On the other side of the ledger, a category that includes some automotive repairs and services lifted 3.7 per cent or $7m, while clothing and softgoods sales lifted 2.4 per cent or $5m.

Core retail sales, which exclude vehicle-related industries, fell 0.9 per cent or $35m seasonally adjusted.

It was the second substantial fall in core sales in the past three months, with the largest drop on record of 2 per cent in December before a 0.3 per cent rise in January, SNZ said.

The core retail sales trend was falling for the first time since 1995, down 1 per cent since a turning point in October 2009. That followed 2-1/2 years of slow growth.

ANZ senior markets economist Khoon Goh said some factors that could explain part of the decline were ongoing retail discounting, a 1.3 per cent fall in food prices in February, and the unwinding of a surge in vehicle sales in the preceding months.

He also cited "ongoing cautiousness on the part of consumers" as a main reason, considering the large falls in discretionary spending.

While data out yesterday showed electronic card transactions up 2.1 per cent in March, that would not necessarily mean a strong sales bounce showing up in the SNZ retail figures for last month.

Goldman Sachs JBWere economist Philip Borkin expected a "reasonable pick-up" would show up in the March retail figures, but suspected monthly retail figures would continue to be volatile as consumers adjusted their spending.

An examination of spending during the Easter period - from April 1 to 5 - suggested consumers were targeting periods when retailers were discounting more aggressively, Mr Borkin said.

A promotional analysis suggested 40 per cent of retailers surveyed were on sale during the Easter weekend, with one in six retailers offering a storewide promotion. Paymark data showed spending was up 5.9 per cent on the Easter period in 2009.

Newmarket Business Association chief executive Cameron Brewer said many people were affected by what he described as "full-price fatigue".

"After 18 months of nationwide sales many people, it seems, only want to buy a bargain," he said.

"It's tough for retailers because sales are slow but their overheads have continued to rocket, which means their margins are being tightly squeezed."

- NZPA