Retail sector predicting better Christmas than 2010

Media release: 19 October 2011

Retail sector predicting better Christmas than 2010

A third of businesses have more work booked for final quarter Retail sector predicting better Christmas than 2010 Two fifths of all Kiwi businesses expect to increase revenue in 2012

Despite the gathering gloom in the international economy, more Kiwi businesses are expecting to see their revenue improve in 2012, while many businesses – particularly in the retail sector – are planning for a strong end to the year, according to the latest MYOB Business Monitor.

The MYOB Business Monitor survey of over 1000 businesses nationwide has highlighted improving revenue expectations and strength in key sectors for the final quarter of 2011, despite a mixed performance for the economy to date.

Revenues for business in 2011 have been narrowly balanced, with 30% of Kiwi businesses reporting increased revenues for the year, up 2% in the last six months, while 31% report decreased revenues – down from 32% in April. Start-up businesses (less than 2 years) have struggled in the last year, with only 19% reporting increased revenue, while larger businesses (20 – 199 employees) are doing well, with 42% showing revenues that have increased by comparison with a year ago.

Within the industries, the Primary sector (Agriculture, Forestry and Fishing) is the best performing, with 45% reporting a revenue rise, while only 16% have seen revenue fall over the last year. By contrast, businesses in the Transport and Warehousing sector are doing it toughest, with only 21% reporting revenue increases and 43% reporting revenue decreases in 2011.

MYOB general manager Julian Smith says the economy appears to be travelling at two speeds at the moment, with quite stark contrasts in performance across much of the country.

“It’s clear while a number of sectors and individual businesses are doing it pretty tough at the moment – and have been for some time – there are many areas of the local economy showing quite steady growth,” says Julian Smith.

“In particular, it is good to see both the Primary sector showing stronger revenues for the second part of the year and Manufacturing and Wholesale business owners reporting more work than usual planned before the end of 2011. Both of these sectors are vital to any export-led recovery, so any positive data from here is good news for the wider economy.”

For the final quarter of 2011, one third (33%) of local business owners claim an increased sales pipeline, which is up 2% since the April report. Christchurch in particular is showing real strength, with 35% of businesses in the City reporting more than normal work and sales in the pipeline. Also, larger businesses (20-199 employees) should enjoy more work for the rest of 2011, with exactly half (50%) reporting an improved sales pipeline. The Finance and Insurance industry (43% say more than usual in the pipeline) and Manufacturing and Wholesale businesses (42% say more than usual in the pipeline) will have the best end to the year, while the sluggish housing market and record low building consents continue to hit the Construction and Trades sector, with local firms reporting the greatest fall in their usual work pipeline (37%).

“Heading in to Christmas, too, its important to note that retailers across the country are finding themselves in a better position than they were this time last year,” says Julian Smith.

In the latest MYOB Business Monitor, 36% of retailers report an increased sales pipeline for the final quarter, with 18% reporting fewer sales expected for the end of 2011, compared to 25% reporting an increased sales pipeline, and 27% reporting a decrease at the same time in 2010.

The number of businesses in Christchurch reporting improved work or sales for the rest of the year is also heartening, says Julian Smith.

“As we know, Christchurch has been hard hit by the effects of the earthquakes, so such strong sales figures for the remainder of 2011 are not only good for the City’s recovery, but also positive for wider New Zealand, which according to latest data is strongly dependent on Christchurch’s rebuilding process for growth in 2012.”

And while results for 2011 might be uneven, Mr Smith says over half of businesses are focused on growth strategies for 2012.

“Kiwi business owners are particularly bullish about their own prospects in 2012, but sentiment about the wider economy continues to reflect not only the slow local recovery but also the range of negative economic sentiment emerging globally,” says Julian Smith.

According to the MYOB Business Monitor, the number of businesses expecting economic improvement in the next 12 months is still low at 25%, although this is 2% higher than reported in the April Monitor data. However, overall confidence in a recovery has slid steadily since April 2010, when almost half (49%) of all Kiwi businesses expected the economy to improve within 12 months.

“Despite a generally negative view of the economy, more businesses believe they perform well in 2012, with 41% expecting revenue growth next year and just 14% expecting a revenue decline.”

“Perhaps reflecting the enormous expectations on the Christchurch rebuilding programme, 46% of businesses based in the City expect their revenue to increase over the next year, which is clearly a positive signal for the whole economy.”

“On a slightly more cautious note, however, fewer than a third of Primary sector businesses expect to improve their performance over next year, which may well have an impact on our trade activity.”

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