Because of annual meetings, updates and quarterly statements, this week has given us an unusually large number of reports from a wide mix of retailers, possibly the widest for a week that we have seen for some months.
Unfortunately, apart from Woolies and perhaps JB Hi-Fi, there’s not much to write home or cheer about.
It’s tough going and will continue that way until mid-December when some of the spending from the $10.4 billion stimulation package from Canberra will hopefully kick in.
In fact that package is being looked as perhaps ‘saving Christmas’ for the sector.
With the payments (apart from the extra training slots and the first home buyer’s grants) targeted at the poor and families, the spending boost will more than likely be concentrated in Coles, Woolies, and retailers who pitch their advertising to small gifts, CDs, etc that don’t cost the earth.
Big ticket items, such as high end TVs, computers, Ipods and Iphones won’t feature as prominent as perhaps last year. Clothes will feature, especially at the cheaper end of the sector.
Overall, retailers reckon there could be $2 to $3 billion in extra spending happening from mid-December through into January and the post-Christmas sales.
Unless there’s an upturn in overall spending from March onwards, it’s likely advertisers, including retailers, will cut spending next year, meaning less for joint market efforts as the year goes on.
So it looks like being a case of trying to grab the new dollars while they are still around.
Harvey Norman is the retailer most seem to be watching.
It’s suffering a sales slump and has been since midway through last month, and even though chairman Gerry Harvey says he will cut advertising 20%, he told the Sydney Morning Herald yesterday that the hack hadn’t happened yet.
He’s half way through the commitment to issue rolling four week sales figures for a month to show how retail confidence is travelling.
So far sales in the four weeks to October 12 were down 4.8% on a year ago and 5.7% in the four weeks to October 19.
That’s tough going, but it seems that retailers in fashion, especially women’s fashion, might also be doing it tough. Small NSW retailer, Noni-B pulled its guidance this week citing the tougher conditions.
One group that wasn’t hurt was Melbourne-based Country Road.
It revealed this week that sales rose 22.4% in the September quarter, but it confessed to expecting conditions over the next six months to be much tougher.
Chief executive officer Ian Moir told shareholders at the retailer’s annual general meeting in Melbourne that sales in Country Road’s stand-alone stores rose 15.8% in the quarter compared with the previous corresponding period.
Sales in department store outlets jumped by more than 27%. The quarter covered the period to September 27.
"To achieve the growth we have in the first quarter on lower promotional activity and in a difficult retail climate has been very satisfying," Mr Moir told shareholders this week.
But, he said, "the next six months are likely to be much tougher than the last six and we are managing our business accordingly."
The slump hasn’t stopped the retailer from continuing to reinvest capital in its new outlets, without resorting to external finance.
He said Country Road expects to invest close to $20 million over the next year in stores from cash flow, working capital improvements and existing financing arrangements.
Country Road shares were unwanted at $3.54 (It has a very small free float)..
The update from Noni-B was very different to the news from Country Road.
The company had expected to generate a net profit between $6.5 billion and $7.5 million in fiscal 2009, according to the outlook statement in August.
But this week it changed that, blaming a significant slowdown in consumer spending on women’s fashion which meant that result is no longer achievable.
"In view of the current economic uncertainty, with consumer confidence remaining weak as the key Christmas period begins, the company does not intend to issue revised earnings guidance," it said in a statement.
"Management has taken a number of initiatives to boost sales and reduce costs and will continue to review opportunities to improve profitability.
"Stock remains under control and cash flow remains positive."
Noni B reported a net profit of $2.54 million for fiscal 2008, which was 69.3% down on 2007. Excluding restructuring costs (mostly on closing its La Voca chain); net profit was $5 million.
Directors didn’t give a new figure for the earnings guidance, but there was a hint of an unexpected bonus.
"In view of the current economic uncertainty, with consumer confidence remaining weak as the key Christmas period begins, the company does not intend to issue revised earnings guidance.
"Management has taken a number of initiatives to boost sales and reduce costs and will continue to review opportunities to improve profitability. Stock remains under control and cash flow remains positive.
"Most La Voca stock has been sold and there are no further lease commitments.
"Some stores have been converted to Noni B, and the remaining leases have been either surrendered or reassigned for a consideration of over $0.5 million."
And the bonus: "A significant part of the $2.5 million after-tax restructuring charge in the FY2008 accounts is expected to be written back in FY200
