By Kate Perry of NZPA
Friday 30th December 2005
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We proudly flew the shopping flag and spent like there was no tomorrow. Sadly, not being international pop stars most of us had to dip into the red to fund our shopping habits.
The nationwide spend-up caused no end of worry to Reserve Bank (RB) governor Alan Bollard who fretted oft and loud about what he saw as an unsustainably high level of consumer spending.
His concern centred on the fact that much of the spending was debt-fuelled, with many New Zealanders spending more than they earned.
They have been able to sate their materialistic appetites with the help of the booming property market. As house prices have skyrocketed, many home owners have ramped up their debt by unlocking the increased equity in their houses.
This consumer spending spree has in turn fuelled demand for imported goods, which led to a widening of New Zealand's trade deficit and saw the current account deficit swell to 8% of gross domestic product (GDP) in the June year.
The spend-up also nudged inflation up outside the RB's 1 to 3% target range, with annual inflation hitting 3.4% in the September quarter.
While New Zealanders have been spending up large, some of our biggest retail stocks have been concentrating their growth offshore - with one big, red, noticeable exception.
After copping abuse from disappointed shareholders pretty much from the day it set up across the Tasman five years ago, The Warehouse finally decided to cut its losses and get the hell out of Dodge - or at least the hell out of its 126 Australian stores.
The Warehouse said its five-year stint in Australia cost it about $250 million.
The group paid $A105 ($NZ113.5m) for the Australian chain in 2000, which at the time consisted of 115 Clint's Crazy Bargain and Silly Sollys stores.
It sold it in November for $A92 million, and said the sale would result in a one-off pre tax expense of $80-90 million.
At the company's annual general meeting in November founder Stephen Tindall apologised to shareholders for the disappointing foray into Australia.
"We unfortunately underestimated the competitive response, we underestimated what structure retail took in Australia - and for that I would like to stand up and personally apologise," Tindall told shareholders.
But new chief executive Ian Morrice would not rule out another expedition across the ditch. It might follow the Michael Hill International formula and grow organically.
"Clearly we wouldn't try and do the same thing again, but that doesn't rule out the Australian marketplace as somewhere that might have growth opportunities for us in the future," Morrice said.
The group's annual net profit was slashed to $39 million, from $61 million the previous year thanks to a $32.9 million non-cash writedown on the Australian assets.
But The Warehouse can't blame everything on Australia, with its New Zealand-based Red Sheds also underperforming this year.
Earnings before interest and tax (ebit) from the Red Sheds stores fell 8.4% to $138.6m for the September year due to a poor first half.
Morrice has been working on a revamp aimed at decluttering the big box-stores and tightening up product lines.
He has already introduced a modified logo, and opened a laboratory store in Te Rapa, near Hamilton which trials new ideas. Another trial has been set up within its Fraser Cove store in Tauranga to sell alcohol.
The group has promised to stock well-known brands, rather than "two-buck chucks" as cheap and nasty grog is known in the United States.
While The Warehouse beat a tactical retreat from Australia, Michael Hill is firmly focused there.
At the end of the last financial year, the bulk of its operations were in Australia, with 102 stores across the Tasman, compared to 47 in New Zealand.
But not all foreign shores have been as successful for the jeweller, which has struggled in Canada since it set up there in 2002.
The Canadian operations have yet to find their feet - or turn a profit. While revenue in Canada rose 5.1% in the June year, the division still reported an operating loss - albeit a smaller one than the last year - of $C744,720 ($NZ927,653).
Despite the loss-making Canadian operations, the jeweller posted a record net profit of $16.5m for the year to June.
Australia was also a standout market for children's clothing retailer Pumpkin Patch which posted a 204% rise in its July year net profit.
Its profit hit $24.6 million, while sales rose 27% to $280.4 million.
The company is looking at further expansion next year, with plans to open 22 new stores in Australia, New Zealand, Britain and the United States.
Back home, a change in strategy led to a 51% jump in profit for the Briscoe Group, which owns the homeware chain Briscoes and the sporting shops Rebel Sport.
The change in marketing strategy included Rebel Sport sponsoring the Super 12 rugby tournament, and a reduction in Briscoes promotions.
While the Briscoes lady may still seem to pop up on your television screen every second day touting yet another `one day only' sale at Briscoes, the chain has apparently reduced the frequency of their sales and the depth of the discounting.
Hallenstein Glasson is looking at expanding its number of womenswear stores in Australia, despite being burnt in the Australian menswear market in the past.
The group pulled out its Hallensteins stores from Australia a few years ago, but is positive about the growth potential for Glassons over there. It currently has 10 Glassons stores in Melbourne and 10 in Sydney.
The drop part of the `shop till you drop' mantra could come into effect next year, if the New Zealand dollar softens and the effect of the RB's interest rate rises start to hit home.
Retail sales figures just out show a mixed picture. Seasonally-adjusted retail sales fell 0.2% in October from the previous month, against economists' expectations of a 0.3% rise.
But excluding auto-related industries, seasonally adjusted sales were up 1.1%, or $39 million, for the month.
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