It’s either a feast or a famine when it comes to reflecting on activity within the retail and property sectors of the past week. There really is little activity to get any of us excited about at present: we are effectively caught between the euphoria of the RWC and the pending elections. This state of mind or ‘limbo period” is traditional when general elections are about to occur, but the past week has generated some thoughts in our minds that we believe are worthy of reflection.
The business activities of RCG take us to all points of the country on a weekly basis. The discussion invariably revolves around business and the RWC still remains a high point of discussion. There certainly remains a feeling of “what do we do now” given that all the hype is over. It has left us with a “social vacuum” that is hard to replace. What we did discover, however, is that all is not well as a result of the RWC. Taupo retailers and most food and beverage retailers showed a decline in business this year over last during the RWC period of 15% or more. The motel and hotel people throughout the country, particularly outside Auckland, suffered from either cancelled or postponed domestic tourism business. Most people who attended RWC games were domestic spenders and as a result that spend was lost to other sectors where it would normally have been spent. We have discussed this point previously so we are not going to labour the point. However, what has surprised us is the obvious decline in commentary from RWC observers as to the outcome of RWC results. Now that it’s over, most people have lost interest in what the actual benefits were.
Our analysis is not driven by a sophisticated research model, but rather a general range of discussions, resulting in an opinion based on fact. Simply put, the economic outcome was not great from the RWC. Over time we will be fed more information once the results are known, but we suspect it will be dribbled out in a way that will provide a bit of a smoke screen to what the facts actually were. Further the actual spend and the ultimate use of the Waka and the Cloud which now sit forlornly on Auckland’s wharfs will be watched with interest. Much still to come from the RWC fallout.
So the above commentary is really all about “gut feel”, conversations with people and the interpretation of those conversations. We believe this is a pretty good barometer and gives reasonably accurate impressions. It flows on and as another example, if we reflect on the aging population, you really don’t need an economic model to understand that people are getting older and that will continue to be the case as the years go by. This will have an impact on our lives. More aged care facilities will be required, both government supplied and privately. The latter has key opportunities for developers who are prepared to provide facilities for people who may be aging but still want to partake in activity, and are not ready for the scrap heap. Effectively they are looking for a continuation of a quality life style and a residential environment that reflects this, rather than creating “boxes” for people to spend their last days in. Some developments are emerging that suggest developers are considering these opportunities, but there is a long way to go to fulfil the opportunity that exists.
The “gut feel” approach can also extend to retail activity. Two weeks ago, we discussed the performance of The Warehouse and what the future may hold for them. We were interested to see an article in the NBR (November 11th issue), which focussed on the growth of “E-Retailers”. Effectively the article suggested that the growth in this area was substantial. It devoted some comments to The Warehouse’s spokesman who described TWL activity through website sales. It suggested that there would be 2.5 million visits to its web site over the November and December periods. “E-Retailing” has also been extended to incorporate Westfield, who is now exploring and encouraging retail purchases through its email-outs! All this has a significant influence on the future of bricks and mortar. It is encouraging to see TWL undertaking a major development at Silverdale north of Auckland, on land which they have owned for over 10 years, but overall the feeling is that there is less development activity occurring than previously. We have also noticed that Air New Zealand have closed some of its Holiday Shop outlets. Is this another example of a decline in face-to-face retailing over “e-retailing”? Our “gut feel” is that this is not the case. RCG has been extremely busy this year and signals are that this will increase with more development opportunities into 2012.
This week, we will be sending out Z gift vouchers in recognition of the role RCG played in association with Z in reformatting the Shell service stations and creating the new Z retail format. This change has started to gain momentum, with very recent marketing being undertaken to influence consumers about the change and to ensure they support the new brand. The “energy” put into this change came after considerable market research. Sometimes research is essential, but “gut feel” will always be a dominant indicator, and a motive for moving forward with an idea or not.
SHAREWATCH – KIRKCALDIE AND STAINS
Kirkcaldie and Stains is a Wellington department store institution, operating from Lambton Quay. “Kirks” owns its retail premises as well as the Harbour City Centre next door, a retail/ office block.
Kirks had a relatively disappointing year to August 2011, with retail sales down 2.7% to $35.6 million. The retail part of the company made a loss of $643,000, which was a marginal improvement from the previous year.
The property side of the company suffered from higher costs and decreased revenue, because the Harbour City Centre was undergoing refurbishment and earthquake strengthening. Nonetheless, the property segment made a small profit, an improvement from last year. This is slightly misleading though – the “improvement” was only because the 2010 tax changes to buildings led to a one-off profit downgrade for the year.
Overall, Kirks has struggled during the year, but it should be in better position for 2012 as the Harbour City Centre refurbishment is wrapped up. However, the outlook for luxury retail remains fairly gloomy.
IN THE PRESS
LOCAL AND INTERNATIONAL MEDIA HIGHLIGHTS 7 – 14 NOVEMBER 2011
17 NZ jobs price of Bendon’s transtasman move
New Zealand lingerie brand Bendon restructures and looses 17 staff as their design operations move to Sydney. Twelve members of its 29-strong Auckland design and development team a expected to transfer to Australia, the company said.
(Source: NZ Herald)
Moa craft beer goes duty free
Moa Beer says it has become New Zealand’s first craft brewery to sell its products alongside champagne and premium spirits at JR/Duty Free stores in Auckland International Airport. Moa general manager Gareth Hughes said. “It’s the first time a craft beer has been offered in duty-free in New Zealand and, we’re told, the world.”
(Source: NZ Herald)
Domino’s to grow store numbers
Domino’s Pizza says it will generate more than 2500 jobs as it gears up to open 40 new stores over the next six months.
(Source: Inside Retailing)
McDonald’s $2.9b brand modernisation
McDonald’s has unveiled an ambitious plan to modernise its brand and enhance customer service. CEO Jim Skinner said the company will invest US$2.9 billion on opening 1300 new restaurants in 2012 and re-fitting more than 2400. The company earlier this year revealed a new modern look for its restaurants and will work to bring in the enhancements in coming months.
(Source: Inside Retailing)
Sunglass Hut popup store sets sail
Sunglass Hut is set to launch a floating popup store on Sydney Harbour next week, endorsing sunglasses for the latest summer season. The floating store is designed around the Sunglass Hut circle logo, includes a DJ booth and features a transparent fit-out to capture the stunning Sydney Harbour backdrop. This is the first floating pop-up location for Sunglass Hut, part of the Luxottica Group, which has more than 200 stores in New Zealand and Australia and more than 2000 worldwide.
(Source: Inside Retailing)
