Small retailers hammered by profit drop | Stuff.co.nz

JAZIAL CROSSLEY

Business was bad for smaller, privately owned retailers last year, with profits plummeting more than 76 per cent on average, according to research from accounting firm Grant Thornton.

Its latest survey of 5000 small-to-medium enterprises found the overall average drop in profit for 2011 was 27.7 per cent but the retail sector suffered more than most.

The revenue of retailers surveyed grew 6.7 per cent last year but rising costs, coupled with dampened consumer confidence, hit the industry hard. Grant Thornton partner Paul Kane said the cost of sales was up 12 per cent on average.

"There has been pressure on profit margins so you could say that means people are price-conscious, looking for bargains. The retail trade has looked at their prices and brought them down accordingly but reduced their margins," Kane said.

Wellington menswear company Mandatory, in its 15th year of trading, has begun to see an improvement in sales this year but owner Clare Bowden said the trading environment was still volatile.

The company had been extremely careful with product ordering and stock levels. It found being a small manufacturer was a considerable advantage.

"We can just produce as we go. We've got a huge custom-made element that has really seen us through. Staffing and stock levels have to be pretty lean. It's tight, but we're certainly seeing an increase and an improvement," Bowden said.

"The rag trade, in particular menswear, has had an extremely tough time,"

Womenswear also struggled. Boutique clothing label Vanilla Ink has just two stores in Auckland, closing a third outlet in January last year.

Owner Susan Duckworth said that since May last year, trading months that were typically strong proved below average.

"You have to just think so much smarter to do the same as you did before."

Duckworth said shoppers at Vanilla Ink's annual February sale were more cautious with their cash.

Early indications showed sales were starting to improve this year with some increased consumer confidence back in the economy.

Retailers Association chief executive John Albertson said anecdotal reports suggested things were improving, but not dramatically.

"I don't think retail will ever go back to where it was six or seven years ago."

Kane agreed 2012 appeared to be proving better for small-to-medium retail businesses.

"Even though margins were down last year, most were still profitable. I think the outlook for this year is pretty good.

"There is going to be growth, certainly, but not dramatic growth. I think we'll see a gradual incline throughout 2012 and 2013."

- ? Fairfax NZ News

Source: http://www.stuff.co.nz/business/small-business/6670412/Small-retailers-hammered-by-profit-drop

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