Retailers’ confidence plunges as profit slide, but Easter could provide a boost

The Australian economy might be heading back towards full health, but don’t try to tell that to Australia’s retailers – a new survey shows their confidence has plunged due to concerns about sales and profits.

The Australian Retailers Association’s March confidence index showed confidence among SME retailers fell 16 points to 24% in the March quarter, which means small retailers now have the lowest confidence level of any industry sector.

The big concern among SME retailers was the economic climate; 16% reported “people now spending” as their main worry, followed by lack of sales (13%) and cashflow (13%).

While profit and sales expectations have increased slightly, ARA executive director Russell Zimmerman says the more retailers (40%) are experiencing declines in profitability than increases (23%).

“Looking ahead, the profitability expectations of retail SMEs were the lowest of any industry sector.”

“The results indicate there is a long way to go before retailers fully recover to ‘business as usual’ after the GFC. Right now small to medium retailers are telling us they’re suffering more than SMEs in any other industry.”

However, figures from IBISWorld suggest that retailers are about to get a boost from a busy Easter trading period – and it’s not just businesses that sell chocolates.

IBISWorld is predicting consumer spending will increase by 2.8% in 2010, although spending on chocolate is expected to dip by 0.5% as households embrace healthier options.

Instead, IBISWorld predicts spending on small gifts will increase by 3.6% to $16.4 million.

As usual, the big area of spending will be entertaining at home, which is expected to see spending of $446.8 million, $321.2 million of which will go towards food and non-alcoholic beverages (an increase of 3.1% from 2009), and $125.6 million on alcohol, up 3.2%.

And IBISWorld general manager Robert Bryant says this year top shelf products are likely to be back on the dining room table.

“Traditional barbeques and family get-togethers will drive food and beverage spending this Easter, and unlike in 2009, when we stuck to low cost, generic brands, this year we will be treating our loved ones to more premium and boutique products.”

Sales of hot cross buns are expected to increase by 2.8%, while seafood sales are tipped to grow 2.9% to over $20 million. Australians are also expected to spend $229.6 million on eating out, up 4.6% on 2009.

Improved economic conditions are also likely to see an increase in holiday spending of 3.6% to $187.6 million.