Retail and Consumer Insights

Spend trends

Changes in consumer spending habits can be seen in the Stats NZ electronic card transactions series data that includes all debit, credit, and charge card transactions with New Zealand-based merchants. Using the Retail and Consumer Dashboard developed by PwC New Zealand, we are able to compare year-to-date retail related electronic spend data by sector with the comparable periods in 2019 and 2020. 

Using our Retail and Consumer Dashboard, it is also possible to compare the September 2021 electronic card spend with the comparable period in 2020. With the exception of the Consumables sector, all categories registered negative year-on-year growth for the month of September with Hospitality (-18.1%), Apparel (-20.0%) and Motor Vehicles (-20.2%) the most heavily affected sectors. 

If we focus on the Hospitality sector, the impact of the ongoing Alert Level restrictions across New Zealand are illustrated in the chart below. Within the Hospitality sector, the recent announcement from Stats NZ identified that electronic spend in the food & beverage and accommodation services categories were down $356 million (-41.4%) and $69 million (-51.6%). For context, it should be noted that in the previous September quarter (2020) Auckland was in Alert Level 3 for the period 14 August to 30 August 2021, while the rest of New Zealand enjoyed Alert Level 2 for a similar period.

Auckland footfall insights

Our PwC Retail and Consumer Dashboard also tracks pedestrian footfall data on an hourly basis across the Auckland CBD⁴. While particularly focused on the Auckland region, the dramatic impact of the current Alert Level restrictions on retailers in Auckland’s CBD is highlighted in the recently released September data. Total pedestrian footfall across the Auckland CBD fell 78.5%, with some key locations even more severely impacted, including Commerce Street West (93.9%), 205 Queen Street (-93.4%) and 45 Queen Street (-91.3%).

Unfortunately, the most recent lockdown restrictions have also ensured that 2021 year-to-date footfall across the Auckland CBD is now 6.1% below the equivalent period in 2020 and (a disturbing) 42.8% below the same (pre-COVID) period in 2019. On a cumulative basis, this analysis also demonstrates that pedestrian footfall in the Auckland CBD has never really recovered since the first instance of COVID in February 2020. The protracted nature of the current lockdown restrictions on the Auckland CBD has led to further calls for further Government support to the Retail, Hospitality and Leisure sectors:

The details of the Government’s Covid-19 Protection Framework, released on 22 October 2021, including the roll-out of a 'traffic-light' system once all DHBs hit 90 percent full vaccination rates, will come as cold comfort to many New Zealand retailers already facing the combined head winds of ongoing supply chain challenges, cost inflation, a tight labour market and further increases in interest rates.

International insights

In its recently published 2021 midyear deals outlook⁵, PwC USA confirmed that M&A activity in the USA in 2021 is expected to outpace 2020, building on the resurgence that began after the first wave of the COVID pandemic. Even as company valuations remain high and a seller’s market endures, demand for high-quality assets and the increasing willingness of some owners to sell them are accelerating deals that were thought to be two or three years away. Many buyers are reassessing where they are in the value chain and how acquisitions can improve their positions. But elevated transaction prices also raise the pressure to capture value in deals.

Key themes emerging from PwC’s Deals Industry Insights include:

Acquisitions, divestitures, IPOs and other deals can be instrumental in how companies continue to navigate the disruption of the last 18 months and the opportunities in tomorrow’s transformed landscape. The risk of not capturing value in a transaction is very real, yet the focus on creating value has never been sharper. 

Going forward, success will be defined less by striking a deal and more by what a company does with the deal. New dimensions of deal value, such as a company’s approach to environmental, social and governance (ESG) issues and its commitment to talent, offer opportunities for buyers and sellers alike to help position themselves as attractive deal partners. The better you understand these dimensions and adjust your value creation strategy, the greater the chance your next transaction will be successful.

Recent news

• Whittaker’s has announced a price increase on its products due to the ongoing pressure on transport and ingredient costs. This is the first price increase it has announced in two years. This comes after Mondelez increased the price of Toblerone by about 4% and said it would probably need to look at increasing prices of other products.

• Fletcher Building chairman Bruce Hassell said the Government’s fiscal response to COVID, of printing money at levels we have never seen before, has “woken the inflation beast”. “Taming it may be harder than we realise and it could inflict real pain on business and wider society” he said.
  

• The average cost of shipping a standard large container has surpassed NZ$14,050 (c.4x higher than a year ago. The average door-to-door shipping time for ocean freight has gone from 41 days a year ago to 70 days. 

• The New Zealand Government is providing another $195m in subsidies for airlines to keep air cargo links open until the end of March 2022. The aviation support scheme originally budgeted $170m in subsidies from 1 May to the end of October 2021. 

• Pamma Retail Group, the NZ licensee of Circle K, one of the world’s largest convenience store brands with over 14,000 locations, announced plans to open 100+ New Zealand outlets. Circle K NZ is also planning to transform the New Zealand retail fuel market – opening some of the first purpose-built EV charging and petrol stations at sites around the country.

• Northelia Version 1.4, a group of experienced entrepreneurs who have experience in the supermarket industry, want to start a third supermarket chain, to shake up the current duopoly in New Zealand. The group members wish to remain anonymous at this stage, but it is reported to include 2degrees founder Tex Edwards. 

• Kathmandu produced strong full year results despite multiple lockdowns, which were estimated to cost the company $13m in earnings. These results were assisted by the Rip Curl brand, which achieved sales growth of more than 50%."We are proud of the results we have been able to produce over the past 12 months in the face of ongoing COVID challenges, delivering strong sales and positioning the business for sustained growth," Kathmandu Group Chief Executive Michael Daly said.

• Hallensteins Glassons reported sales of $288m, up 0.1% on the previous year. These results reflect online sales accounting for 21.9% of sales, and the ongoing growth of the Glassons Australia business. Net profit after tax was $28m, down 4.3% on the previous year.

• Briscoes Group has posted a record half year profit of $47.5m for the six months ending August 2021, on the back of strong consumer demand and measures to protect its supply chain. Revenue from the Briscoes homeware business increased by 20% on a year ago to $222.6m, while earnings from Rebel Sport rose by a quarter to $135.8m. Rod Duke said the company had benefited from its focus on three key strategic areas:enhancing the shopping experience, improving its supply chain and developing new revenue streams over the period.

Recent deals - recently announced transactions in the retail and consumer sector include:

September / October:

• Z Energy announced on 10 October that it had agreed to be acquired by Australian fuel retailer Ampol for $NZ3.78m a share, plus an extra NZ5c a share dividend, a total transaction value of $1.9bn. The Z Energy Board unanimously approved the transaction and recommended that shareholders vote in favour. The proposed acquisition is also subject to NZ High Court approval and regulatory approvals, including NZ Commerce Commission and the Overseas Investment Office.

• US-based private equity group Story3 Capital Partners announced on 5 October that it had acquired a portion of Coco Republic in a deal thought to value the up-market furniture company at more than $100m. Coco Republic sells up-market furniture, homewares, lighting, rugs, art, outdoor furniture and storage products, and also offers interior design services. Story3 has plans to expand the brand that was founded by chairman Paul Spon-Smith. 

• Furniture retailer Nick Scali announced on 4 October that it had agreed to buy leading Australian specialist sofa retailer Plush for $103m. Nick Scali chief executive Anthony Scali believes Plush will greatly broaden his $980m furniture empire’s exposure to the mid-market sofa sector, with the opportunity to also roll out as many as 100 new Plush stores in the next few years.

• George Weston Foods, the firm owned by the UK’s Associated British Foods, has applied to take over Dad’s Pies. George Weston Foods, operates in New Zealand and Australia and is regarded as one of the largest food manufacturers in both countries with 40 facilities. Dad's Pies, based in Silverdale, was founded in 1981 and offers a range of savouries from beef to lamb, chicken and bacon.

PwC Retail and Consumer Dashboard

The PwC Retail and Consumer Dashboard is updated monthly, to include the latest data on electronic spending, consumer sentiment and Auckland pedestrian analysis. Through our dashboard we identify and analyse trends over time, particularly in the aftermath of the COVID lockdowns. If you are interested in online access to our dashboard to help inform your decision making, please contact: Matt Gunn