The second half of the current financial year is critical for some listed retailers and key outlook themes include challenging currency movements and a tough Australian retail backdrop, Forsyth Barr broker Suzanne Kinnaird says.
In particular, three retailers - Kathmandu, Pumpkin Patch and The Warehouse Group - were under pressure to perform.
Kathmandu had only reported one weak result, but the material details of the profit fall were a concern, she said.
Earnings were seasonally weighted to the second half of the financial year and the next six-month period was important for investor sentiment.
''The next six months is a critical period for Pumpkin Patch to ensure further benefits are realised from its business transformation programmes and the company meets its operating profit guidance and bank covenants.''
Following a substantial period of investment, The Warehouse had reversed the long-term falling trend in sales. However, earnings deterioration remained a concern, Ms Kinnaird said.
The Warehouse chief executive Mark Powell announced last week his intention to leave the job early next year, after four years at the helm.
The retail sector was facing a challenging macro backdrop in Australia, structural pressure and increased competition from a borderless retail environment and price-conscious consumers, she said.
Retailers were likely to suffer from the weaker New Zealand and Australian dollars against the US currency, albeit at a lag, given current hedging.
The majority of the New Zealand-listed retailers were well positioned to weather the barriers, given their relative scale against local industry peers.
The listed retailers typically operated large store networks and were market leaders in their respective categories. Execution would continue to be critical to outperform in a tough retail environment, Ms Kinnaird said.
In New Zealand, consumer sentiment was still in positive territory but had fallen from recent highs. Activity in Auckland and Christchurch was keeping house prices elevated. Rural areas were expected to experience pressure from the lower dairy payout. Unemployment levels remained low and pressures on manufacturers should ease following a weaker dollar.
Across the Tasman, the Australian economy remained relatively weak with a soft labour market and low wage growth. Monetary conditions remained stimulatory in the face of falling commodity prices and incomes. Ms Kinnaird expected the industry backdrop to remain challenging in the apparel sector, which was most relevant to the New Zealand-listed retailers.
As expected, commentary from all New Zealand listed retailers came about the ''online channel''. The companies were continuing to invest in supply chain and systems to support further online sales growth.
New Zealand retailers still lagged their overseas peers in terms of sales through the online channel and there was upside to sales levels for all listed retailers, excluding Restaurant Brands, she said.
That was reliant on the retailers continuing to invest in capability to support growth in addition to increasing market and brand awareness and improving the customer experience.
The borderless nature of online shopping has meant local retailers now competed with a much larger set of competitors Ms Kinnaird said.
After strong growth ahead of traditional retail through 2013, the growth rate in online spending through domestic websites had slowed and was tracking that of traditional retail. About 60% of current online retail purchases were made from domestic retailers and the remaining 40% coming through offshore sites.
''Purchases from offshore retailers are growing more rapidly. This will be an interesting statistic to watch, particularly if we see a further pull-back in the New Zealand-US dollar cross, making purchases through international websites less attractive.''
Kathmandu was best placed to benefit from increased online sales and Hallenstein Glasson the company most at risk, Ms Kinnaird said.
