Despite positive news, it’s still going to be tough for retailers

A leading provider of industry research, analysis and forecasting services has come out and warned retailers not to get too comfortable with the economy despite positive reports circulating that the worst is over.

According to BIS Shrapnel’s Retail Property Market 2009 – 2019 report the recent news of the strong bounce back in consumer sentiment, surprisingly robust retail turnover data and the upgrading of profit guidance by large retailers don’t reflect what’s in store for the year ahead.

Maria Lee, author of the report and BIS Shrapnel senior project manager, commented on some of the key findings.

“Government handouts, the positive March quarter GDP figure and the bounce back in the share market have been behind the positive news. But as unemployment continues to rise throughout the rest of this year and next, we expect consumers to rein in their spending,” she said.

“Last year consumers didn’t spend for fear of unemployment. This year they haven’t got the money to spend and, in fact we think consumers will borrow to shore up spending.”

Another worrying factor mentioned in the report is the Australian dollar and the effect this has on retailer’s profit margins.

“When the Australian dollar collapsed last year it caused panic among retailers because it seemed as though the high profit margins to which they had become accustomed would come under pressure,” she said.

“The dollar has now made up much of the lost ground, but remains highly volatile and the risk of downward pressure on the dollar, and on profit margins, remains.”

Overall BIS Shrapnel outlined that it is going to be a tough year for retailers before consumer spending recovers in line with the economy around 2011.

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