Retailers from all over the country are looking through rose colored glass despite many online competitors threatening to lower sales this year. Sales expectations plummeted by 26 points (index of nine) as compared with the same time frame for the past year.

55 per cent of mortar and bricks retailers view the turtle-paced demand from the public as the prime obstacle for this year, especially with online sellers being ahead of the game, with 56 per cent on their lead.

Dun & Bradstreet's latest Business Expectations Survey for the March quarter 2012 also revealed more than one in three (34%) retailers expressed concern over wages and salary growth, up from one in four (25%) during November.

According to Dun & Bradstreet CEO, Christine Christian, online traders have significant advantages over bricks and mortar retailers, for whom operating costs invariably erode profit margins.

"High street retailers are facing increasing competition from online stores; compounded by the fact that they are dealing with overheads not applicable to e-commerce.

"The situation is likely to deteriorate for those retailers unwilling or unable to adapt to changing consumer behavior," Ms Christian said.

Concern from retailers comes despite the sector recording relatively strong September quarter results compared with the first half of 2011. During this time actual retail sales rose to equal the cross-sector average of 14, up from -3 in the June quarter. Likewise retail profits rose notably to an index of two compared with a result of -10 during the June quarter last year.

Sales and profit expectations for the first quarter of 2012 are down 15 and 22 points respectively on the same quarter in 2011. While all sectors experienced some degree of improvement in actual sales and profits during the September quarter, expectations for conditions in 2012 remain substantially reserved compared with 12 months ago.

The D&B Business Expectations Survey shows that for the March 2012 quarter:

  • Sales Expectations are at their highest level in twelve months but remain 15 points below this time last year
  • Profit Expectations continue to recover from the first negative index in two years but remain more than 20 points below this time last year
  • Employment Expectations are also the strongest for twelve months and are only two points below the previous peak for March quarter 2011
  • Investment Expectations have risen four points and are now significantly above the long-range average but are seven points below the previous peak in December quarter 2010

In particular, more than 50 per cent of non-durables manufacturers, retailers and wholesalers cite slowing demand as the most significant barrier for the business in the year ahead, with one in five concerned over a shortage of skilled labour.

Ms Christian said ongoing uncertainty in the global economy is acting as a drag on the national outlook.

"As the world contemplates a second recession, it is inevitable that local businesses will begin to question how this may affect their business in the coming year. As insulated as we have been so far from the turmoil in overseas markets, a second global recession will undoubtedly have consequences for sectors of the economy," Ms Christian said.

In spite of the notable drop in sentiment year-on-year, expectations for profit and sales have risen across sectors compared with the third quarter 2011, with first quarter sales expectations sitting five points above the December quarter.

Expected Sales, Profits, Employment, Inventories and Capital Investment Indices

Expected Sales, Profits, Employment, Inventories and Capital Investment Indices

During the third quarter, businesses reported increases across indices including actual sales (+9), profits (+5), employee numbers (+3), capital investment (+1) and inventories (+5).

Sales expectations were strongest among wholesalers, rising 10 points to 28 for the March quarter 2012; the sector's best result since a 32 point high in expectations for the March quarter 2011.

According to Dr Duncan Ironmonger, Dun & Bradstreet's economic consultant, the latest D&B National Business Expectations Survey shows that whilst retailing is under pressure, as a whole the Australian economy is continuing with modest growth prospects. This is within a relatively benign inflationary environment. The D&B selling prices expectations index is only 14, some 17 points below the 10-year average index of 31.

"This low inflation situation for the Australian economy was confirmed by the Reserve Bank's decision in early December to lower the cash rate to 4.25 percent. The Bank now sees the rate of inflation for the next couple of years to remain within its target range of 2 to 3 percent," said Dr Ironmonger.

Detailed results for the Dun & Bradstreet Business Expectations Survey are below.

The latest D&B National Business Expectations Survey shows...

Outlook for the March quarter 2012

  • Sales expectations are up five points to an index of 16, the highest of the last four quarters and four points above the 10-year average index of 12;
  • An increase of three points has taken the profits expectations index to 8, just three points above the 10-year average index;
  • Employment expectations are up six points to an index of 7, now five points above the 10-year average index of 2;
  • The inventories index is up five points to an index of 8, six points above the 10-year average index of 2;
  • A rise of four points has taken the capital investment index to 10, a rapid turn-around in two quarters from the rapid decline of the previous three quarters and now four points above the average index (6) of the last 10 years;
  • The selling prices index is down three points to 14, 17 points below the 10-year average of 31.

Issues expected to influence operations in the March quarter 2012

  • 29 per cent of executives rank interest rates as the primary influence on their business - down one percentage point in a month;
  • 27 per cent of firms expect wages growth to be the primary influence on operations - up five percentage points from last month;
  • 15 per cent of firms believe fuel prices will be their main concern in the quarter ahead - the lowest percentage since February 2011;
  • 15 per cent of firms believe access to credit will be the most important business influence in the quarter ahead - up one percentage point from last month.

Actual results for the September quarter 2011

  • Capital investment has maintained a positive run of ten consecutive quarters, with a net index of seven. 16 per cent of firms increased investment while 9 per cent cut spending;
  • 36 per cent of firms increased sales compared to the September quarter 2010, while 22 percent experienced lower sales;
  • Fourteen per cent of firms increased staff while 9 per cent reduced employee numbers;
  • The profits index was up five points to an index of 4, 27 per cent of firms increased profits and 23 per cent recorded lower earnings;
  • The selling price index was up one point to an index of 13, 27 per cent of firms raised prices and 14 per cent decreased prices.

About the Survey:

D&B Australasia conducted the latest Business Expectations Survey in December 2011. Each quarter 1,200 business owners and senior executives representing major industry sectors across Australia are asked if they expect increases, decreases or no changes in their upcoming quarterly Sales, Profits, Employment, Capital Investment, Inventories and Selling Prices. Since its introduction in Australia in 1988, the Survey has proven to be a highly reliable measure of economic performance.

The index figures used in the Survey represent the net percentage of Survey respondents expecting higher sales, profits, etc., compared with the same quarter of the previous year. The indices are calculated by subtracting the percentage of respondents expecting decreases from the percentage expecting increases.