Market consolidating

Press, 22 September 1980, Page 26

Market consolidating

by

ADRIAN BROKKING,

commercial editor

The. New Zealand sharemarket went through a period of consolidation last week:'trading was fairly active, ; and prices firmed slightly on every day of the week. The renewed interest in mining and oil shares sculminated in the sharp rise by New Zealand Petroleum, which opened at 410 c and rose to 600 c on Friday. The good profit reports from Dalgety and Allied Farmers are likely to remind investors of the good prospects in the rural sector. New Zealand Refining and Mainseal reported good profit recoveries, and both increased their dividends.

Ashby Bergh restored its dividend to 22.5 per cent after a marked turnaround in profitability, and Mair and Company, another sue-

cessful local trader, announced a one-for-eight bonus issue after a record profit for the year of almost $786,000. On the debit side, Atlas Majestic gave notice that its troubles are not yet over by deferring its specified pref: erence dividend, and Property Securities’ profit slipped for the year, although it recovered markedly in the second half.

An interesting local development is the announcement by L. D. Nathan that work will shortly begin on a new “Big W” Woolworths discount department store in Shirley. Although Christchurch is first, three similar stores will be opened, in Lower Hutt, Napier, and Mount Maunganui, and four further projects are being in-

vestigated in other centres. The move is. part of a major expansion by L. D. Nathan after it acquired Woolworths and McKenzies, and a result of the reorganisation that is now taking place in order to increase the profitability of both retail chains.

The duplication of lines is gradually being eliminated, and eventually the two chains will specialise in different types of stores — one in hard and white goods, and the other in soft goods.

The city stores ■ of both Woolworths and McKenzies are believed to be trading well. The discount department store concept will give further flexibility to L. D. Nathan’s retail operations. It is also capable of considerable development: any centre with a population of

50,000 should be able to support one such store, and cities the size of Christchurch should be able to accommodate two or three. However, the establishment of the “Big W” stores is an expensive operation, and expansion in this field is likely to be slow, depending on available finance. However, by leasing rather than owning Nathans might be able to accelerate the programme. Needless to say, the major retailers in the city centre are apprehensive, and strongly opposed the scheme last year at town planning hearings. Retailing is already highly competitive, and the addition of such a large store with a large sales potential over a wide range of goods can only put further pressure on already slim margins.