The radio workers were caught by the unexpected speed of the decline of NZ’s consumer economy, since Christmas – and they won’t be the last. Jonathan Milne reports.
When broadcaster Tova O’Brien uttered the resounding words, “they’ve f***ed us”, they resonated beyond the 1 percent audience share of a small talk radio operation and its owners.
Because O’Brien and the 30 radio colleagues effectively laid off this week weren’t really done over by management – they were done over by a fast-declining consumer economy.
Retail and hospitality are the first sectors to feel the downturn; radio is where these sectors place many of their advertising dollars. To that extent, when O’Brien tweeted “devastated”, she was a canary in the mine.
* Yesterday, radio was such an easy game to play
* At the end of Today
Today FM’s on-air implosion was just one dramatic exposition of what seems, pulling together a few indicators, to be the sharp decline in consumer spending that the Reserve Bank has been pushing for.
Newsroom co-editor Mark Jennings says most media companies started to notice a drop-off in retail advertising in December. MediaWorks is carrying a lot of debt, so the lower revenue and cashflow will be really squeezing it.
According to the NZ Herald, MediaWorks’ acting chief executive Wendy Palmer told tearful radio staff she wouldn’t have taken the job last month if she’d known how dire the financial situation was. “MediaWorks, like the whole advertising sector in New Zealand and internationally, continues to be impacted by an environment with lower revenues and higher costs.”
MediaWorks’ main competitor is the NZX-listed NZME, which includes the Herald and radio stations led by Newstalk ZB. The company says it has maintained earnings results but only in the face of business confidence falling to historic lows, supply chain challenges, labour shortages, higher interest rates and inflationary pressures.
Delivering its financial results last month, chief executive Michael Boggs warned of a “soft start” to 2023. He’s promised to update shareholders at NZME’s annual meeting this coming month. “There is uncertainty across the economy and the market.”
So if that’s how it looks in the radio media, who depend so heavily on retail advertising, how do the retailers themselves feel?
One of the country’s biggest retailers, The Warehouse Group, is cutting 340 jobs. Chief executive Nick Grayston told investors he expected a tough second half of FY23, because of rising costs, inflation, interest rates, and wages. “While the macroeconomic outlook remains unpredictable, we are taking action to ensure the ongoing improvement in operational performance,” he says.
The Warehouse Group is being propped up only by its expansion into groceries. People still have to eat, and some of The Warehouse’s food prices are more competitive than the two big supermarket chains.
Briscoe Group managing director Rod Duke, delivering the company’s results this month, said he expected the deteriorating economic conditions and subsequent negative impact on customer sentiment to continue into the 2023 calendar year. He says there are pressures on the company’s margins and warns investors should not underestimate how difficult trading will be.
“We expect NZ retail in general to remain highly sensitive to ongoing uncertainty in relation to deteriorating economic conditions, customer sentiment, cost pressures, higher interest rates and political uncertainty given the upcoming general election.”
Kathmandu is slightly more upbeat. “While the consumer outlook remains uncertain, with high global inflation and rising interest rates expected to impact consumer demand, we remain cautiously optimistic,” says KMD Brands group chief executive Michael Daly.
The country’s 28,000 retailers employ more than 220,000 people. Retail NZ boss Greg Harford says the start of 2023 has been “incredibly tough” for them, with a significant downturn in sales in-store and online. “Half of all retailers are not expecting to meet sales targets in the current quarter, and 30% are not confident their business will survive the next 12 months.”
This is all hitting their bottom line. The extreme weather, low consumer confidence, and inflation being impacted by domestic factors like wage increases, supply chain, and supplier price increases – he says it’s all hurting.
Right now, the indications are that Reserve Bank Governor Adrian Orr has got the recession he wanted, and NZers have “cooled the jets” on their spending.
Harford tells Newsroom customers are not spending and costs are going up. “My request to everyone is to get out and support their local retailers and try and keep the economy going,” he pleads, defiantly.
“It’s not clear to me how increasing interest rates will help constrain the cost increases that retailers are facing,” Harford says. “So while I appreciate it’s the only tool he’s got, it’s a pretty blunt one and possibly not the most helpful.”