Businesses optimistic
about future

Some 54 percent of companies
think the economy will improve
this year, a survey finds

More than half of Hawaii businesses, especially those in the retail sector, are reporting higher revenues than last year, according to a new survey of isle businesses.

The survey released yesterday by the Business Banking Council showed that optimism also is high. Fifty-four percent of Hawaii companies indicated that they expect the state's economy will improve this year, while 6 percent think things will get worse. The remainder, 40 percent, believe the economy will be about the same.

Roughly half of the retailers polled said they were very optimistic about their industry as a whole in the next year, which marks a two-fold jump in this measurement from the previous year. In addition, 53 percent expected retail spending to increase in the next year or two.

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QMark Research & Polling conducted the telephone survey of 403 companies statewide between Jan. 10 and 28.

While the optimism index for the retail sector was slightly lower than for all Hawaii companies, the performance measures were slightly higher than the overall group.

"Business is really great, but retailers always like to say that they are cautiously optimistic," said Carol Pregill, president of Retail Merchants of Hawaii. "In Hawaii, they all still remember the aftermath of 9/11."

Four years have made the difference for the retail sector, which is benefiting from the financial success of the state's residents and its visitor industry, said Pregill.

Tourism growth and an increase in the number of higher-spending visitors have resulted in retail improvements and higher revenues for businesses, Pregill said. They have also brought more players into the market.

Booming construction, low interest rates, housing demand and increased employment also have contributed, said Carol Ai May, vice president of the 105-year-old City Mill Co. hardware store chain, which has eight locations on Oahu.

"Most of the research that they are presenting pretty much reflects the performance of City Mill and our own level of optimism," Ai May said "We enjoyed a very good 2004 with higher sales and more customers and we are very optimistic about the next two years."

Still, Ai May said the company knows the market is still far too competitive to take success for granted.

"People say you have a loyal following because you have been around so long, but we know that customers come to us because we have earned their business," Ai May said.

The survey shows 54 percent of the respondents reporting higher gross revenues than a year ago, a slight decrease from a similar survey in the first quarter of 2004. Declining revenues were reported by 20 percent this time, slightly more than the 19 percent recorded a year earlier.

There also was a slight decrease in the number of people saying their pre-tax profits were up, 44 percent vs. 47 percent in 2004. Also, slightly more companies saw profits getting smaller -- 23 percent compared with 17 percent in the earlier survey.

One in four businesses polled has increased staffing levels over past year, 58 percent have maintained staffing levels, while 16 percent reported a decline in employees.

"More people that want jobs are working and people have more money to spend," Pregill said. "Also, personal income in Hawaii is at an all-time high."

For the first time since 9/11, more than half of the firms sampled said that they've fully recovered from the negative effects of the attacks. About 21 percent of the retailers that were polled said the pace of business has stayed the same in the wake of 9/11 and 18 percent said business has dropped.

Fifty percent of retailers polled said holiday sales were up from a year ago, while 28 percent indicated that they saw no change in sales and 21 percent said sales declined.

Looking at the actual performance of the businesses surveyed, the study showed several changes as retailers adjusted to the expansion of national discount retailers. Retailers have dropped inventory levels and prices and have begun stocking different products in reaction to new players in the market, Pregill said.

"Competition has improved the market for consumers," she said, adding customer preferences drive Hawaii's retail.