Sue Allen

Public sector chief executives are now earning more in pay and perks than their private sector counterparts, a survey has found.

The Sheffield Human Resource Consulting survey found public sector chief executives' total packages were worth a median $255,000 last year, nearly $7000 more than their private counterparts.

National Party state services spokesman Gerry Brownlee said the survey was a damning indictment on the lopsided growth in the New Zealand economy, under which the state sector had ballooned, while the private sector was being suffocated.

Though he did not begrudge paying people what they were worth, Mr Brownlee said private sector pay rates were often linked to productivity "and on that score many of our public sector bosses are failing". He also called for more accountability, along private company lines.

State Services Minister Annette King said the organisations managed by public sector chief executives had a huge impact on the lives of ordinary New Zealanders, and it was essential to have the best people in those jobs.

Public sector chief executives had to appear annually before select committees to answer for their performance. "You cannot get much more accountable than that."

Sheffield's reward team leader, Jarrod Moyle, said pay for public sector chief executives had been increasing for several years, and overtook the private sector in 2005. Sheffield did not report the change then in case it was a blip.

The pay rates reflected the fact that salaries needed to increase to attract top talent to the public sector, he said.

Of the 540 chief executives surveyed, 293 were from the private sector and 211 from the public sector.

The survey found chief executives across all businesses and organisations received a median base salary of $181,000, up 5.9 per cent on the previous year.

Total packages, including benefits, ranged from $183,327 to $365,000, with the median around $255,000, up 4.72 per cent.

Auckland still commands the highest salaries, the median package for chief executives there being $297,670, compared with Wellington's $285,000. The proportion of chief executives receiving some form of performance-based pay had fallen to 56 per cent in 2006, from 69 per cent in 2003.

For those who received it, performance-based pay made up about 14 per cent of their package, compared with 62 per cent in the United States and 30 per cent in Australia.

Borders is considering selling its New Zealand business as its parent company concentrates on rebuilding its loss-making United States operations.

Borders New Zealand regional manager Justin Barratt said staff had been told Borders was reviewing all options for its overseas branches, but for now it was "business as usual" in New Zealand.

The news emerged at the company's quarterly briefing in the United States last week.  Borders said it planned to withdraw from Britain, Ireland, Australia and New Zealand, underlining the dire state of book retailing in the high street.

US chief executive George Jones said the chain would focus on its US business. Like other book retailers, it is straining under competition from online retailers such as Amazon and large chains selling big titles at a discount, such as supermarket chain Tesco in Britain and Wal- Mart in the US.

The second-largest US book retailer, Borders posted a loss of US$74 million (NZ$103 million) for the three months to February 3.  Mr Jones told investors he did not need the distraction of an international arm.

Mr Barratt said staff in its Asia Pacific stores had been told the company was reviewing its "strategic alternatives". Selling its New Zealand stores was one option. Borders owns all its overseas stores.

The news came just days after Borders opened its first store in Wellington. Borders had planned five New Zealand stores by the end of the year, with the new Wellington store and two in Auckland joining existing stores in Auckland and Christchurch.

Mr Barratt said openings were expected to go ahead as planned.

Borders employs about 200 people in New Zealand, the majority in its stores.

The company said it had hired investment bank Merrill Lynch to explore alternatives for its 71 stores in Britain and Ireland.

The US chain's first overseas stores were in Britain, where it acquired Books Etc in 1998, opening its first Borders branded store in August that year.  The announcement this week follows HMV's decision last week to close 30 of its Waterstone's bookstores in Britain.

Clothing companies Swazi and Norsewear have opened a combined store in Wellington to tap into more "urban" customers.

Norsewear and Swazi have now opened four combined shops in the past five months, with others in Otaki, Geraldine and Tirau.  A fifth store opens in Auckland next month.

Swazi founder Davey Hughes said both companies had been having problems with urban and tourism markets.  "We were struggling to get into both of those."

Swazi specialises in heavy-duty outdoor gear.  Many people wanted to buy Swazi garments but sometimes did not want to go into a hunting or gun shop to get them, he said.

Combining the businesses halved the cost and the risk of opening up a high street store. Both companies support the Buy Kiwi Made campaign.

Mr Hughes said the shops were proving hugely successful.  Swazi's factory in Levin had taken on five more staff to cope with increased demand.  It now employed about 90 people at the factory and more in the shops.

Mr Hughes and wife Maggie started the company in October 1994. Swazi has fought to keep its production in New Zealand, despite competing with companies producing in lower-cost countries, such as China.

Norsewear was founded in 1963 by Norwegian Ola Rian. He set up its first factory in Norsewood, Hawke's Bay, in 1967.  The company went into receivership in the 1980s, when the textile industry was hit by a move to free trade that removed tariffs on imported clothing.

It now has about 70 staff at two factories, in Norsewood and Wanganui. In 2001 it branched out into urban wear and launched a range of outdoor and sports wear.

Trade Minister Phil Goff leaves for Mexico this morning to push for a trade deal that could boost exports to New Zealand's fourth largest market dairy market.

Mr Goff said Mexico's population growth and changing demographics pointed toward increased demand for New Zealand's meat and dairy products.

Last year, Mexico imported $424 million of New Zealand products, making it New Zealand's largest Latin American trading partner.

Mr Goff said there was also potential to enhance existing cooperative activities in agriculture, agribusiness, education, tourism, technology and scientific research.

Mexico's main exports to New Zealand are computers, beer, motor vehicles and telephone equipment.

In recent years, Mexico and New Zealand had taken its political relationship to a new level, by strengthening personal links and cultural exchanges, Mr Goff said.

"I am now working to move the trade and economic relationship in a similar direction to capitalise on the potential we see in this market," he said.

National's trade spokesman, Tim Groser, said pushing for a free trade deal with Mexico was "absolutely the right thing to do", and had been a work in progress for more than a decade.

A free trade deal would also help stop New Zealand losing out to Canada and the United States, which have preferential access to Mexico under the North American Free Trade Agreement, or Nafta, which came into effect in 1994.

With the future of World Trade Organisation talks in doubt, it was wise for New Zealand to be pursuing bilateral agreements, Mr Groser said.

The benefit to Mexico could lie in diversifying its economic ties to the Asia-Pacific region, rather than relying heavily on trade with the US and Canada.

New Zealand already has free trade agreements in place with Australia, Singapore, Thailand and the so-called P4 between Brunei, Chile, New Zealand and Singapore.

It is currently in negotiations with China, Malaysia, Hong Kong and the 10-member Association of Southeast Asian Nations trading bloc.

New Zealand is also talking with the Gulf Cooperation Council, which comprises Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates and Oman.

On Friday Mr Goff called for public views on free trade talks with the six Gulf Cooperation Council states.

Officials are preparing for a first formal negotiating round in June and it was critical to hear from people ahead of the first round, he said. Exports to the Gulf states were worth $791 million in 2006.

CLOTHES STORE owner Hallenstein Glassons says sales are down and it is unlikely to match last year's half-year profit.

The market took the news badly, the shares falling 21 cents to close at $5.40.

Hallensteins warned that intense competition in New Zealand and Australia meant sales for the 16 weeks to November 21 were 2 per cent lower than last year.

Despite improving profit margins, if current trends continued through the key Christmas period it was unlikely to meet last year's results for the six months to February, it said.

It is a turnaround from a "stellar" performance for the previous corresponding half-year, when tax-paid operating profit rose 28.7 per cent to $10.9 million.

One analyst said the result was unsurprising, given a run of bad weather and similar comments from Australian peers such as Just Group.

"I think it's going to be tough over the critical December period for them because of very strong prior- year comparatives."

Last week, Just Group said its first-quarter sales had increased 4.1 per cent, but interest rate rises and cold weather had hit margins.

Also last week, The Warehouse warned of patchy consumer demand, with homewares, grocery, electrical entertainment going well but demand for apparel slowing.

Forsyth Barr analyst Guy Hallwright said earnings had been "probably near peak" for a while. Competition was also increasing on both sides of the Tasman.

In New Zealand, Farmers has moved more into women's makeup and fashion. Just Group's Portmans, Just Jeans, Dotti, Jay Jays and Jacqui-E stores are well established on most high streets, or expanding.

The Hallenstein Glasson statement came as clothing retailer EziBuy opened its first store in Hamilton, as part of a national expansion plan.

In the year to August, Hallenstein Glassons reported tax-paid profits 12.5 per cent higher at $21.71 million.

FARMERS department stores are under new management, with Rod McDermott taking over as managing director and chief executive as the company moves ahead with its change of image.

Chairman Denham Shale said Farmers had completed the full transformation at about a third of its stores and was hoping to complete work at most by the end of next year.

"We are definitely wanting to get ourselves at a level where we're on our own. We don't really want to be in a space occupied by others."

Farmers was aware of its "social responsibility' in smaller towns where it was often the only department store, he said. In those areas Farmers was working to revamp stores but retain a wider range of products.

In Matamata and Rotorua, Farmers has merged old stores or moved into larger spaces to make a combined department and homeware stores.

The 58-store chain was bought by New Zealand-owned private company James Pascoe three years ago from its Australian owners Foodland Associated.

James Pascoe is owned by husband-and-wife team David and Anne Norman. Mr Norman will become group managing director for James Pascoe and remain on the board.

A spokesman for Farmers said the new arrangement would allow Mr Norman to turn his attention to other parts of the group, mostly the Australian jewellery chain.

In September, Pascoes launched a lightning raid on Australian jeweller Angus & Coote, snapping up about 11 per cent of the business and sparking talk of a full takeover. It later took its shareholding to almost 15 per cent.

Mr Shale said James Pascoe was happy with its holding.

As well as Farmers, James Pascoe owns Pascoe Jewellers, Stewart Dawsons and Australian jewellery chain Prouds. Farmers has 58 department stores across New Zealand.

In a statement, James Pascoe's board said Mr McDermott's appointment would provide the continuity and stability required to achieve Farmers' repositioning.

In recent years, Farmers has been moving away from its history as a general merchandise store and moving upmarket, with an increased focus on jewellery, clothes and makeup.

Mr McDermott has 30 years retailing experience, including management positions in Australia with Myer and Big W, part of retailing giant Woolworths.

He has been with Farmers for 15 years, and has been chief operating officer for the past three years.

It's been part of the shopping landscape for nearly 150 years. Now Wellington department store Kirkcaldie & Stains faces turbulent times. Sue Allen meets new managing director John Milford.

JOHN MILFORD'S time behind the top desk at Wellington's flagship department store, Kirkcaldie & Stains, has been short, but he already has a plan.

Actually, he has three -- short, medium and long-term. No doubt shareholders will be all ears.

Last month, they received the painful news that profit had dropped almost 70 per cent to $290,000 for the six months to February. Worse still, dividends were being suspended.

But it is not just shareholders who are interested in how Kirks fares -- anyone and everyone in Wellington has a view on the store.

Too cramped, great shoes, brilliant sales, wonderful Christmas shop, out of touch, too much make-up and cosmetics, brands being cut without reason. Everyone has something to say about the store.

Mr Milford is undaunted by the task, but then he has more than 30 years' experience running department stores and retail businesses.

In the short-term bag is a "back-to-basics" approach, with inventory control, investment in a new point-of-sale system and improved customer service at the top of the list.

Once you know stock control is largely paper-based, Mr Milford's desire to get a firm grip on what's coming in and going out becomes clearer. He hints that some merchandise areas are likely to be dropped and some expanded.

Christmas 2006, traditionally Kirks' flagship annual event, pulling in people from far and wide, will be massive, he says. Events will also be held "that will be working towards the goal on inventory".

The first event is today -- a "never-to-be-repeated" $6 million clearance sale of back stock at Shed 11.

Small changes are already appearing: the cluttered women's clothing department has been recarpeted, racks cleared and discipline restored.

Among the medium-term issues is grappling with what seems to have been Kirks' problem for a while, a lack of focus on who its customers are and what they want to buy.

Kirks has responded by stuffing more and more into limited space in the hope someone will want to buy something.

It has 45,000 names on databases across the various departments, but the information is not centralised.

No detailed customer research has been done in the past five years.

"Do we know, as a business, who our customer profile and target is? No, not as well as we should do, and we are working on that."

The size and demographics of the Wellington region mean Kirks will always need to have fairly wide appeal, but change is needed.

What Mr Milford has described as "little gems" will also help Kirks in the medium term -- offering better financial products, better marketing and more exclusive brands, and upgrading its Internet business.

Kirks' bottom line gives an idea of how bumpy the ride has been for the store and its shareholders.

In 2003, profits were down 13 per cent to $1.42 million, in 2004 they were down 22 per cent to $1.1 million and last year they bounced back 9 per cent to $1.2 million.

Mr Milford describes the latest half year's 69 per cent profit fall as "not acceptable".

Though he will not comment on his predecessors, he says the results show the lack of a robust plan and a solid foundation.

"This is a terrible analogy, but I'll use it," he says.

"If you look at this business you can't just put a bit of rouge and lipstick on it and expect it to look really good. You've got to clean the skin, lay the foundation and do the makeover properly."

Michael Curtis, one of a group of property investors that in March seized 19.9 per cent of Kirks through LQ Investments, says they are "watching with interest for an improved result over the next year".

LQ's property expertise will be put to good use renegotiating Kirks' two leases soon.

They and the board are also looking at maximising return from the neighbouring Harbour City Centre, which Kirks bought for $29 million in 2002. The rental income from that building has helped Kirks stay afloat.

Mr Milford's arrival certainly provides a sense of history being repeated.

Kirkcaldie & Stains was established in 1863 by John Kirkcaldie, a Scotsman who had served his apprenticeship as a draper, and Robert Stains, an Englishman who had worked in the retail trade in London.

Their first shop was on the historic Bank of New Zealand site, now Old Bank Arcade. They moved to the present site in Lambton Quay in 1868.

Like them, Mr Milford learned the trade from the bottom up. He began his retail career in 1971 as a management trainee with Allders department stores in London. When he left in 1994, he was a director in charge of customer service for 44 stores and 7000 workers.

Allders went into administration in a blaze of publicity last year, but Mr Milford has only good things to say about his time there and credits the company with teaching him how to be a good shopkeeper.

He moved to New Zealand with his family after being shoulder-tapped by the head of Farmers in New Zealand, Terence Delaney.

He is now a fan of what he calls New Zealand's "egalitarian state".

"To have someone on the shop floor saying: `Hey, John, I don't think we're doing this very well', was a bit of a culture shock for me."

Mr Milford joined Farmers as a regional manager for Auckland, but after a management reshuffle he took over as general manager of its 63 stores.

He then spent four years at Eric Watson's Pacific Retail Group, eventually rising to chief executive of Pacific Retail Ltd, running its Bond & Bond, Retail Brands, Noel Leeming, Big Byte, Computer City and Living & Giving stores.

Though he admits he knows nothing about cars, his next move was to car parts retailer Repco, and from there to Kirks.

It was those early days as a management trainee, working in every department from sales tills to loading dock, that taught him the discipline of being a good retailer.

It also gave him what he describes as "empathy" with staff. It would be a mistake, however, to confuse that with sympathy for those who do not perform.

He has come from a background of targets, goals and tangible measurement. "I am a firm believer in performance; in what gets measured gets done," he says.

"If you don't give people objectives and they don't clearly understand them and if you don't help and support and train them, why would you wonder when they (the goals) don't get achieved?"

Kirks does not have a performance-pay system but one could hazard a guess it soon will have.

The real bottom line is that the more profitable a business is, the better it is for everyone, he says, allowing a business to reinvest, hire more staff and pay more to those it has.

His pay package has a healthy incentive-based element and he will have his work cut out to deliver.

But is he confident he can turn the business round? "Yes, definitely.

"My long-term plan is for this business to be here in 50 years' time and for Kirks to stay as a centre of excellence for retailing." AT A GLANCE

John Milford

1954: Born, Portsmouth, England
1965: Cowplain Boys School, Hampshire
1970: Highbury Technical College, Portsmouth
1971: Joined Allders (operators of British department stores) as a management trainee.
1994: Moved to New Zealand to join Farmers
2000: Chief executive of Pacific Retail
2004: General manager of Repco Australia
April 2006: Joined Kirkcaldie & Stains as managing director

Married: to Janet since 1975, has two sons, Jack and James.
Car: None at the moment but wants to buy a Porsche (not new)
Book: Biography of Winston Churchill by Roy Jenkins
Pastimes: Fishing, shooting, reading, history and cars