Australian retailers to hold their own against their international counterparts but are still lagging behind in terms of e-commerce market share, according to a new report by accounting and advisory firm, BDO.

The annual report, Spend Trend, revealed 2014 was a more positive year for Australia’s retail sector, with signs the sector is recovering and sales revenue and net profit margins moving upwards.

The report compared key 2013-14 financial ratios and indicators for 19 ASX-listed retailers and 13 international retailers from across the US and UK.

BDO partner, John Bresolin, said despite international retailers generating greater revenue growth in the past year, Australian retailers improved their gross margins and cut key costs to achieve superior growth in net profit.

“The 2014 global retail landscape has been characterised by hyper-integration, from major online players like Amazon playing in the bricks and mortar space to more international retailers entering new markets such as Australia,” Bresolin said.

“In 2013-14, the report found sales revenue amongst Australian specialty retailers* grew by 6.6 per cent ($1 billion), compared to 10.4 per cent ($20 billion) for the selected international retailers,” Bresolin said.

“However, Australian specialty retailers led the charge in terms of gross profit margins, which increased by 2.2 per cent in 2014, as opposed to a fall of 2.8 per cent amongst international retailers.

“The local specialty retailers also demonstrated moves to better balance their expenses, with major costs like salaries and wages, rental and marketing representing 33 per cent of sales in 2014, down from 41 per cent in 2013 and 42 per cent in 2012, a fall of 20 per cent.”

Excluding a number of one off transactions, these measures translated into an 11 per cent increase in average net profit margins for Australian specialty retailers in 2014, whereas international retailers experienced a fall of six per cent.

According to Bresolin, Australian retailers are well positioned financially to meet the future challenges of increased international competition and the need for greater industry innovation to meet the demands of consumers.

“International retailers remain 2.5 times more geared than those locally, meaning Australian retailers have the opportunity to leverage their stronger balance sheets with less debt to meet the challenges of the volatile retail sector,” Bresolin said.

“Australian retailers have also demonstrated better consistency in terms of cash flow. The number of days taken to pay creditors remained fairly constant over the past couple of years, now at 46 days for the Australian retailers and 67 days for specialty retailers, while international retailers took almost a week longer to pay creditors in 2014 than they did in the year previous.

“It is clear, however, that many Australian retailers need to strengthen their online presence, as they are still lagging well behind the internationals in terms of e-commerce market share.

“For example, some of the international omni-channel retailers now complete up to a third of transactions online, while their contemporaries in Australia record levels as low as one or two per cent.

The full Spend Trend 2014 report is available for download at http://www.bdo.com.au/resources/publications/retail/spend-trend-2014.