Despite seeing an improvement in actual sales and profits during the September quarter, Dun & Bradstreet’s business expectations survey for the March quarter 2012 indicates that retailers will continue to remain substantially cautious compared to 12 months ago.

The reason being is bricks and mortar retailers will continue to brace for the worst with over half (56 per cent) expecting online competition to have an adverse effect on their business this year.

As a result, retailers remain pessimistic about first quarter, with expectations down 26 points to an index of nine compared with the same period in 2011.

The survey also revealed more than one in three (34 per cent) retailers expressed concern over wages and salary growth, up from one in four (25 per cent) during November.

Christine Christian, Dun & Bradstreet CEO, said online retailers will have significant advantages over bricks and mortar retailers, for whom operating costs invariably erode profit margins.

“High street retailers are facing increasing competition from online stores; compounded by the fact that they are dealing with overheads not applicable to e-commerce,” she said.

“The situation is likely to deteriorate for those retailers unwilling or unable to adapt to changing consumer behaviour.”

Concern from retailers comes despite the sector recording relatively strong September quarter results compared with the first half of 2011. During this tme actual retail sales rose to equal the cross-sector average of 14, up from -3 in the June quarter.

Likewise, retail profits rose notably to an index of two compared with a result of -10 during the June quarter last year.

Sales and profit expectations for the first quarter of 2012 are down 15 and 22 points respectively on the same quarter in 2011.

Christian said ongoing uncertainty in the global economy is acting as a drag on the national outlook.

“As the world contemplates a second recession, it is inevitable that local businesses will begin to question how this may affect their business in the coming year. As insulated as we have been so far from the turmoil in overseas markets, a second global recession will undoubtedly have consequences for sectors of the economy,” she said.

In spite of the notable drop in sentiment year-on-year, expectations for profit and sales have risen across sectors compared with the third quarter 2011, with first quarter sales expectations sitting five points above the December quarter.