Thursday, March 23, 2023
HomeBusinessShoppers heavily discount retail sector

Shoppers heavily discount retail sector

While interim sales updates in January from some retailers (Myer, JB HiFi and Super Retail Group, for example) told a story of solid gains later part of last year, other updates – Best and Less, Kogan and Baby Bunting – told a weaker story.

- Advertisement -

And, on the last day of the month, the Australian Bureau of Statistics’ December retail sales data confirmed it was a ‘black’ month for the sector overall – sales down 3.9% in December, traditionally a boom end to the year with the Christmas and post-Christmas selling seasons.

Markets had been expecting a weak performance – a dip of 0.2% was forecast, but not the crash, which followed the surprise 1.4% gain in November off the back of the Black Friday and other one-off sales.

The strong November performance saw many analysts wonder if the sharp rise was more due to sales from December being pulled forward – they were and retailers have again shown themselves to be too clever by half in trying to con consumers into two rounds of one-off purchases within a month, especially as the same households face higher interest rates, inflation and cost hikes for energy, petrol, cars and falling real wages, despite fantasy warnings from the markets and business media about a prices-wages spiral.

The last time retail sales were in negative territory was the 3.7% slide in December 2021 thanks to the impact of the Covid lockdowns and social distancing restrictions.

The most telling stat from the ABS release was that retail turnover fell across all states and territories, “with the majority down by more than 3.0 per cent”, according to the Bureau.

That will please the Reserve Bank as it looks at monetary policy settings. It is a clear sign that consumers are retreating (just as they are in the US where the first estimate of 4th quarter GDP and other data last week showed a clear slowing in consumer spending).

Strong retail sales for December, on top of the solid 1.4% gain in November would have seen the central bank reaching for the interest rate lever labelled 0.50%. Instead, the slump in December (which produces a fall of 2.5% across the two months) will see the lever marked 0.25% pulled next Tuesday.

Annual sales growth fell to 7.5% in December from 7.5% in November. With inflation rising 7.8% (as measured by the Consumer Price Index) in 2022, retail sales actually sagged in real terms.

December’s slide should also be a warning to investors and others that retailing in the June half is going to be a war of attrition – a grind where a growing number of products and retail services could get cheaper as the year goes on.

The ABS data makes a mockery of claims from some economists and banks of a multitude of rate rises ahead for the economy from the rBA in 2023. The latest was Deutsche Bank’s forecast of four 0.25% increases (for a peak cash rate of 4.1 by year’s end).

Ben Dorber, ABS head of retail statistics, said: “The large fall in December suggests that retail spending is slowing due to high cost-of-living pressures.”

“Retail businesses reported that many consumers had responded to these pressures by doing more Christmas shopping in November to take advantage of heavy promotional activity and discounting as part of the Black Friday sales event.”

“This is the first monthly fall in retail turnover for 2022, following eleven consecutive monthly rises. Retail turnover remains elevated at its sixth highest level in the series and was up 7.5 per cent through the year.”

“Seasonal spending patterns continue to change and evolve around Black Friday and the holiday period.

“While there was a strong rise in original terms for December, as is expected in the lead up to Christmas, this year’s rise in original terms was smaller than those typically seen in past December months. This has led to the large seasonally adjusted fall,” Mr Dorber said.

“Turnover fell in industries previously boosted by November Black Friday sales. Department stores had the largest fall, (-14.3 per cent), followed by clothing, footwear and personal accessory retailing (-13.1 per cent), household goods retailing (-7.8 per cent) and other retailing (-4.6 per cent).

“Food retailing was the only industry to record a rise in December (+0.3 per cent), while cafes, restaurants and takeaway food services was relatively unchanged from November.”

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

Image & Story Credit:

- Advertisment -

Most Popular