Australian Retail Sales Update….tailwinds for some
We’re keen to keep an eye on retail sales. You might recall we have previously explained that on the positive side, unemployment if very low, is very good for retail conditions. On the negative side wages growth has been stubbornly flat and retailers have been unable to pass on any price rises.
Also, the slowing of high rise residential development activity in Australia means that some tradies may start feeling the pinch, unable to be as fully employed as they may have liked. To the extent that high levels of credit card and mortgage debt affect consumer behavior, it may start to show in consumer sales data.
This week January retail sales data was released.
Retail sales in January were +2.1 per cent year on year (yoy) (seasonally-adj) and +0.1 per cent month on month (mom) (seasonally-adj). This compares to expectations of +0.4 per cent month on month.
Strong numbers came through from cafes, restaurants and catering (+5.5 per cent yoy and +0.5 per cent mom), hardware (+3 per cent yoy and +0.5 per cent mom), and liquor (+3 per cent yoy and -2 per cent mom) the latter continuing a strong trend. Electrical was also strong (+2.6 per cent yoy and -0.1 per cent mom) – but we already suspected this from JB Hi-Fi’s update of more than 4 per cent growth in JBH stores.
There were however pockets of weakness. Furniture and floor coverings (-2.4 per cent yoy and -0.2 per cent mom), footwear and personal accessories (-2.3 per cet yoy and -3 per cent mom), takeaway food services (-1 per cent yoy and -0.6 per cent mom), and finally, something we have written about extensively; department stores (-0.9 per cent yoy and -0.6 per cent mom).
For companies in these weakening sectors growth can still occur, but it is important to understand when a tailwind could be morphing into a headwind.
We recently posted some research by Citi on the retail sector winners and losers this latest reporting season. You can review this here.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
