Are there green shoots starting to sprout in the retail sector?

Retailers still facing headwinds, but there may be some signs of improvement

Mike King

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Published February 5, 2015 1:07 pm AEDT

There was no magic turnaround in retail sales in December, according to data from the Australian Bureau of Statistics (ABS).

That means the tough times are likely to continue for retailers. Weak consumer confidence is playing its part, and consumers haven't been spending. That's despite big falls in petrol prices putting more money in their pocket and justifies the Reserve Bank (RBA) cutting interest rates earlier this week.

Retail sales grew at just 0.2% in December, compared to November, and growth has been trending down for the last four months of 2014, as you can see in the chart below.

Source: ABS

Still, some industries performed better than others. Clothing, footwear and accessory retailing gained 0.6% – good news for the likes of PAS Group Ltd (ASX: PGR), Premier Investments Limited (ASX: PMV) with its Just Jeans, Jay Jays, Dotti and Portmans stores and RCG Corporation Limited (ASX: RCG) – the owner of the Athlete's Foot stores.

In lunchtime trading, PAS Group was down 0.8% while Premier was up 1.3%, and RCG Corp had surged 2.7%.

On the plus side, consumer electronics retailer JB Hi-Fi Limited (ASX: JBH) recently reported strong January sales growth, after a disappointing and rather weak first half of 2015 financial year. That may be a signal that consumer confidence is starting to turn. Further cash in the pockets of consumers will also come thanks to the RBA rate cut. Could things be about to turn?

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