Christmas could come early for consumers this year with research undertaken by Deloitte suggesting nearly one in three retailers will cut prices on items early in December, as reported by The Australian Financial Review.
Indeed, the Christmas period is the most important time of the year for most retailers and usually plays a key role in determining their overall earnings results for the entire year. Last year, $45.2 billion was spent in the Christmas sales period with the ABC citing Russell Zimmerman, chief executive of the Australian Retailers Association (ARA), as saying "(Retailers) often get around 60 per cent of their sales at this time of the year so it's an extremely important time for them."
In an update from the ARA earlier this month however, Mr Zimmerman noted that the low Retail Trade growth experienced in September (which grew 3.6%, according to the Australian Bureau of Statistics) was less than the sector had hoped for.
He also said he was disappointed with the Reserve Bank of Australia's decision to not cut interest rates, adding that: "To ensure the resilience of Christmas spending, the ARA would have hoped to see sales growth of closer to five per cent."
The early prediction is that Christmas revenue growth will be around 4% higher than the $45.2 billion achieved last year.
While that may be the case however, the big fear is that retailers such as David Jones and Myer Holdings Ltd (ASX: MYR) could kick off their sales early, forcing others to do the same. Of course, heavily discounted items could spur greater sales but it would come at the cost of margins and therefore profitability.
It seems the sector would be better off if most retailers held off from heavily discounting their items with the reality being that consumers seem most willing to spend in the Christmas period – regardless of price.
JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) are among the companies prepping for big Christmas periods, while Dick Smith Holdings Ltd (ASX: DSH) will be hoping for a pick-up in sales following an ugly profit downgrade recently.
