What the latest ABS figures mean for the ASX retail sector

According to the latest data from the ABS, retail turnover fell by 0.5% in December in a sign of continued weak demand in the sector.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

According to the latest data from the Australian Bureau of Statistics (ABS), retail turnover fell by 0.5% in December to $27.77 billion in a sign of continued weak demand in the sector.

Shoppers are increasingly choosing to bring their Christmas shopping forward to November to avoid crowds and take advantage of sales events such as Black Friday. The focus on sales and ongoing price competition is adding to pressure on retailers, with more closures anticipated. 

Month down, quarter up

A weak result in December was expected given stronger than expected results in November when the ABS recorded a 0.9% rise in retail turnover.

On the plus side, results for the December quarter showed a 0.5% increase in sales, the largest quarterly increase since June 2018. Much of this increase can be attributed to the November sales, including Black Friday and Cyber Monday sales events. 

Over the quarter, sales of household goods increased 1.4%, while clothing and department stores recorded increases of 1.5% and 2.1% respectively. Dining out increased by 0.5%.

Reserve Bank Governor Philip Lowe told the Australian Financial Review (AFR) that last year's interest rate cuts had helped households improve their balance sheets and free up spending money. This was, "bringing forward the day when households feel comfortable to lift their spending again," Lowe said. 

Sector concerns remain

Nonetheless, ABC News reports that economists predict retail to continue to underperform over the next few months, which may prompt further rate cuts. In the near term, the impact of bushfires and coronavirus remains a concern, with the latter impacting on tourist and student arrivals.

The bushfires significantly impacted New South Wales shoppers, with seasonally adjusted turnover in the state declining 1.2% in December. Sales fell by 1.3% in South Australia, 0.5% in Queensland, 0.4% in the Northern Territory and 0.1% in ACT in December. Sales in Victoria and Western Australia were flat while Tasmania recorded a 1.1% increase. 

Some retailers see improvements

For individual retailers, the outlook varies. While news broke this week that Colette by Colette Hayman was the latest retail to enter administration, others have had more positive results.

Homewares retailer Temple & Webster Group Ltd (ASX: TPW) released figures for 1HFY20 this week showing a 50% increase in revenue year on year. Earnings before interest, tax, depreciation and amortisation (EBITDA) was up 130% to $2.3 million from $1 million in 1HFY19.

Clothing retailer Mosaic Brands Ltd (ASX: MOZ) also announced a share buy back yesterday in anticipation of positive future earnings generation. 

According to the AFR, the improvement in spending in the December quarter and continued house price growth prompted UBS to upgrade Harvey Norman Holdings Limited (ASX: HVN) and JB Hi-Fi Limited (ASX: JBH) to 'neutral' and 'buy', respectively.

Furniture retailer Nick Scali Limited (ASX: NCK) believes sales will improve this half following an increase in foot traffic and customer orders in the December quarter. Nick Scali reported better than expected first-half profits yesterday, with shares closing around 11% higher in response to the results.

Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

3 small-cap ASX healthcare shares 'with strong prospects'

Fund manager IML discusses why these 3 ASX healthcare shares are likely to rise in value.

Read more »

Magnifying glass on a rising interest rate graph.
Share Market News

Will the RBA finally cut interest rates next week?

Let's see what economists are saying about the central bank's meeting.

Read more »

A couple sits on a sofa, each clutching their heads in horror and disbelief, while looking at a laptop screen.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors endured a rough Friday to close the trading week today.

Read more »

a man wearing old fashioned aviator cap and goggles emerges from the top of a cannon pointed towards the sky. He is holding a phone and taking a selfie.
Broker Notes

7 ASX All Ords shares elevated to 'strong buy' status in October

The brokers turned bullish on these ASX companies last month.

Read more »

A businessman compares the growth trajectory of property versus shares.
Share Market News

How ASX shares vs. property performed in October

The national home value rose for the 21st consecutive month while the ASX 200 dipped.

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

The worst 3 ASX 200 stocks to buy and hold in October unmasked

You would have done well to avoid these three ASX 200 stocks in October.

Read more »

A female Woolworths customer leans on her shopping trolley as she rests her chin in her hand thinking about what to buy for dinner while also wondering why the Woolworths share price isn't doing as well as Coles recently
52-Week Lows

Why is the Woolworths share price at its lowest point since 2020?

We haven't seen Woolies shares this low since COVID.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why AFT, Amcor, Corporate Travel, and Macquarie shares are falling today

These shares are ending the week in the red. But why?

Read more »