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

Animation of a man measuring a percentage sign, symbolising rising interest rates.
Share Market News

Here's when Westpac says the RBA will now cut interest rates

Will borrowers need to wait until the middle of next year for relief? Let's find out.

Read more »

Boys making faces and flexing.
Opinions

3 ASX 300 shares to buy and hold for the long run

I believe these stocks have loads of growth potential.

Read more »

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

Hands reaching high for a trophy with a sunset in the background.
Record Highs

The ASX 200 Index is on its way to another all-time high today. Here's why

These blue chip stocks are driving the index towards a new record today...

Read more »

Group of friends trading stocks on their phones. symbolising the 3 most traded ASX 200 shares today
Share Market News

3 ASX mining stocks topping the most-traded list in October

Chinese stimulus news and company announcements likely contributed to the higher trading activity.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

3 ASX 200 stocks smashing the benchmark this week

These three ASX 200 stocks are leading the charge this week. Here’s how.

Read more »

Two people tired and resting after sports race.
Broker Notes

Fundie rates 2 ASX 200 stocks in short-term pain but with long-term gain potential

Blackwattle Investment Partners sees these 2 ASX 200 stocks as worthy of a buy and hold strategy.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why A2 Milk, EOS, GQG, and Mineral Resources shares are racing higher today

These shares are ending the week strongly. But why?

Read more »