The damage to the retailing sector from the sluggish spending in the closing months of 2010 was underlined in a trio of reports yesterday (see stories below).
Retail sales data from the Australian Bureau of Statistics for December and the final three months of 2010 revealed the weakness of retail activity as consumers retreated and the strength of the Australian life added to the financial strains many companies were feeling.
The ABS said retail sales rose 0.2% in December (meaning the Christmas sales period was very weak).
That was well below market forecasts for a rise of 0.5%.
That was after a rise of 0.4% in November and the big 0.9% fall in October which outweighed the two other months and produced the fall of 0.3% for the three months to December (in volume terms).
That was after the 0.7% rise in retail sales in the September quarter, meaning sales growth for the period July-December of around 0.4%, which is anemic.
For 2010 retail sales rose 2.1%.
Excluding food, sales rose 0.6% in December, following a 0.7% rise in November.
The ABS said food retailing was flat in December (meaning the Christmas spirit was not upon us) and only other household goods retailers saw positive growth as department stores saw negative growth, along with the previous boom sector, cafes and takeaway and restaurants.
The ABS said the following industries fell in trend terms in December 2010: Cafes, restaurants and takeaway food services (-0.8%), Other retailing (-0.3%), Department stores (-0.3%) and Clothing, footwear and personal accessory retailing (-0.1%). Food retailing (0.0%) was relatively unchanged. Household goods retailing (0.5%) rose in trend terms in December 2010. "
And the Bureau said that sales fell "in trend terms in December 2010: New South Wales (-0.2%), South Australia (-0.4%), the Northern Territory (-1.2%) and Tasmania (-0.1%). Queensland (0.0%) was relatively unchanged. Victoria (0.1%), Western Australia (0.1%) and the Australian Capital Territory (0.3%) rose in trend terms in December 2010."
In the three months to December, the ABS said "the seasonally adjusted estimate fell in volume terms for Cafes, restaurants and takeaway food services (-4.7%), Other retailing (-1.1%), Clothing, footwear and personal accessory retailing (-0.6%), Food retailing (-0.1%) and Department stores (-0.3%). The seasonally adjusted estimate rose in volume terms for Household goods retailing (3.1%) in the December quarter 2010."
"In the December quarter 2010, the seasonally adjusted estimate fell in volume terms for New South Wales (-0.7%), Queensland (-0.8%), South Australia (-0.6%) and the Northern Territory (-4.1%). The seasonally adjusted estimate rose in volume terms for Western Australia (0.6%), Victoria (0.1%), the Australian Capital Territory (1.2%) and Tasmania (0.6%) in the December quarter 2010."
With that in mind, it is probably not surprising that department store chain Myer saw its shares fall 13% yesterday after it reversed previous guidance for a 5% to 10% profit rise and said it was now expecting a 5% fall in earnings for the 2010-2011 financial year.
But JB Hi-Fi, the discount consumer products chain, was applauded by investors who sent the shares higher after the retailer said profit was up 14% in the six months to December, despite sales growth dropping to just 8% for the half year from a 12% estimate in October and an expectation last August for growth of 17%.
Crucially JB Hi Fi didn’t cut its full year profit forecast increase, like Myer was forced to do. That was despite JB Hi Fi telling the market that the first five weeks of 2011 were no better than the closing weeks of what was a tough half year period.
Woolies has already halved its profit growth forecast for the six months to December and for 2011, Harvey Norman is looking at a 30% plus fall in first half profit and others, especially in women fashionwear (Noni-B and Specialty Fashion group) say profits will be down.
And yet this is not the result of the interest rate rise in November, because retail sales were positive for two months after that rise following the big fall in October.
It’s the continuing consumer conservatism and saving and the impact of the strong dollar which is giving retailers (especially in consumer products) inventory losses as global prices for TVs and other consumer products fall in US dollar terms, then in Australian dollar cost.
And it’s not the internet either causing this slump in activity.
If anything it would be the rise in the number of people travelling overseas in 2010, preferring to take advantage of the falling Australian dollar cost of travel than spending it here in shops or on holiday. The impact of the floods and Cyclone Yasi in Queensland will add to that pressure this year.
The ABS warned that the Queensland component of the retail sales were impacted by the December floods and may be subject to future revisions.
Mixed reports in the ANZ job ads survey for January, not so much for what happened in the month but the extent of a surprise revision for December.
The report showed the number of jobs advertised o
