Australia: Retail sales stall - Westpac

Matthew Hassan, Research Analyst at Westpac, explains that Australian retail sales posted a disappointing start to 2018 with a  0.1% gain in Jan vs expectations of a 0.4% rise as annual growth slowed to 2.1%.

Key Quotes

“The lead in to Jan was mixed. On the plus side, retail was coming off a 0.5% decline in Dec with consumer sentiment and private sector business surveys suggesting some improvement in Jan. Against this, the launch of Amazon’s Australian operations late last year look to have stepped up price competition in key non-food retail segments although some of this dampening effect was expected to be offset by the inclusion of Amazon sales in the retail survey measure.”

“The wash up suggests price discounting remains the dominant force in early 2018.”

“The store type detail showed material declines for clothing (–0.7%mth) and department stores (–0.6%mth), likely reflecting increased price competition. Household goods retail was essentially flat, as was both food and cafes and restaurants. The only segment to record a solid gain was ‘other retail’ up 1%.”

“By state, sales dipped 0.2% in NSW but posted slightly better gains in Vic, Qld and WA.”

“The business size detail shows small retailers are struggling with a further 0.7% decline in Jan taking sales down 3.3% since mid-2017. Jan performances varied across large retailers – non food up 1.4%, large food retailers down 0.7% – but both have still seen solid gains since mid 2017.”

“In terms of distribution, online channels continue to see strong growth, up 36%yr vs 1.1% growth for 'bricks and mortar' retail, i.e. over half of the growth in total retail sales is now coming via online channels.”

“Overall the Jan report is a fairly bleak read. Retailers have seen no real reprieve on the difficult conditions that prevailed through most of 2017 with the picture suggesting competitive pressures and price discounting remains intense in many segments.”