Food bucks the retail gloom
Year on year it has been the same story with household savings rising, the higher dollar making overseas travel more attractive and the erosion in apparel sales from the internet.
Retail experts say it has been a combination of the warm lead-up to winter, particularly in NSW, the heaving and constant discounting across all sectors and, to a lesser extent, the uncertainty eminating out of Canberra with the pending federal election.
There was an expectation that after the earlier Easter, which threw data-collecting into disarray (an extra three shopping days were included for the April calculations), May would have seen better sales.
The fall in interest rates in that month was also anticipated to send some cash registers ringing. But to no avail.
The saviour has been food and what economists label food catering, or takeaway meals and cheap-and-cheerful restaurants.
Retail trade rose by 0.1 per cent in May after falling by 0.1 per cent in April and falling by 0.6 per cent in March. Annual spending growth fell to 2.3 per cent - the weakest annual growth rate in 15 months.
Latest data from the Bureau of Statistics shows that non-food retailing rose by 0.1 per cent in May after rising by 0.2 per cent in April. Sales by chain-store retailers and other large retailers rose by 0.3 per cent in May. Sales by chain-store retailers and other large retailers were up 3.8 per cent on a year ago.
According to CommSec chief economist Craig James, the biggest gain in spending in May occurred at other specialised food retailers (butchers, bakers and so on) up 3.3 per cent, followed by pharmaceutical, cosmetic and toiletry retailers, up 2.2 per cent, and clothing retailers, up 1.6 per cent.
The biggest drop in the month was by other recreational retailers (entertainment media, sporting goods, toys), down 1.9 per cent; followed by footwear and other personal accessory retailers, down 1.7 per cent.
The retail analysts at Citi said retail sales continued to be sluggish.
"We see no reason to expect any notable improvement in the industry until the federal election is out of the way in September 2013," the analysts said.
"Looking ahead, June retail sales may be softer this year compared to the PCP [prior comparable period], with the government's Schoolkids Bonus to be paid in July this year [versus June last year]. Retail sales should continue to be below long-term trends for the next 12 months, because income growth is slower than historically seen."
Amid the weak conditions, the bricks-and-mortar side of retail is booming. There has been more than $6 billion of shopping centres change hands in the past year.
The latest was by Blackstone Group, which paid $360 million to Lend Lease's unlisted Australian Prime Property Fund Retail for the Greensborough Plaza, in Melbourne's north-east.
The new $300 million-plus Moelis Australia Property Visa Fund also bought its first asset, the Healesville Walk Shopping Centre.
Frequently Asked Questions about this Article…
The article says retail softness is due to rising household savings, a higher Australian dollar that makes overseas travel more attractive, growing online competition eroding apparel sales, a warm lead-up to winter in some regions, widespread discounting, and political uncertainty ahead of the federal election.
According to the article, retail trade rose 0.1% in May after falling 0.1% in April and 0.6% in March. Annual spending growth fell to 2.3%, the weakest year‑on‑year growth in 15 months.
CommSec noted the biggest gains were at specialised food retailers (butchers, bakers, etc.) up 3.3%, pharmaceutical/cosmetic/toiletry retailers up 2.2%, and clothing retailers up 1.6%. The largest declines were other recreational retailers (entertainment media, sporting goods, toys) down 1.9% and footwear and personal accessory retailers down 1.7%.
The article identifies food and 'food catering' — takeaway meals and inexpensive restaurants — as the saviour of the retail sector, providing the strongest support to retail sales amid weak conditions.
Sales by chain-store retailers and other large retailers rose 0.3% in May and were up 3.8% on a year‑ago basis, according to the data cited in the article.
Yes. Citi's retail analysts said they expect retail sales to remain sluggish and saw no reason to expect notable improvement until the federal election is out of the way (mentioned as September 2013 in the article). They also warned retail sales may stay below long‑term trends for the next 12 months because income growth is slower than historically seen.
The article highlights strong activity in bricks‑and‑mortar property: more than $6 billion of shopping centres changed hands in the past year. Examples include Blackstone Group paying $360 million to Lend Lease's unlisted Australian Prime Property Fund Retail for Greensborough Plaza, and the new Moelis Australia Property Visa Fund buying Healesville Walk Shopping Centre as its first asset.
Based on the article, investors should monitor monthly retail trade data (including category‑level performance such as food and clothing), the impact of political events like the federal election, income growth trends, and major shopping‑centre transactions — which show continued investor interest in bricks‑and‑mortar property despite weak consumer spending.
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