Food bucks the retail gloom

The past 12 months have been some of the toughest for the retail sector, with sales struggling in spite of interest-rate cuts and steady employment numbers.

The past 12 months have been some of the toughest for the retail sector, with sales struggling in spite of interest-rate cuts and steady employment numbers.

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.

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