Is retail really rolling again?

There have been signs that retail gathered some much-needed momentum over the festive season. Now we're poised for clarification of the scale, and true nature, of those promising figures.

Given that its retail brands cover a significant proportion of the spectrum of retail segments, the release of Wesfarmers’ second-quarter retail sales numbers has provided encouragement with first detailed insight into how the major retailers fared in the lead-up to Christmas.

The numbers were solid, with sales in the second quarter rising by 5.2 per cent, to $9.896 billion, while the retail giant said a record number of shoppers visited its stores in the Christmas period.

In the meantime, the CFS Retail Property Trust data issued on Wednesday provides some sense that the modest positive momentum that was apparent in retailing as last year progressed continued into the final three months of the year.

Across most of the key retail segments either comparable sales grew at an improving, albeit very modest, rate through the year or the rate of decline slowed.

In department stores, for instance, the trust’s moving annual turnover for the year to June (using comparable stores data) saw a 2.5 per cent decline. By September the 12-month rolling period sales numbers had moved into positive territory, with 1.3 per cent growth. For the 12 months to December the growth had flattened but was still up 1.2 per cent.

That’s broadly consistent with the improvement seen in Myer’s sales in the first quarter of the 2012-13 financial year, where its comparable stores sales growth of 0.8 per cent was its first positive sales growth for two years.

A similar pattern can be seen in CFS’s discount department store experience. For the year to June the segment was experiencing significant distress, with comparable stores sales declines of 1.9 per cent. By December the rates of decline had been pulled back to 0.2 per cent.

Supermarket sales, particularly for the two big chains, have performed solidly through the tough post-financial crisis retail conditions but from CFS’s experience also picked up steadily through the year.

Similarly, specialty stores have held up well while the "mini majors" – brands with smaller store sizes like JB Hi Fi, Priceline, Aldi etc – improved towards the end of the year after a difficult mid-year experience probably due to the restructuring of Woolworths’ Dick Smith brand ahead of its sale. The continuing disruptive ripples from Kmart’s strategy of aggressive pricing of a focused range may also have been a factor.

There’s nothing in the CFS numbers to suggest a major recovery in retail sales after several torrid years for non-food retailers but there are indications within both the official statistics and anecdotally that consumers are slightly more confident and slightly more willing to spend.

The Gillard government’s mid-year cash handouts and the Reserve Bank’s continuing series of official rate cuts should have helped but it is probably also the case that the retailers have been sacrificing some margin to drive their sales – there’s been a lot of heavy and sustained discounting and promotional activity over the Christmas and New Year period.

We’ll have to wait until the big retailers start producing their earnings results for the first half to get a better sense of whether they have been driving profitable sales growth or not (one suspects the spectacular trebling of earnings Speciality Fashion Group foreshadowed last week is a unique experience) but there is a sense within the sector that at least conditions have stabilised.

Given the continuing fragility of the global economy and the structural changes occurring in retailing as foreign brands with different retail formats launch in this market, and the shift to online retailing continues to develop, that may be as much as the major local non-food retailers can hope for.

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