Myer eyes a Christmas miracle

Even as business confidence appears to be imploding the Myer first quarter sales results have provided a tiny tinge of optimism that consumers might be finally edging out of their defensive mindsets.

Myer's modest lift in sales – total sales were up one per cent and comparable stores sales 0.8 per cent – might not appear particularly encouraging but it was the first quarter of positive total sales growth for more than two years and the second successive quarter of comparable stores sales growth.

It wasn't possible to read too much into the fourth quarter comparable stores sales growth of 0.3 per cent given that there was a broader uptick in the sector generally attributed to the Gillard government's cash handouts just before the end of the conventional financial year.

The Myer numbers for the 13 weeks to 27 October, however, could suggest that the protracted and quite steep downturn in consumer activity might have bottomed. Given the extent of the continued discounting that has been occurring, and the continuing growth of online retailing, one assumes that a rise in total sales is being driven by volume rather than price.

Given that there have been three official rate cuts this year, totalling a full percentage point, and a 1.5 percentage point reduction since the rate-cutting cycle started last November, it wouldn't be that surprising if it finally flowed through to some pick-up in retail sales, or at least a halt (temporary or otherwise) to the downward spiral that has hit the full-service department store operators hardest.

Reserve Bank governor Glenn Stevens, in announcing that rates were on hold on Cup Day, did say there had been some signs of ongoing growth in consumption, although he qualified it by saying a return to very strong growth was unlikely. For Myer's Bernie Brookes and David Jones' Paul Zahra, any stabilisation in sales would be regarded as a major positive.

Brookes has been quite disciplined in not chasing sales growth at the expense of earnings so it would appear reasonable to conclude that the positive direction of the numbers reflects a genuine improvement rather than sales bought at the expense of margin.

Not surprisingly, Brookes isn't getting carried away and remains quite cautious and defensive and unwilling to bet too much stock on a bonanza Christmas but the successive quarters of comparable stores sales growth do at least provide a more encouraging platform to enter the crucial Christmas and New Year trading period than the department store operators had last year.