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Why retail figures and Metcash profit disaster confirm retailers are still doing it tough

Posted on Jun 5, 2015

Today’s retail sales numbers were disappointing.  The figures, combined with Metcash profit disaster confirm that retailers are still doing it tough.

Of concern were the declining retail sales in Queensland.  Obviously these states have been impacted by the mining downturn, and today’s figures indicate that the pain is being felt by individuals.  Yesterday’s GDP figures indicated that mining is still providing a positive contribution to the state’s growth.  However, with the significant reductions in the mining workforce from the cancelation of new projects and completion of major LNG projects, consumer spending has been impacted.Trends of changing consumer behaviour are continuing to be supported by statistics.  Online sales rose strongly again, suggesting that Australians prefer the convenience of online shopping over traditional channels.

MetCash’s result further indicates that cheaper alternatives ALDI and CostCo are providing consumers with more choice and they are moving with their feet.  No longer is MetCash just competing with Woolworths and Coles for market share.  The two new players are disrupting the traditional supermarket model, and all parties are being required to take notice.

On the bright side, we are expecting a more robust improvement in retail sales for May and June, as the small business budget measures and the impending end of the financial year will be a boost for retail.  Companies like Harvey Norman and JB Hi-Fi are expected to be the main beneficiaries from the listed retailers.  We continue to like this sector of the market as Australians continue to spend on IT, technology and entertainment.

RETAIL SALES FIGURES, Thursday 4 June

David Lane, director of Wealth Management at Pitcher Partners