“GFC-level terrible.” Those were the words of NAB group chief economist Alan Oster when commenting on the state of the retail sector during an NAB Economics podcast. This was in light of a recent leading business survey declaring that the sector was “clearly in recession.” The dire situation, however, seems to have actually escalated in just the past few months compared to the last two years. Firms behind popular retail brands like Focus on Furniture are, going into administration while company closures in the sector have become increasingly rampant. The recent disruptions due to e-commerce, coupled with the slow growth of the Australian economy, were already doing enough damage to the sector but retailers are now officially calling it a crisis. To better understand how this decline had accelerated, one can also look at how retailers were behaving four years ago. Another retail survey by Macquarie Wealth Management notes a very steep contrast, as evidenced by the radical shift in attitude towards expanding floor space in stores. “Retailers are far less bullish on their space requirements today than they were five years ago, when we first conducted this survey. Only around 7% of large retailers currently intended on increasing space on a one-year view. This compares to around 61% back in 2014. In fact, 24% expect to decrease space over the next 12 months,’’ the report says. With recession now on the minds of many business and thought leaders in retail, there has been increasing sentiment that rent reductions need to follow. Finally, someone is saying the R word about Retail Trade- recession. The other Rs are rent reductions.” But while rent reductions may ultimately be the only way out, finding the means to enable to those reductions will not be easy with rent rises deeply rooted in the current leasing system. Only time will tell if landlords will cave to the pressure of retail recession woes. Phil Chapman is the director of retail leasing specialist Lease1.
Australian retail turnover rose 0.6 per cent in May 2017, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures. This follows a rise of 1.0 per cent in April 2017. In seasonally adjusted terms, there were rises in household goods retailing (2.2 per cent), clothing, footwear and personal accessory retailing (1.3 per cent), cafes, restaurants and takeaway food services (0.6 per cent), other retailing (0.6 per cent), and food retailing (0.1 per cent). These rises were offset by a fall in department stores (-0.7 per cent). The rise in household goods was across all subgroups: electrical and electronic goods retailing (2.8 per cent), furniture, floor coverings, houseware and textile goods retailing (2.0 per cent), and hardware, building and garden supplies retailing (1.5 per cent). In seasonally adjusted terms there were rises in New South Wales (1.3 per cent), Victoria (1.2 per cent), South Australia (0.8 per cent), Western Australia (0.3 per cent), Tasmania (1.2 per cent) and the Australian Capital Territory (1.0 per cent). There were falls in Queensland (-1.1 per cent) and the Northern Territory (-0.5 per cent) in May 2017. The trend estimate for Australian retail turnover rose 0.3 per cent in May 2017 following a 0.3 per cent rise in April 2017. Compared to May 2016 the trend estimate rose 3.2 per cent. Online retail turnover contributed 3.9 per cent to total retail turnover in original terms. Winter sales better late than never: retailers The Australian Retailers Association (ARA) said the positive trade figures released by the Australian Bureau of Statistics represent a better than expected trade in May with 3.82% total growth year-on-year. ARA executive director Russell Zimmerman said the May retail trade figures illustrate a positive outlook for the industry as retailers head into winter. “Retail figures have improved from April across the board with the cold winter snap driving consumers indoors,” Mr Zimmerman said. Clothing Footwear and Personal Accessories figures have levelled out in May, showing a 3.76% increase year-on-year. Household Goods (5.11%), Electrical (5.80%) and Furniture (8.62%) have seen the strongest year-on-year growth with many new electronic products launched to the public in late April. Mr Zimmerman said the late arrival of cold weather might have had a positive effect on retail sales but some retailers are still not getting the sales volume they need due to the considerable amount of discounting happening across Australia. “Although liquor has slowed down considerably as we move away from Easter, Supermarkets, Cafés Restaurants and Takeaway Food remain strong.” May trade figures remained steady across the board with all states showing a stable growth. Australian Capital Territory (5.68%), Victoria (5.19%), South Australia (4.90%) and Tasmania (4.53%) lead the pack with modest year-on-year growth. While New South Wales (3.93%) and Queensland (3.07%) also show a moderate year-on-year increase. Both Western Australia (0.98%) and the Northern Territory (0.62%) might trail behind the other state still show fairly stable figures. “As we enter the colder months we will see retail growth remain strong, giving retailers breathing room in the tough trading environment,” Mr Zimmerman said. “We look forward to seeing consumers take advantage of the end of financial year sales in June giving retailers another boost in sales.”