Australian retail sales rose 4.8% year-on-year in February 2026. Growth has softened a little, reflecting soft growth in food & liquor and a slowdown in household goods. Growth in dining out and online retail remain above trend, suggesting consumers took the February rate hike in their stride. The starting point for the slowdown in retail sales is reasonably strong and we may see March growth at 3%-4% overall following higher petrol prices. A return to sales growth near 4% is our view and more consistent with a neutral cash rate backdrop.

What we’re hearing and seeing in retail

• March 2026 retail feedback: Despite interest rate hikes and the spike in petrol prices, retail feedback has only softened a little. Foot traffic in shopping centres is still up. There is a small amount of panic buying in groceries that may lift sales for supermarkets. The weakest feedback has been in fashion for March 2026.
• The implications from higher petrol prices: Following excise relief, petrol prices are about 50 cents higher than March 2025. This would drop overall retail sales growth by 1.4%.
• Outlook for retail prices: Price rises are being negotiated for supermarket items and we could see it on shelf in May 2026. There is increasing concern about plastic packaging costs and availability. We see an additional 2%-3% inflation in grocery, but negligible moves in non-food retail.

Sub-sector insights

• At-home food and liquor: Total food and liquor sales rose 3.1% in February 2026. Within this, supermarkets are trending at 4%-5% growth, whilst liquor sales are flat to slightly negative in off-premise.
• Cafes, restaurants and takeaway food: Sales rose 7.0% in February 2026, continuing to win share from supermarkets. Whilst a cut back in fuel volumes is negative for QSR, operators like Guzman y Gomez, KFC, and McDonalds have seen acceleration in comp sales growth driven by value.
• Household goods: Household goods sales grew 2.9% in February, down from 4.2% in January. Furniture sales respond quickest to interest rate changes with a six-month lag, followed by hardware and electronics.
• Department stores: Department stores sales rose by 4.0%, which is down from 4.8% in January. Kmart/Target suggested growth of ~4% for the first six weeks of 2026, with Big W flat for the first seven weeks.
• Clothing & footwear: Sales grew 5.0% in February, moderating from 6.5% in January. This is strong relative to the trading update from Accent Group of flat, but closer to Universal Store at 7.1% for the first seven weeks.
• Other retailing incl recreational goods: Other retailing grew 8.8% in February 2026. The category includes pharmacy, where Chemist Warehouse reported sales growth of 14.4% over the first seven weeks.
• Online spending: Whilst data for online spending is still lacking, RBA device not present payments data, which is a proxy for online sales, grew 8.2% in January 2026, below the long-term average of 15.6%.
• Non-retail spending: Discretionary spending continued to outpace staples spending in February. This trend will likely reverse from March as fuel and interest costs spike higher.