Australian retail sales rose 4.7% year-on-year for December 2025. This was a solid end to the year and the December quarter showed growth of 5.8%, which was above trend. It is important to call out the strength of non-food, which was 7.1% across the December quarter, an unusually strong result. We believe we have just seen the peak in retail sales growth, with a gradual slowdown over 2026 likely.

What we’re seeing and hearing in retail

• Black Friday pull forward differs and January softer: Interestingly, the strength in November sales did not take much from December. It is more likely that Black Friday promotions led to weaker sales in the lead-up period. We have had feedback that January 2026 sales trends are weaker.
• Gross margin pressure: While sales growth across the quarter was strong, we expect to see gross margins drop across most retailers as a partial offset. More sales were made during promotional periods.
• Consumer in remarkably strong shape: Almost every economic datapoint on the December 2025 quarter was strong. Consumer spending was much stronger while household deposits went up. Home sales were stronger too. No wonder the RBA hiked.

Sub-sector insights

• At-home food and liquor: Food at-home and liquor sales rose 2.7% in December 2025. While detail is not provided, we expect liquor sales were down circa 1%, with supermarkets up 3%. Stripping out tobacco, supermarket sales could have grown closer to 4%. Woolworths had a much stronger growth rate in December given industrial action in the pcp.
• Cafes, restaurant and takeaway food: Café, restaurant and takeaway spend grew 7.5%, continuing its strong run and is indicative of positive sentiment towards discretionary spending.
• Household goods: Household goods grew 4.3% in December 2025. This was a slowing from double-digit growth in November. We expect there has been a slowdown across furniture and electronics.
• Department stores: Department store sales were up 2.4%. We have had feedback of slower sales in Kmart, while David Jones total sales should be stronger given a store re-opening and other refurbishments.
• Clothing & footwear: Clothing & footwear grew 2.9%. Slowing from the 9.4% growth in November. Rebel highlighted industry promotional activity impacting sales of footwear. Feedback on apparel was slower growth in December, especially in menswear.
• Other retailing incl recreational goods: Other retailing grew 8.6% and accelerated on November. Super Retail Group called out weakness in BCF impacted by Victorian and South Australian weather-related issues.
• Online spending: AusPost reported parcel volumes up 7.6% across November and December 2025, with athleisure and women’s fashion outperforming. The broader market may be slightly stronger as market share gains by marketplaces boost sales outside AusPost.
• Non-retail spending: Total consumer spending rose 5.3% with services spending up 7.5%. Health spending was up 8.8%, alcohol and tobacco sales fell 11.7%, a smaller reduction than the November drop of -17.1%.