Australian retail sales rose by 1.6% year on year in February 2024, adjusted for the leap-year effect. Sales trends are very weak, given population and price are still positive contributors to retail. As a silver lining, retail is now almost back to pre COVID-19 underlying sales trends. Perhaps the mean-reversion is done? The weakest categories in February were furniture, electronics and footwear. Pharmacy, cosmetics and apparel did well. We expect retail sales growth to continue to hover around 0%-2% over the next few months.

What we’re seeing and hearing in retail

• Watch for leap-year: While an obvious statement, February 2024 was boosted by the leap year. Reported sales growth of 5.3% drops back to 1.6% year on year once we adjust for the leap year.
• March softer: Our feedback from a wide range of contacts is that sales trends have eased for March. We expect soft trading updates for retailers come late April and May.
• Keep an eye on wages: The minimum wage decision for FY25e will be made in early June. We expect a range of 3.5%-4.5% as the likely outcome.

Sub-sector insights (Feb ‘24 adjusted for leap year)

• Supermarkets: Supermarket sales rose 2.1% in February, slowing on the January 2.4%. Price deflation is the likely driver of the slowing rate of growth, particularly in meat categories.
• Liquor: Liquor sales were flat with volumes in decline. Liquor is going through a mean reversion and weak growth is likely for most of 2024.
• Pharmacy and cosmetics: Pharmacy and cosmetics rose 6.7%. While a slowing on January, another strong sales result which we expect was driven by pricing.
• Takeaway food: Takeaway food rose 5.3% and cafés and restaurants rose 1.3%. There is evidence of trading down in dining out, a useful indicator of broader sentiment towards trading down by consumers.
• Electronics: Electronics sales fell 4.2%. This sales slowdown accelerated on January. Price deflation and consumers waiting for promotional events is denting sales.
• Hardware and furniture: Hardware sales fell 0.2%. Furniture fell 3.4% which was a smaller drop than January at 4.5%.
• Recreational goods: Recreational goods rose just 0.3% but this was a turnaround from the decline in sales for January.
• Department stores: Department store sales grew 2.1%, with feedback suggesting Myer and Kmart are a disproportionate share of the growth.
• Fashion: Clothing sales rose 6.6% but footwear fell 0.7%. Premier Investments called out positive momentum for February-March (first 8 weeks) sales, implying a returning to near flat like-for-like growth after a decline for the six months to January 2024.
• Online retail: Online sales in food rose by 17.1% but fell by 0.6% in non-food. The food growth was stronger on January and is weighted to supermarket online sales growth.

* Adjusted for leap year Source: ABS, MST Marquee