Retail sales for December 2023

Christmas soft but needs context

Australian retail sales only rose 0.3% for December 2023. If we average November and December, given the Black Friday pull-forward, growth was still a weak 1.1%. The additional detail for December highlights a consumer that is increasingly cautious. Café & restaurant sales were particularly weak, along with liquor and all household goods categories declined. We expect similarly weak trends in January 2024. We expect low retail sales growth of 1%-3% over the next six months.

What we’re seeing and hearing in retail

  • Trading down the challenge emerging: The primary feedback we are now hearing is weaker sales because consumers are trading down to cheaper products. This is evident in supermarkets, liquor, QSR and fashion.
  • Gross margins good: Many retailers are holding flat or even increasing their gross margins. Discounting may look high, but retailers raised shelf prices and product costs are falling.
  • Weather patterns hurt January 2024: We have had weak feedback on January, particularly in liquor and fashion. It has been both cooler and wetter than last year.

Sub-sector insights

  • Supermarkets: Supermarket sales only rose by 1.9% in December and were up 2.8% for the December quarter. This is a 2pp slowdown from the September 2023 quarter. Independents have slowed, but it does point to weaker growth likely at Coles and Woolworths as inflation unwinds.
  • Liquor: Liquor sales fell 1.0%. We have had soft feedback across the sector and expect sluggish sales for Endeavour and Coles for the Dec qtr.
  • Takeaway food: Takeaway food sales rose by 4.8%, while cafes & restaurants fell 0.3%. Trading down is clearly evident in spending and cafes & restaurants will have a challenging 2024.
  • Electronics: Electronics sales fell by 4.0% in December. The combined Nov-Dec performance was -1.1%. We expect to see a decent improvement at Harvey Norman and slightly softer trends for JB Hi-Fi relative to market over the December quarter.
  • Hardware and furniture: Hardware sales fell by 2.9% in December 2023 and were down 1.4% for the quarter. Sales trends softened by 2.4pp vs the September quarter trends. Furniture sales fell 3.3% in December and were down 3.2% for the quarter. Nick Scali noted its December quarter written orders were up 8.2%, which is likely to reflect share gains in sales.
  • Recreational goods: Recreational goods sales rose 2.1%, which may reflect better sales in toys. Super Retail Group noted very weak sales of
    -8% for Rebel across November-December 2023.
  • Department stores: Department store sales rose by 3.3% for December. Our feedback suggests Kmart is trading well. The six month growth was 1.5%. Myer had 0.1% comp sales growth for 1H24 (to end of January).
  • Fashion: Clothing sales fell 1% and footwear and accessories fell by 0.7%. Fashion sales may have been impacted by wetter weather in December.

Online retail: Online sales rose by 13% in food and fell 0.6% in non-food. Online is growing rapidly for supermarkets, but may be cannibalising stores.

Australian retail sales growth for December 2023

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