Australian retail sales rose 4.1% in January 2025 with decent signs of growth across most categories. Liquor is still lagging, while hardware and electronics were softer than recent months. Pharmacy and recreational goods were the standout segments. We expect retail category and company divergence to rise over the next six months. Overall sales trends are likely to bounce around the 3%-4% mark, which is satisfactory growth, but still a challenge relative to cost growth.

Australian supermarket sales are at a record low as a share of total food spending. Dining out is winning share of spend and the same is true for the US and NZ. Our research shows that employment growth, inbound tourism and savings tend to be well correlated with dining out spending and all still point to solid growth. Supermarket prices have also risen faster impacting its relative affordability. Dining out is bound to slow, more so in 2024 than now and unfortunately for supermarkets any uptick in volume may be more than offset by a fade in inflation.