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CE & Appliance Suppliers Suffering As Market Starts To Go Pear Shaped

A ChannelNews survey of leading suppliers to the consumer electronics and specialist audio channel reveals that several are suffering, with some suppliers reporting the worst trading conditions in over a decade, retailers such as David Jones are down as much as 30% at some stores in recent weeks.

Some executives at leading distributors supplying both CE and appliance goods to stores, claim that they doubt that they will deliver a profit this year, with several concerned that credit insurance could become an issue if the downturn continues.

There is also speculation that some distributors who were already under pressure due to COVID and having to pay increased costs for goods and rising freight costs could actually fail if conditions worsen.

The decision by the Reserve Bank to push up the official interest rate in May and June is being blamed for much of the lightning-fast reversal in sales growth as the department store which was taken over by Anchorage Capital grapples with a consumer cutting back on discretionary spending.

It’s also expected that several retailers will report “Shock “results with leaked documents revealing that recently sold David Jones, is already facing plummeting sales across its flagship stores.

Several distributors have moved to cut costs claiming that leading retailers have moved to only ordering replacement stock, as consumers cut spending and retailers avoid having stock on their books at the end of the financial year.

The move comes as both retailers and suppliers are suffering from “over supply “due to demands to pull forward orders for the Australian market during COVID. One leading supplier to JB Hi Fi, Harvey Norman and The Good Guys claims that stock that arrived in his warehouse recently was ordered 18 months ago.

Another issue bubbling away in the CE and appliance channel is ageing stock that has not sold through resulting in new and often more expensive stock not being ranged until the old stock has sold through.

Documents leaked to the Australian reveal that David Jones has fallen hopelessly behind its sales forecasts and trails sales for the same time last year by about 10 per cent”.

Sales for David Jones’ Warringah Mall store in Sydney between the week of June 4 and June 10 were down 20.54 per cent year on year, in Melbourne’s Highpoint shopping centre David Jones is down 20.16 per cent while at Eastland David Jones on the fringes of eastern Melbourne, sales are down 38.96 per cent compared with the same period last year.

David Jones Malvern in Victoria has witnessed a 19.01 per cent sales decline compared with the same time last year.
The nation’s $400bn retail sector now fears a marked slowdown that could plunge Australia into recession with several brands slashing costs, reducing headcounts as they struggle to deliver profits.

Back in December private equity firm Anchorage Capital Partners who once owned the failed Dick Smith stores acquired David Jones from its South African owner for about $100 million, a fraction of the $2.1 billion Woolworths Holdings paid in 2014.

Anchorage claimed at the time that they were confident that they could turn around the 184-year-old retailer that operates 43 stores in Australia and New Zealand, two distribution centres and a growing e-commerce business.

But this is not happening.

One bright spot is that the David Jones’ online platform did generate sales in $10.419m for the period, slightly ahead of forecasts, it was still down 3.98 per cent on last year.

Bondi Junction sales fell 13.6 per cent below forecast and 17.34 per cent compared with the same time last year.

At Chatswood Chase the, the store pulled in $1.647m in sales, which was 7.8 per cent below management’s forecast and 9.39 per cent short compared to last year.

A spokesman for David Jones told The Australian that June was traditionally a quieter month for retail, however the cumulative impact of 12 interest rate rises was weighing on shoppers.

David Jones had set itself “aggressive” sales targets for the year, which were made much harder to reach especially in the wake of the June rate increase by the RBA.

David Jones chief executive Scott Fyfe told The Australian the past two RBA rate rises had a significant impact on consumer confidence and traffic at its stores, while the fashion and broader retail sector was pushing through very high discounting at the moment, which was impacting everyone.

“The amount of discounting in the market is significantly higher than it was this time last year; we are seeing 40, 50 and up to 70 per cent off in some of our key competitors,” Mr Fyfe said.

The department store had also done its own stock clearance and high discounting in March before David Jones was sold to Anchorage, which meant that in June it had a lot less stock on clearance available for shoppers. David Jones had about 20 per cent less sales stock than this time last year which was impacting its sales momentum.

The retail recession that has been foreshadowed by Retail Forecasts for some time has now arrived claim analysts at Deloitte.

The business recently released the latest edition of Deloitte Access Economics’ Retail Forecasts.

Economics partner and principal report author, David Rumbens, said: “This retail recession isn’t a surprise. High inflation and rising interest rates have eroded the purchasing power of consumers, and, in response, consumer sentiment is now at historically pessimistic levels.

“We’re also expecting consumer caution to extend further than just goods, with consumers expected to also pull back on services, which could result in a broader based “consumer recession” later this year.”

“However, it’s not expected to be a uniform picture across the retail landscape. Over the past six months food sales in real terms have continued to grow by a healthy 1.7%. Non-food retail on the other hand has been in the dog house, with sales volumes falling by 3.7%.

“We’re also seeing consumer bases react differently to the economic environment. Younger people have been disproportionately impacted by the higher cost of living, particularly via rents, and so are curbing spending more than older Australians.

“There are, however, still some silver linings for consumers, with retail price growth starting to ease. Headline inflation over the March quarter was 1.4% while trimmed mean CPI was 1.2%, both much higher than the 0.6% retail price growth.

“In part, the more modest retail price growth comes down to discounting, and particularly apparent in apparel and department stores.

“There’s also some good news for retailers, with expectations of future migration being upgraded to 400,000 in 2022-23 and an expected 315,000 in 2023-24. “The further return of migrants, and especially students coming back for Semester 2, could be the boost needed to get retail sales back to overall growth later in 2023.”



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