Where Will CE Grow If There Is A Recession
CE retailer Harvey Norman and Woolworths who own Dick Smith and Power House will benefit from their exposure to WA and QLD as well as rural Australia says one of Australia’s leading retail analysts. He also says that NSW is hurting retailer’s top line.
Craig Woolford the Senior Analyst in the retail sector at Citi Bank Investments claims that during the past two years, WA retail sales grew at 1.5x the national average and QLD rose by 1.2x the national average.
In contrast, NSW only managed 0.8x the national average. The trends are not just driven by income growth, but also population growth in both metropolitan and regional areas outside NSW. He says that in the past five years, QLD’s population has grown 13%, WA’s 8% and NSW only 4%.
January was another strong month in retailing with supermarkets and department stores outperforming. Our indicator of listed retailer sales performance suggests the ASX-listed sector has outperformed the unlisted retail sector since March 2007.
He says that while retail spending was strong in 2007, not all parts of Australia enjoyed the good growth. NSW and Victoria have lagged the other states. In addition, rural and regional areas have suffered despite demographic trends favouring population growth in those areas. WA delivered 9.9% growth in calendar 2006 and a further 10.5% increase in 2007.
He also claims that NSW is hurting the top line of retailers through over exposure to the State where in 2006 growth was 4.4% and 6.4% in 2007, both below the national average. Despite this he says that premium retailers still performed strongly in NSW because household wealth and income growth for that demographic remained firm.
One of the key markets going forward is regional Australia and retailers who have exposure mining and agricultural industries will benefit.
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