Despite JB Hi Fi delivering a record result and Myer showing signs of a turnaround retailers are now concerned as to how 2023 is shaping up, with Super Retail Group CEO Anthony Heraghty claiming that demand will soften in the second half of 2023.
An avalanche of price rises across food petrol, building materials and general household goods has analysts concerned that retail sales could fall flat in 2023
In an interview with the Financial Review, Heraghty says retail therapy is underpinning sales, but demand will soften despite cashed-up consumers fuelling unprecedented retail sales growth this year.
Despite back-to-back interest rate rises in May, June, July and August, household consumption remains surprisingly buoyant, leading some analysts to suggest Australian consumers are more resilient than those from overseas markets.
Some analysts claim that wages growth could help retailers overcome a downturn.
MST Marquee analyst Craig Woolford believes retail wages will grow about 5.5 per cent in 2023, after rising about 3.5 per cent in 2022, while rents are likely to rise 5 to 7 per cent this year, after growing 4 to 5 per cent in 2022.
Heraghty who reported record growth this week said, “We haven’t seen a slowdown in customer activity in Australia, compared to New Zealand, where we certainly are seeing some softness,”
Heraghty told Window Shopping after the owner of Supercheap Auto, Rebel, BCF and Macpac reported record sales but a 20 per cent drop in net profit crimped by rising costs and discounting.
“We are at full employment, the savings rate has given customers confidence and at the same time, especially in our categories, you’ve had customers who have been repeatedly locked down, rained out, flooded or hit by bushfires over the last three years – I think they’re frankly desperate to engage in a leisure pursuit or a health and wellbeing pursuit.”
JB Hi-Fi chief Terry Smart says consumers are also continuing to spend on mobile phones, computers, and large and small appliances. JB Hi-Fi’s Australian sales rose 9.7 per cent in July (after falling 12.4 per cent in July last year) and The Good Guys sales rose 7.8 per cent (after falling 6.4 per cent).
“At this stage we’re not experiencing a feeling of any slowdown,” Smart said after the group delivered its ninth consecutive year of profit growth.
“The categories we’re in definitely have a high appeal and consumers are probably less likely to step away from buying those at this point in time.”
But in sectors other than auto accessories, sporting goods, outdoor leisure, electronics and appliances, consumers finally appear to be starting to tighten their belts.
Retail sales rose 12 per cent year-on-year in June, but month-on-month growth slowed to just 0.2 per cent, the smallest rise this year, with weakness emerging in household goods and department stores.
CBA’s latest credit and debit spending data points to further gradual moderation in spending, while consumer sentiment remains deeply in negative territory.
