The ASP, (average selling price) is falling at retailers, with the next few weeks reporting season, set to reveal which retailers have the management teams in place to manage what is tipped to be a difficult reporting season.
One retailer that is set to be of interest is Harvey Norman who of late has been cancelling orders because they are seen as carrying too much stock. Then there is the issue of allegations of corruption and the sudden placing of the franchisee operation of Harvey Norman Commercial in NSW into administration with insiders tipping that there could be some “big write offs”
Analysts are tipping that Harvey Norman is on track for a significant fall in earnings, questions are also being raised about the value of the Companies.
The retailer told shareholders recently it expected pre-tax profits, excluding the impact of property revaluations, to come in between $637 million and $704 million for the 12 months to June 30. That compares with pre-tax profits, excluding property revaluations, of $943 million in the previous financial year.
Last week the Australian Bureau of Statistics (ABS) claimed that retail sales volumes recorded a third consecutive quarterly fall in the three months to June, as consumers cut spending in response to surging inflation and higher interest rates.
The ABS reported that retail sales volumes fell 0.5% in the second quarter after a 0.8% drop in the first three months of this year and a 0.4% fall in the fourth quarter of last year.
This marks a cumulative fall in retail volumes of 1.7%, and the ABS stated that this is the first time since 2008 that retail sales volumes have recorded three consecutive quarterly falls.
The good news could be a slowdown in Reserve Bank rate hikes.
On the other hand, with inflation surging across the economy, retail prices rose 0.9% in the quarter, up from 0.7% in the first quarter. This has left retailers locked in an unwelcome ‘jaw’ of surging prices and falling volumes, leading to margin compression.
This trend is expected to be evident on the 30th of June figures from major retailers including Harvey Norman, Woolworths and Big W, Wesfarmers, JB Hi-Fi, Super Retail Group and Harvey Norman as well as The Reject Shop and The Shaver Shop.
“The widespread fall in sales volumes reflects what retailers have been telling us about consumers focusing on essentials, buying less, or switching to cheaper brands,” said Ben Dorber, the ABS head of retail data, in Thursday’s statement.
June’s monthly sales fall of 0.8% was pictured as a sign that consumer spending had slowed, but much of the analysis ignored the fact that the drop was merely giving back the 0.8% jump in May when many retailers tried one-off specials and other promotions to boost sales, which ended up being self-defeating by the end of June.
Sales had dropped 0.1% in April, so the quarter was seen as a negative, as annual headline sales value growth slowed to just 2.3% over 2022-23. Headline inflation might have eased to a still high 6% in the same period, according to the quarterly Consumer Price Index, but it did the damage to retail volumes claims analysts.
Dorber said the fall in retail sales volumes showed the extent to which consumers have pulled back on spending in response to cost-of-living pressures.
On the other hand, retail prices, which are based on data from the Consumer Price Index, rose 0.9% this quarter, up from 0.7% in March.
“Retail prices rose for the seventh straight quarter, but have eased from the strong growth throughout 2022,” Mr. Dorber said.
