Rocky Road Ahead For Retail: Deloitte

Written by Oonagh Reidy     07/06/2013 | 09:37 | Category: INDUSTRY

Don't expect 2013 sales growth to last, warns Deloitte.

Rocky Road Ahead For Retail: Deloitte


Australian retail sales is expected to jump 3% in 2012-13 financial year, driven by the strong growth early 2013, according to Deloitte Retail Forecasts. 

Although March quarter (Q1) sales rose 2.2% - the strongest result for six years - don't expect it to last, as the retail environment remains "extremely competitive."

"That rate of sales growth is unlikely to be sustained for any length of time, with data for the month of April confirming much more modest retail sales growth" warns the Retail Forecast, released today. 

Deloitte analysts predicts retail will dip slightly in 2013-14 to 2.8%, before rising 3% again in 2014-15 as employment growth improves. 

The latest figures from ABS showed April retail rose just 0.2%. 

"There are unlikely to be too many easy yards for retailers over the years ahead," the forecast indicates, as economic fundamentals including the slowing resources boom, weakening Aussie dollar and consumer confidence don't support it.   

Although the mining states of WA, Qld, NT powered the retail boom last year, so far in 2013 its a different story.  

NSW, Victoria and the ACT have led retail growth so far this year, along with Tasmania, which is clear from the ABS latest retail figures. 

The retail growth seen in the first quarter - was not resource-led but driven by low interest rates, notes Deloitte, adding retailers in WA and Queensland will face "challenges" as major projects start to detract from economic activity, although population growth will still favour these States.  

Several major retailers including JB Hi-Fi and Harvey Norman reported sales uplift sales in the early months of 2013 - JB's January sales grew a whopping 12%, compared to single figure growth for the previous six months to 31 December 2012

"Consumers have also become less confident over the past couple of months as the Reserve Bank has started to push the panic button." Deloitte warns.

But there are also other fundamental changes. 

Over the past year, non-food retailing has overtaken food as the stronger growing segment - which might be expected with record low interest rates. 

The unemployment rate will rise over 2013 and Australia's main symbol of economic supremacy - the strong Aussie dollar against the US dollar has now slipped away - none of which are a strong grounding for robust retail sales, Deloitte says.  

"However, over time, low interest rates and a lower $A are a combination which should work in the favour of Australian retailers, as the housing cycle turns and favours more spending on consumer durables," according to the Retail Forecast.

However, measures announced in the latest Federal budget will cut into disposable income, particularly during 2014-15.

"That won't be devastating for consumer spending, but it will limit the upside which might otherwise have been seen from an expected peak in housing activity."

And don't expect tax cuts in future Federal budgets, either, as analysts note, the days of a tax cut every Federal budget ...are now long gone." 





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