Outbreaks hurting Australian retailers

Lockdowns and other restrictions have unsurprisingly led to less shopping, but Aussies are still spending big on one retail category.

Australia’s retail trade has taken a hit from lockdowns and other restrictions, new figures show, but shoppers keep spending big on food.

According to Australian Bureau of Statistics data released on Wednesday, total retail turnover fell 1.8 per cent in June, seasonally adjusted, with director of quarterly economy-wide surveys Ben James unsurprisingly attributing the dip to coronavirus restrictions across multiple states.

“Victoria saw restrictions from the start of the month, which were gradually eased from the 11th of June,” he noted.

“NSW, in particular Greater Sydney, saw stay-at-home orders issued towards the end of the month.

“Other states and territories saw interrupted trade due to mini-lockdowns, as well as reduced mobility between states with the tightening of border restrictions.”

Given the worsening Covid-19 situation around the nation this month, July retail trade figures are bound to show a bigger drop.

Victoria led the state falls in June, with the impact of its fourth lockdown more pronounced last month than in May, when turnover respectively declined by 3.5 per cent and 0.9 per cent.

Turnover was 2 per cent lower in NSW last month while Queensland also fell, by 1.5 per cent, due to stay-at-home restrictions and reduced interstate mobility.

Only food retailing went up in June, by 1.5 per cent.

The biggest turnover slumps were, unsurprisingly, among cafes, restaurants and takeaway food services, and clothing, footwear and personal accessory retailing.

CommSec senior economist Ryan Felsman said it was the biggest monthly tumble in total retail turnover in six months.

“The country’s ‘V’-shaped economic recovery could quickly become ‘W’-shaped if persistent Covid-19 outbreaks aren’t brought under control,” Mr Felsman said.

“Already Commonwealth Bank economists expect GDP to contract by 0.7 per cent in the September quarter alongside a likely lift in the unemployment rate in July.

“With lockdowns extending in Sydney and Victoria alongside mobility curbs in South Australia, it’ll be interesting to observe whether businesses see the latest outbreaks as being transitory – preferring to retain workers by cutting hours rather than jobs.”

Australian Retailers Association chief executive Paul Zahra said lockdowns appeared to be on the cards for the rest of the year given concerns about the Delta variant.

“We’ve seen 68 days of state-imposed lockdowns already in 2021 and there’s no doubt that number will continue to climb,” Mr Zahra said.

“Small businesses in particular are in crisis and are bearing the full brunt of lockdowns. Whilst existing support arrangements are welcomed, it’s not enough to stem the losses.

“We need to see an urgent return of effective support schemes like JobKeeper and the Leasing Code of Conduct that were so beneficial in keeping businesses alive during the first phase of the pandemic.”

Mr Felsman advised investors in ASX-listed retailers to expect the impact of the restrictions on July and August trading updates, noting electronics giant JB Hi-Fi warned on Tuesday that its sales had suffered in recent weeks.

“Consumer demand could be weaker given reduced government income support and uncertainty about the job market,” Mr Felsman said.

“And construction stoppages could affect hardware store sales.”

Meanwhile, the easing of the pandemic-induced online shopping boom continues to be felt for web-only retailer Kogan, which gave an update on its frantic efforts to deal with overzealous stocking it embarked upon late last year, believing demand would likely continue into the second half “and potentially grow further”.

“The company invested in inventory and operational capacity to be able to fulfil that growth,” Kogan said.

“As is now clear, the company’s expectations weren’t accurate and as a result the company purchased too much stock.”

Kogan was forced to discount heavily while forking out high warehousing costs.

The retailer says, however, the efforts to slash inventory have come a very long way and the right levels are being approached.

Kogan’s unaudited accounts show a more than 56 per cent surge in full-year revenue.


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