Paul Zahra, CEO of the Australian Retailers Association, said today that the ABS Retail Trade Figures for May confirmed expectations of a spending spike following the easing of restrictions, but warned the figures did not indicate the return to normal trading patterns.
Mr Zahra said the ABS figures, showing a 16.9% boost in overall retail turnover from April to May 2020 and a year-on-year increase of 5.8%, continued to reflect the release of pent-up demand following the most stringent period of lockdowns.
“While the figures are encouraging for retailers which endured a torrid April, it’s far too early to say that the sector is out of the woods. We are concerned that this could just be a ‘sugar hit ‘from consumer spending bolstered by government support,” Mr Zahra said.
“Economic indicators such as the unemployment rate are a reason to be cautious about the retail recovery, which will be hard fought and move in-step with the wider economic recovery,” he continued.
Mr Zahra warned that the real test would come in the coming months when a range of government supports are due to expire for households and businesses, applying downward pressure on consumer spending and leaving retailers with substantial additional costs.
“Though most shops have reopened, retailers are facing significant financial challenges due to interruptions or loss of revenue, the cost of additional hygiene protocols, and reduced foot traffic. Victoria remains a significant cause of concern, with lockdowns in COVID-19 hot spots likely to dampen recovery efforts, with retail sales lagging behind the rest of the country,” he said.
“These figures show that the pandemic has left some categories much worse hit than others, with some retailers facing significant hurdles to recovery as well as a financial cliff when JobKeeper is due to end in September. For many retailers, some ongoing support is crucial to help them through to the important Christmas trading period.
“It’s pleasing to see online shopping playing a vital role during these unprecedented times as Australians embrace convenience with sales growing 13.6% year on year,” he said.
Tough times for discretionary and CBD retailers
“Discretionary retailers continue to face difficult conditions, with clothing, footwear and personal accessory spending down almost 20 per cent year-on-year despite a large but expected spike against April 2020 figures. After many stores closed during the lockdown period – these stores are fighting back after a big blow,” said Mr Zahra.
“We expect that subdued foot traffic will continue over the winter months, with CBD locations worst affected by the loss of tourism and fewer workers and visitors which will slow the recovery of discretionary categories.
“With many Australians continuing to work from home and adapting to a home office, it’s no surprise to see elevated sales in household goods, recording an increase of 29 per cent year-on-year, while home improvements continue to be popular,” Mr Zahra said.
“Consumer spending is likely to ease should stimulus measures be turned off, though we expect spending on essentials such as supermarkets to remain strong.
“May marks the beginning of a slow and challenging road to recovery for the retail sector. We remain optimistic that the worst pandemic is over locally, and are confident that retailers are keeping shoppers and staff safe as Australians slowly return to their usual shopping habits,” Mr Zahra concluded.
Monthly Retail Growth (April 2020 – May 2020, seasonally adjusted)
Department stores (+44.4%), Food retailing (+7.2%), Household goods retailing (+16.6%), Cafés, restaurants and takeaway food services (+30.4%), Other retailing (+9.4%), and Clothing, footwear and personal accessory retailing (+129.2%).
Western Australia (19.7%), Australian Capital Territory (+12.3%), Queensland (+16.6%), Victoria (+17.2%), South Australia (+16.1%), Tasmania (+17.3%), New South Wales (+16.5%), and Northern Territory (+8.1%).
Overall month-on-month sales growth: +16.9%
Year-on-Year Retail Growth (May 2019 – May 2020, seasonally adjusted)
Food retailing (+12.9%), Cafés, restaurants and takeaway food services (-34.8%), Other retailing (+9.9%), Household goods retailing (+28.8%), and Department stores (+12.6%), and Clothing, footwear and personal accessory retailing (-19.4%).
Tasmania (+11.1%), Queensland (+10.6%), Victoria (+0.9%), Western Australia (+13.1%), Australian Capital Territory (+5.2%), South Australia (+8.1%), Northern Territory (+10.9%), and New South Wales (+3.5%).
Overall year-on-year sales growth: +5.8%