Retail: Australian retail sales – June 2021

About the author:

Josephine (Jo) Little
Author name:
By Josephine (Jo) Little
Job title:
Former Senior Analyst
Date posted:
05 August 2021, 7:30 AM
Sectors Covered:
Consumer Discretionary (Retail)

  • Total Australian retail sales +2.9% in June (+11.9% vs 2019). 
  • COVID-19 beneficiaries in negative growth mode (yoy) for the second month in a row (and vice versa) – widely expected. Expect Jul/Aug data to paint a different picture as lockdowns took hold and spending patterns shift. 
  • Online penetration jumps up to 10.5% (not far off COVID-19 peaks) and perhaps reflecting a one-week impact of NSW lockdowns. 
  • We remain cautious on the sector in the short-term, with lockdowns (coupled with a lack of JobKeeper and meaningful landlord support vs 12 months ago) likely seeing companies move to more risk aware settings.  
  • Cost inflation and elevated inventory levels are two things we will be watching closely this reporting season, coming off the back of extreme margin levels.  

June retail sales +11.6% in June vs 2019 (2-year stack)

Total Australian retail  sales (seasonally-adjusted) in June grew by 2.9% yoy (+0.4% mom). This is the weakest growth print we have seen in some time given the base now to be cycled, but a credible outcome nonetheless.  

However, once again, the growth is largely being supported by those most heavily impacted by COVID-19 last year and vice versa – as widely expected by the market. 

Key category highlights

Strongest (those negatively impacted during COVID-19):  Cafes/restaurants (+29%), footwear/personal accessories (+15.7%), takeaway (+9.7%) and clothing (+6.8%). Pharmacy posted strong growth (+8.4%) off a flat base.

Weakest (the big COVID-19 winners): Liquor (-10.1%), hardware (-5.2%), electrical (-4.3%) and household goods (-3.2%). Grocery was reasonably flat cycling 11% growth. Other recreational goods posted 2.2%  growth despite a strong pcp (+38%). Furniture (+1.2%) posted its weakest print in some time despite the comp being similar to that of May. Overall, given the base being cycled, these declines appear reasonable. 

Online penetration: picked up to 10.5% in June, with Sydney lockdowns likely assisting penetration in the final week of trading. Online penetration is down from the peak of 11% in April 2020, but well above pre-COVID-19 levels of 6-7%. 

Key picks

What the data tells us re upcoming trading update: This data tends to agree with our view that COVID-19 beneficiary retailers will report single-digit negative comps at trading updates (albeit 2-year growth stacks will remain material). This is of course before allowing for lockdown impacts which have undoubtedly dented sales (impact likely separated by companies). However, combined, there is perhaps little to get excited about in most trading updates.  

Where we are comfortable being in retail - Auto (Eagers Automotive, Peter Warren Automotive), Lovisa (although Australian lockdowns will now impact in the short term, northern hemisphere should have emerged with solid momentum and hoping for strong store rollout to recommence in FY22), Universal Store (will also be impacted by lockdowns, perhaps more than most, and there is escrow coming up in August, but we think the market will be more willing to look through this impact as we now know how quickly demand snaps back afterwards).

Figure 1: Annual retail sales growth by month and category (seasonally-adjusted) 

Growth stocks have had a choppy ride since the onset of the pandemic

Source: ABS

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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