Retail: Australian Retail Sales: August 2021

About the author:

Author name:

By Alexander Mees

Job title:

Head of Research

Date posted:

06 October 2021, 8:00 AM

• COVID lockdowns continue to dominate the landscape when it comes to retail spending in Australia. With NSW, Victoria, and the ACT all in lockdown during August, seasonally adjusted (s/a) Australian retail sales were down -0.7% yoy and -1.7% mom to A$29.3bn.
• With vaccination rates climbing and lockdowns coming to an end, the outlook is improving.
• The best performing categories might most accurately be described as ‘the essentials’, with pharmaceuticals, food and liquor at the top of the list for yoy growth.
• By contrast, spending on clothing and footwear was well down on the PCP, which of course reflects the limited opportunities for people in Australia’s two most populous states have had to show off new clothes.
• What does it all mean? We think there is a lot of pent-up demand in the clothing space that is likely to be released when lockdowns ease. We highlight UNI and AX1 as retailers likely to see a strong bounce in sales when they can open their doors once again.
• By contrast, the recent strength in the homewares and furniture space appears to have moderated with implication for stocks in our universe including ADH, BLX and MYD.

August retail sales -0.7% yoy, +6.3% on a two-year stack

The imposition of lockdowns in NSW, ACT and Victoria have seen retail sales weaken over the course of CY21. Overall sales in August were down -0.7% yoy (s/a). This was a less steep decline than the -3.1% reported in July, which was the first full month of lockdown in NSW.

On a month-on-month basis, sales were down -1.7% (s/a) in August. NSW fell -3.5% to its lowest level of sales since the onset of the COVID pandemic in April 2020. Victoria went back into lockdown on 5 August and its retail sales were down -3.0% over the course of the month.

Queensland was a little softer at -0.9%, while sales in WA and SA were up 2.8% and 6.6% respectively. Online sales penetration was up 240 bps compared to July, to a record 15.0% of total retail sales. Online sales have now doubled over the course of a year and a half.

Category highlights

Strongest: The essentials. With discretionary spending kept in check by COVID restrictions, the best performing categories were ‘the essentials’. Sales of pharmaceuticals, cosmetics and toiletries, which have been strong almost all year, were up 10.3% yoy and were a clear highlight.

Food and liquor sales (both up +2.7%) might suggest the consumer is eating and drinking more in lockdown.

Weakest: Clothing and furniture. The other end of the spectrum is dominated by the discretionary categories of clothing, footwear and department stores. Clothing retail was down -18.2% yoy, with reasons to keep the wardrobe refreshed few and far between in NSW, Victoria and ACT.

Furniture, which had been powering ahead earlier in the year, appears to be running out of puff, with a -12.6% decline in August following an -8.9% decline in July.

Implications

Keep your eye on the clothing retailers. In our opinion, these sales trends show that pent-up demand is building for clothing and footwear. Website traffic is strengthening for this category and there is every chance of a surge in spending when lockdowns are lifted, especially as summer approaches.

We would point to a 21.0% yoy pop in clothing sales in November last year, which followed the lifting of the lockdown in Victoria on 27 October 2020. Overall retail sales were up 13.2% in that month. We would recommend investors keep an eye on UNI and AX1.

Have we all done enough nesting? Retail spending on furniture and homewares has been very strong through most of the past year. The picture is less positive now. The category was weak in July and even weaker in August.

The category is cycling strong comps, which accounts for some of the slowdown, and growth is still impressive on a two-year basis, but the question must be asked as to whether consumers have done most of the spending they want to on making their homes more comfortable for a while, and are now looking to spend more on other categories.

Perhaps COVID will have made consumers have a greater long-term appreciation of their home environment, but short-term trends would imply they may be taking a breath on doing it up. Retailers we cover with exposure to homewares and furniture include ADH, BLX and MYD.

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