Retailers report solid sales, but grey clouds loom

The “good-but-not-great” mantra from Australia’s retail sector continued yesterday, with more evidence that post-Christmas sales have remained solid.

A survey from the Australian Retailers Association reported 67% of members were trading at the same or better level than the same period in 2008-09, with 20% of retailers reporting sales were up 10% or more on last year.

The ARA is predicting total post-Christmas sales of $6.77 billion, not including food, restaurants and cafes. Executive director Russell Zimmerman says the late pre-Christmas rush appears to have continued through into the New Year.

“In the week before Christmas, 62% of retailers reported trading to be the same or better when compared to the same time in 2008 and this growth has followed through to post-Christmas sales which is encouraging.”

The findings from the ARA’s survey were backed up by women’s clothing retailer Speciality Fashion Group, which reported an 11.5% increase in sales to $318 million for the six months to December 31.

However, chief executive Gary Perlstein has warned that the Christmas period was extremely tough and competitive and this could well continue into this year.

“Christmas 2009 trading was more challenging than in 2008, with the discounting in the market being more aggressive than we have seen for many years,” he said in a statement to the ASX.

“This may be the first indication that there will be more difficult trading conditions in the second half of 2009-10, when consumers will not be receiving government handouts and interest rates are on the rise.”

Rising rates are also a concern for automotive retailers, who also experienced a strong finish to what was a difficult 2009.

Data from the Federal Chamber of Automotive Industries showed 937,328 passenger cars, SUVs and commercial vehicles were sold in calendar 2009, down 7.4% compared to 2008.

But the Federal Government’s 50% investment tax break for small businesses helped boost car sales late in the year, with total sales in December jumping 16% to a record 88,708 units.

FCAI chief executive Andrew McKellar said the tax break effectively saved the industry from an ugly year.

“The final outcome for the year has surpassed the industry’s original expectations by some 57,000 vehicles and a significant proportion of this additional volume can be attributed to the tax break.”

The FCAI is expecting sales in excess of 940,000 units for 2010, which represent only a slightly better year than 2010.

But without the tax break to stimulate sales, the early months of 2010 are likely to be tough for car dealers.

McKellar also has concerns about how further rate rises could affect the market.

“The challenges of the past year have not yet fully passed so 2010 will be a year of consolidation for the industry.”

“There is a real risk that if market lending rates are further increased, excessively, the momentum of the economic recovery now underway could be damaged.”