Yesterday saw the release of Australian retail sales for March from the Australian Bureau of Statistics. Rather pleasingly the data released showed that sales beat the expectations of economists for the first time in four months by increasing 0.4% to $24.95 billion.
It could have been a good month for retailers such as Premier Investments Limited (ASX: PMV) and Specialty Fashion Group Ltd. (ASX: SFH), as the data revealed sales of clothing and footwear climbed 1.1% month-on-month.
Sales in cafes, restaurants, and takeaway outlets were flat in March, following a 0.2% decline in February. With such high growth expectations on a company like Domino's Pizza Enterprises Ltd. (ASX: DMP), shareholders will no doubt be hopeful that it is managing to capture market share in a rather subdued market at present.
Although a slowdown in the domestic market would not be great news for Domino's, it does have extensive international operations that currently account for over two-thirds of its sales. So I wouldn't be panicking too much just yet.
Shareholders of Retail Food Group Limited (ASX: RFG) on the other hand may be a little nervous with this data. Around 17% of its earnings comes from its international operations, which is unlikely to cushion the blow from a slowdown domestically. But I do believe the aggressive expansion of its coffee segment could help it steal market share from independent chains, which could help the company grow its earnings at a good rate still.
The doom and gloom returned to department store sales which suffered a 0.5% decline month-on-month.
Looking at things on a year-on-year basis shows that household goods sales is the best performing area of the Australian retail industry with year-on-year growth of 5.8%. With interest rates being cut the housing market could be about to get a second wind, putting to bed any concerns of a slowdown.
This might mean retailers such as Nick Scali Limited (ASX: NCK) and Harvey Norman Holdings Limited (ASX: HVN) could be in line to produce bumper earnings and strong returns this year. Interestingly, I believe the same could be said for these shares also.
Foolish takeaway
There are a number of great retail shares on the ASX for investors across different sectors. But in my opinion, the household goods sector does look to be the best place to be invested at the moment, whereas unfortunately the department store sector looks best avoided still.
