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Department store sales slide 10%

Department stores sales have crashed by 10%, indicating our big retailers are facing massive issues. The good news is that we’re still eating out and buying appliances.

Retail sales overall slumped unexpectedly in July by 0.8%, according to data released today by the Australian Bureau of Statistics (ABS), with the largest contributor being department store sales. “Other” retailing was down 2.8%, while footwear and personal accessory retailing was down 0.9%.

Partially offsetting the falls, household goods sales were up 2.4%, cafes, restaurants and takeaways were up 0.3% and food retailing was barely changed, climbing only 0.1%. Household goods represents amongst other things, sporting goods, floor coverings, appliances and white goods.

The news suggests there’s no end in sight to the current consumer malaise for David Jones Limited (ASX: DJS) or Myer Holdings Limited (ASX: MYR), and it could be getting worse. Both retailers have already been hit by weak consumer confidence, a strong Australian dollar that allows consumers to purchase goods cheaply overseas and a move to online retailing.

David Jones recently reported its like-for-like sales (stores open for more than one year) for the 2012 financial year have fallen by 4.3%, reflecting the weak retailing conditions. Myer is yet to report its full year sales, but its third quarter like-for-like sales were down 2.1%, compared to the previous year.

In stark comparison, Super Retail Group (ASX: SUL) which sells products such as car accessories, sporting goods, camping equipment, and outdoor furniture, recently reported solid growth in like-for-like earnings.

Car accessories manufacturer, ARB Corporation (ASX: ARP) doesn’t announce like-for-like figures, but the company managed to increase its revenues by 5.7% for the 2012 financial year, despite being faced with some of the same issues as the big department stores.  The company was also impacted by floods in Thailand – where it manufactures much of its product, and tough economic conditions in many of the countries where its customers operate.

The Foolish bottom line

Many of our retailers are still struggling, but there are bright spots if you dig a little deeper. Department stores have forecast tough conditions to continue, while some niche retailers are forecasting very positive growth in the next financial year.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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