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Consumers spending again

It seems consumers are heading back in-store – according to the latest retail sales figures.

Economists had expected a rise of 0.4% in retail sales for January, but retail sales have trumped expectations, rising 0.9%.

That positive rise comes on the back on falls in December of 0.4% and a fall of 0.2% in November. Food retailing, clothing, footwear and personal accessory retailing, household goods, and restaurants and takeaways all posted rising sales, while, department stores and liquor sales lagged.

Sales of pharmaceuticals and recreational goods – part of “other retailing” was the largest contributor, rising 2.6%.

Sales of fashion and accessories rose 0.7% in January, suggesting retailers like Speciality Fashion Group (ASX: SFH) which owns Millers and Katies brands, and Premier Investments (ASX: PMV), owner of Just Jeans and Jay Jays stores, are enjoying a good start to the year.

Household goods sales rose 1.3%, led by furniture, floor coverings, houseware and textile goods retailing jumping 4.3%. As evidence of the strong performance, Harvey Norman Holdings (ASX: HVN) reported last week that it had seen an uptick in sales, with Australian sales up 4.1% in January.

Liquor retailing was down 2.6%, perhaps after strong sales in the festive season over Christmas and into the start of the new year. Disappointingly, department stores saw their sales fall 0.6%, most likely on the back of discounting and sales following Christmas, and could be bad news for our two largest department store owners David Jones Limited (ASX: DJS) and Myer Holdings (ASX: MYR).

Foolish takeaway

Consumer sentiment may be finally rising, after an extended period of indifference. With the RBA’s official cash rate at an all-time low of 3%, and 175 basis points of rate cuts since November 2011, households appear to have taken their hands out of their pockets, and have started to spend. Most retailers should be thrilled, and it’s likely good news for investors in retail stocks.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, 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.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in David Jones.

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