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Retail spending down again

The Australian Bureau of Statistics (ABS) has released the retail trade figures for March and they show a 0.4% fall in turnover. The fall comes on the back of a 1.3% rise in February, which had investors hopeful that a trend was forming.

The worst performing sector in March was clothing, footwear and personal accessories which dropped 4.2%. Household goods also had a tough month falling 1.5%, while department stores did relatively well with just a 0.1% drop in turnover.

Meanwhile, the best performing contributors were food-related, with restaurants and takeaway up 0.2% and food retailing up 0.5%.

Certainly some retail companies have been growing revenues and profits better than others. JB Hi-Fi (ASX: JBH) has been a stand-out performer in the retail sector, raising its profit forecast last week to between 7% and 11% above the previous year. Given the tough retail trade climate, management is doing a good job, however it should be noted the growth is being driven by new stores, with same store sales revenue declining.

Like JB Hi-Fi, The Reject Shop (ASX: TRS) is another retailer who is in a sweet spot. The discounted goods store had no trouble recently raising fresh money from investors to speed up the roll-out of its stores across the country. Given its price points and targeting of the frugal consumer, The Reject Shop is perfectly placed to entice customers through its doors in the search for more value for money.

RCG (ASX: RCG) owner of The Athlete’s Foot sport shoe chain, recently paid a record interim dividend. The company has managed to continue growing sales which is exceptional given the 4.2% drop in the clothing and footwear category. So far RCG has maintained sales in the face of weak consumer spending by offering a superior fitting service and also stocking shoe brands which have managed to cut off online sales from overseas.

CEO of Myer (ASX: MYR) Bernie Brooks, who was making headlines for all the wrong reasons last week over concerns that the federal government’s increasing levies and taxes will further strain consumer spending, will presumably not be pleased to see the o.1% decline in department store sales and consider it as adding weight to his argument.

Foolish takeaway

Retail stocks have had an impressive run recently, bouncing back from what was likely an oversold position. However their share prices today are priced for perfection and sales figures like the ones just released certainly don’t back up the case of a perfect retail environment.

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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 contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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