The Australian Bureau of Statistics released the retail sales data for May today which revealed a surprise beat.
Instead of the 0.3% that the market was expecting, retail sales bounced back in May with a 0.4% increase to $26.7 billion.
In addition to this, April’s data was positively revised higher to a 0.5% increase from 0.4%.
What were the drivers of the strong result?
The ABS has pointed to Australia’s cold weather as being a driver of growth. This led to a notable increase in clothing sales.
Department stores sales rose 3.9% and clothing, footwear, and personal accessories climbed 2.2%. Finally a bit of positive news for the embattled Myer Holdings Ltd (ASX: MYR). And perhaps another reason to be positive on footwear retailer Accent Group Ltd (ASX: AX1) and fast fashion jewellery retailer Lovisa Holdings Ltd (ASX: LOV).
Another area of retail on the rise was food retailing. It rose 0.3% in May, possibly indicating that Wesfarmers Ltd (ASX: WES) and Woolworths Group Ltd (ASX: WOW) had a good month from Australian’s eating in because of the cold weather.
Unfortunately the same cannot be said for cafes, restaurants, and takeaway food outlets which saw a decline of 1% during the month. Collins Foods Ltd (ASX: CKF) and Domino’s Pizza Enterprises Ltd. (ASX: DMP) are part of this category.
Elsewhere, household goods sales rose 0.1% during the month. While this is positive, I doubt it will be enough to improve investor sentiment in Harvey Norman Holdings Limited (ASX: HVN) and JB Hi-Fi Limited (ASX: JBH).
Which retail shares should you buy?
I continue to believe that Lovisa is one of the best retail shares for investors to consider buying on the Australian share market. However, due to its incredible share price gain over the last 12 months, it does trade at a premium today.
While I believe it will deliver long-term growth that justifies this, it may be unsuitable for investors with a low tolerance for risk. Accent Group may be a better option for those investors.
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Motley Fool contributor James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.