You’d think the robust rise in retail spending in August would be a boon for our listed retailers but the response from the market was extremely muted.
This is despite the fact that the increase in retail turnover was very widespread in the month with rises in five out of six categories, including the embattled department store sector.
But the news was only enough to push the S&P/ASX 200 Cons Disc (Index:^AXJO) (ASX: XDJ) index up 0.2%, which is about the same as the broader S&P/ASX 200 (Index:^AXJO) (ASX: XJO) benchmark.
While the share prices of Woolworths Group Ltd (ASX: WOW) and JB Hi-Fi Limited (ASX: JBH) are outperforming the market with a 1.7% and 0.5% gain in after lunch trade, shares in Harvey Norman Holdings Limited (ASX: HVN), Super Retail Group Ltd (ASX: SUL), Premier Investments Limited (ASX: PMV) and Domino’s Pizza Enterprises Ltd. (ASX: DMP) have slumped firmly into the red.
The Australian Bureau of Statistics (ABS) said August retail turnover increased by 0.3%, which is better than the 0.2% that economists were expecting. The rise also compares well with the previous month when retail sales were flat.
“Cafes, restaurants and takeaway food services (0.7%) led the rises,” said Ben James, Director of Quarterly Economy Wide Surveys.
“Rises were also seen in Clothing, footwear and personal accessory retailing (0.8%), Other retailing (0.4%), Department stores (0.9%), and Household goods retailing (0.2%). Food retailing was relatively unchanged (0.0%).”
South Australia recorded the biggest rise of 0.8% while Queensland was flat and the Northern Territory fell 1.3%.
But the retail gains may not be sustainable, and I think that’s why investors haven’t gotten too excited about the data.
The fall in property prices is accelerating at a time when mortgage rates look to be heading up. The near-term outlook for wage growth isn’t great either while the spike in petrol prices look set to become a bigger than expected drag on consumer-facing stocks.
Meanwhile, the falling Australian dollar is likely to put upward pressure on prices and that’s never a good thing for sales of discretionary products and services.
On the flipside… well there isn’t much of one and that’s the problem. Employment remains robust but there’s little room for further meaningful improvements. The jobs market could tighten more and that may lead to better wages growth, but that’ll take some time to come to pass.
There’re also the personal and small business tax cuts but these will be offset by rising living expenses.
This is a tough environment for retailers to catch a lucky break.
There are more compelling stocks for investors to focus on. The experts at the Motley Fool have picked some of their best stock ideas for FY19 and you can find out what these are by following the free link below.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
Motley Fool contributor Brendon Lau owns shares of Premier Investments Limited. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of Super Retail Group 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.
- Growth outlook fails to save the Aristocrat share price today – February 26, 2021 12:08pm
- AMP (ASX:AMP) share price on watch with proposed $2.3bn joint venture – February 26, 2021 9:41am
- Sandfire (ASX:SFR) share price hits year high on profit result and supercycle hopes – February 25, 2021 11:06am