Revealed: ASX Christmas winners and losers

How will the retail industry fare this festive season with most Australians enjoying their holidays at home?

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The COVID-19 recession has seen anxious Australians lock up their wallets to save their money.

Unfortunately for ASX-listed retailers, like Wesfarmers Ltd (ASX: WES), JB Hi-Fi Limited (ASX: JBH), Super Retail Group Ltd (ASX: SUL), Myer Holdings Ltd (ASX: MYR) and Harvey Norman Holdings Limited (ASX: HVN), Christmas is not expected to bring much joy.

Research firm IBISWorld revealed this week that negative shopper sentiment combined with high unemployment and tumbling discretionary incomes could devastate the sector.

"Consumer electronics retailing is expected to be 2.7% lower this December, relative to last Christmas. Department store turnover is expected to be 1.0% lower, at $2.8 billion," said IBISWorld senior industry analyst Yin Yeoh.

"Although many households are likely to receive a cash injection from the recent Federal Budget, there is a high likelihood that these funds will be saved rather than spent, providing little help to the ailing retail sector."

Consumer goods retail lost 15.8% in revenue over the 2019-20 financial year, and is forecast to dip another 2.1% in the current year.

The Christmas winners

Although in the minority, there are some retailers who will have a good time this Christmas.

For example, Australians are expected to drink away their worries this festive season. 

Alcohol retailing this December is expected to surge 3.6% year-on-year, to hit $1.6 billion, according to IBISWorld.

The theory is that Australians can't holiday overseas this Christmas so they will be forced to spend within the country.

As such, the supermarket sector will also benefit.

Grocers like Woolworths Group Ltd (ASX: WOW),  Coles Group Ltd (ASX: COL), and  Metcash Limited (ASX: MTS) will be licking their lips at IBISWorld's prediction that sales will increase 2.8% year-on-year this December, to reach $11.1 billion.

"Families are expected to go all-out on their Christmas feasts this year, with many Australians celebrating their ability to reunite with family after states reopen borders and ease social distancing regulations," said Yeoh.

She warned, however, these companies aren't necessarily up for a windfall.

"While the upcoming Christmas season provides major opportunities for supermarkets and liquor retailers, growing competition in these industries is expected to exert downward pressure on prices and profit margins."

Christmas is now November

The last five years has seen Christmas shopping habits shift to November as American customs like Black Friday and Cyber Monday seep into Australia.

This pattern, IBISWorld says, will continue this year.

"A 7.8% decline in discretionary income this year is likely to cause some consumers to postpone expensive gadget purchases," said Yeoh.

"However, consumers are still expected to take advantage of Cyber Monday and Amazon Prime sales. Other large players, such as JB Hi-Fi and Harvey Norman, are likely to offer discounts during the same period, in an effort to retain market share."

Prospects for retailers next year are a bit brighter, although still very dependent on the ongoing pandemic.

"The outlook for the retail sector, and the economy overall, is largely dependent on the rate of new COVID-19 cases across the country," Yeoh said.

"Australia is making promising progress in this regard, which should make retailers optimistic for a rebound next year."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths 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.

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