ASX retail shares in focus as Aussies spend big in January

ASX retail shares might get a second look by investors after the Australian Bureau of Statistics revealed an 11% increase in retail sales.

Mitchell Lawler

Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money. Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed. His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.

Published February 19, 2021 4:09 pm AEDT

ASX retail shares will be in focus after the Australian Bureau of Statistics (ABS) released its preliminary January retail turnover figures. The data indicates an increase of 10.7% in retail turnover compared to January 2020.

On a month-by-month basis, January notched up a 0.6% increase over December. In contrast, January 2020 retail sales slipped 0.4% from December 2019.

Today's results show a continued upwards trend following the collapse in retail spending in April last year. Furthermore, it appears retail turnover is stabilising on monthly basis, compared to the erratic swings in early 2020.

rising retail asx share price represented by excited shopper holding lots of bags best buy — Image source: Getty Images

Finer details for ASX retail shares

All states reportedly experienced an increase in turnover, except for Queensland. COVID-19 restrictions during the period resulted in a fall of 1.5% for the sunshine state. In particular, household goods, clothing, footwear, and personal accessory retailing were impacted.

By today's market's close, both Super Retail Group Ltd (ASX: SUL) and Accent Group Ltd (ASX: AX1) shares were flat, with the former inching slightly lower. Super Retail Group has exposure to footwear through its ownership of Rebel. The company reported its half-year results this week, which showed an acceleration in footwear sales during the half. Accent is expected to report its half-year results on Tuesday next week.

Food retailing fared the best during January, with a 1.8% increase in sales. Both Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) shares edged higher today. Coles reported an 8.1% increase in total sales revenue in its recent half-year results. However, management provided a cautious outlook for the second half as this will be in comparison to the panic-buying half experienced last year.

Looking ahead

It will be interesting to see what future retail trade data looks like as we move towards the months most impacted by the pandemic last year. The next retail trade update will be issued by the ABS on 19 March.

It will likely be a tale of two scenarios – food retailing will be held up against one of the strongest periods in its history. Meanwhile, discretionary retailing will be compared to one of its worst. The market will be watching ASX retail shares closely as the information unfolds.

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