ASX 200 retail shares slump despite higher-than-expected sales

It’s been a tough day on the ASX for retail shares…

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A woman sits with her head down and colourful retail shopping bags all around her.

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Strong retail sales data released today failed to lift sentiment towards ASX 200 retail shares this afternoon.

Retail trade jumped 7.3% month-on-month to $33.4 billion in November last year, according to the Australian Bureau of Statistics (ABS).

That’s around twice what economists surveyed by Bloomberg were expecting, reported The Australian, and is 5.8% above November 2020.

Big rebound in consumer discretionary spending

The increase marked the largest monthly improvement since May 2020 when retail trade surged 16.6%. That followed a 17.4 per cent plunge in the first round of COVID-19 lockdowns in April that year.

Consumer discretionary goods are leading the rebound in retail sales. Footwear and personal accessory retailing surged 38.2% in November, department stores added 26% and household goods improved 11.6%.

But ASX 200 retail shares aren’t celebrating today. The Premier Investments Limited (ASX: PMV) share price closed down 1.75%, Wesfarmers Ltd (ASX: WES) shares fell 1.35%, and the JB Hi-Fi Limited (ASX: JBH) share price dropped 0.55%.

In fact, the retail sector fell in sympathy with the S&P/ASX 200 Index (ASX: XJO), which ended the day down 0.77%.

Why are ASX 200 retail shares underperforming?

There could be a few reasons for this. The latest ABS figures were promising, but that was two months ago. Markets are forward-looking, so historical data isn’t quite as exciting for ASX investors.

In the meantime, retail sales are facing some headwinds. Last week, ANZ revealed spending had slumped to lockdown levels in the new year, particularly in Melbourne and Sydney.

Additionally, findings by the Australian Retailers Association (ARA), released on Monday, show three-quarters of retailers currently have staff in isolation due to COVID-19.

The findings also show that 50 per cent of businesses ranked “staff shortages” as their main challenge. This was followed by “lack of customers” and “supply chain/delivery issues”.

Coles Group Ltd (ASX: COL) last week reported they were suffering supply issues. This was followed by similar claims by Woolworths Group Ltd (ASX: WOW) yesterday.

The New South Wales and Victorian state governments are also starting to reimpose some social restrictions.

There are worries the malaise will last for a while yet, and if there is one thing investors hate, it’s uncertainty.

Confidence takes a blow

Little wonder that consumer confidence has taken a blow. The latest ANZ-Roy Morgan Consumer Confidence index fell 2.4 points to 106.0 during the first week of January. The reading is 2.9 points below January 2021.

The spread of Omicron is cited as the key reason for the decline with 14% of Australians expecting “good times” for the Australian economy over the next 12 months – a drop of 5 percentage points from the previous survey.

In contrast, 24% of Aussies expect “bad times”, which is a 4 percentage point increase over the last survey.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Premier Investments Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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