Why are ASX retail shares taking a hit on Friday?

The Fair Work Commission has announced a 5.75% increase to the minimum wage from 1 July.

Sad woman in a trolley symbolising falling share price.

Image source: Getty Images

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Key points

  • ASX retail shares are falling today amid the Fair Work Commission announcing a 5.75% increase to the minimum wage from 1 July
  • Australian Retailers Association CEO Paul Zahra says a cost-of-doing-business crisis is occurring alongside the cost-of-living crisis
  • Official data on retail spending reveals a downward trend in 2023 as high inflation and interest rates begin to bite 

ASX retail shares are falling amid news today of a 5.75% hike to the minimum wage and concern among investors about the rising cost of living now affecting retail sales in 2023.

Earlier today the Fair Work Commission announced a 5.75% bump to minimum wages, effective from 1 July, which will result in a pay rise for 21% of Australian workers.

The minimum wage will rise from $21.38 per hour to $22.61 per hour. The weekly rate will rise from $812.60 to $859.32.

What will rising wages do to ASX retail shares?

Australian Retailers Association CEO Paul Zahra says businesses will struggle to absorb this additional cost.

Zahra referred to a cost-of-doing-business crisis, saying (courtesy The Australian):

Many retailers are under enormous financial pressure, with rising operating costs across the board. Supply chain costs have increased, utilities have increased, rent has increased, materials have increased and now labour will increase substantially.

This is before factoring in that discretionary spending is softening – leaving many retailers concerned about operating costs. We fear the scale of this increase will tip some businesses over the edge…

The S&P/ASX 200 Consumer Staples Index (ASX: XSJ) is the worst-performing market sector today, down 0.8% at the time of writing.

The S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) is up 0.2% and the S&P/ASX All Ordinaries Index (ASX: XAO) is up 0.33%.

As we reported last week, official retail sales figures from the Bureau of Statistics (ABS) show an ongoing decline in spending in 2023 as rising inflation and interest rates start to impact consumer decisions.

Fastest fallers among ASX retail shares on Friday

Among the worst-hit ASX retail shares today is Adairs Ltd (ASX: ADH).

The Adairs share price tumbled 20% in earlier trading to hit a new 52-week low of $1.51.

This came after the homewares retailer released a trading update and downgraded its FY23 earnings forecasts.

As my Fool colleague James reports, Adairs management says the rising cost of living and higher interest rates are directly to blame for "a more subdued trading environment since April".

Some of the other fast fallers among ASX retail shares today are:

  • The Mosaic Brands Ltd (ASX: MOZ) share price is down 5.6% to 17 cents
  • The Lovisa Holdings Ltd (ASX: LOV) share price is down 1.9% to $19.89
  • The Coles Group Ltd (ASX: COL) share price is down 1.3% to $17.90
  • The Premier Investments Limited (ASX: PMV) share price is down 1.3% to $22.09
  • The Temple & Webster Group Ltd (ASX: TPW) share price is down 1.2% to $4.84
  • The Woolworths Group Ltd (ASX: WOW) share price is down 1.1% to $37.69
  • The Endeavour Group Ltd (ASX: EDV) share price is down 0.9% to $6.20
  • The Super Retail Group Ltd (ASX: SUL) share price is down 0.7% to $11.30

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs, Lovisa, Super Retail Group, and Temple & Webster Group. The Motley Fool Australia has positions in and has recommended Adairs and Super Retail Group. The Motley Fool Australia has recommended Lovisa, Premier Investments, and Temple & Webster Group. 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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