Why were ASX retail shares hit hardest today?

Australians are continuing to tighten their belts, according to new retail data.

Woman holding an orange and looking at the expensive grocery receipt, symbolising inflation.

Image source: Getty Images

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Many ASX retail shares closed weaker on Thursday amid new retail figures from the Australian Bureau of Statistics (ABS) showing a tiny rise in sales as "consumers continued to restrain their retail spending".

Total Australian retail turnover increased by 0.2% in August, according to seasonally adjusted figures.

This follows an 0.5% rise in July and a drop of 0.8% in June.

Ben Dorber, ABS head of retail statistics, said trend turnover rose by 1.3% compared to August 2022, which was the smallest trend growth over 12 months in the history of the retail data series.

Dorber explained:

Considering how high inflation and strong population growth has added to retail turnover in the past year, the historically low trend growth highlights just how much consumers have pulled back in response to cost-of-living pressures.

The retail winners and losers of August

Clothing, footwear and personal accessory retailing recorded the largest rise in turnover at 1.3%.

Cafes, restaurants and takeaway food services were up 0.7%, other retailing lifted 0.7%, and department store sales rose 0.4%.

Dorber said warmer weather, Afterpay Day promotions, and FIFA Women's World Cup lifted these categories of spending.

CreditorWatch's chief economist Anneke Thompson commented:

It seems Australians are still keen to eat out and not give up their takeaway coffees.

However, despite strong demand in the sector, increased spending could also be attributed to many businesses being forced to increase prices.

Moderating fresh food prices will be welcome relief for café and restaurant operators, however, energy, transport and insurance bills are all still rising considerably, and continue to impact the viability of many of these businesses.

Household goods retailing recorded a third consecutive monthly fall of 0.4%. This category has fallen nine times over the past 12 months.

Food retailing fell for a second consecutive month, by 0.3%.

Thompson said:

Strong population growth and a weakening economy usually results in food retailing being one of the strongest categories, so this is quite an unusual dynamic.

It is also likely reflective of consumers trading down to cheaper alternatives of commonly purchased grocery items.

What happened to ASX retail shares today?

The S&P/ASX 200 Consumer Discretionary (ASX: XDJ] sector was the worst performer of the 11 market sectors today, closing down 1.2%.

Here's a snapshot of some of the fallers among ASX retail shares today:

  • The Adore Beauty Group Ltd (ASX: ABY) share price closed down 7.01% to 73 cents
  • The ARB Corporation Ltd (ASX: ARB) share price closed down 2.02% to $31.09
  • The Myer Holdings Ltd (ASX: MYR) share price closed down 1.75% to 56 cents
  • The Premier Investments Limited (ASX: PMV) share price closed down 0.53% to $24.58
  • The Harvey Norman Holdings Limited (ASX: HVN) share price closed down 0.52% to $3.83
  • The Beacon Lighting Group Ltd (ASX: BLX) share price closed down 0.28% to $1.795.

Premier Investments shares were up earlier in the day after Solomon Lew's group released its full-year FY23 results.

The company revealed a 9.7% lift in sales to a record of $1,643.5 million for the 12 months ending 31 July.

However, the company noted a "challenging general discretionary retail environment" now.

In a statement, Premier Investments said:

1H24 commenced against a backdrop of a challenging general discretionary retail environment, as consumers in Premier Retail's global markets face increasing cost of living pressures.

In this environment, the Group's global sales for the first 6 weeks of 1H24 (August and into September) are down 2.0% on a record 1H23 and up 18.1% on 'pre-COVID' 1H20.

The Group is focused on the key Christmas trading quarter ahead, noting that results for the first half are always driven by this critical period.

Motley Fool contributor Bronwyn Allen has positions in Harvey Norman. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ARB Corporation and Harvey Norman. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group. The Motley Fool Australia has positions in and has recommended Harvey Norman. The Motley Fool Australia has recommended ARB Corporation, Adore Beauty Group, and Premier Investments. 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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