ASX retail shares are mixed today after the release of the latest retail sales data from the Australian Bureau of Statistics (ABS). Shortly before market close, the ASX consumer discretionary sector is the third-worst performing of the day, with heavyweights like Wesfarmers Limited (ASX: WES) and JB Hi-Fi Limited (ASX: JBH) lagging the S&P/ASX 200 Index (ASX: XJO).
Elsewhere in the sector, though, Harvey Norman Holdings Limited (ASX: HVN) is trading flat and Temple & Webster Group Ltd (ASX: TPW) is surging almost 3% on the back of share buyback news.
The April numbers revealed a small increase in retail sales for April 2024. Seasonally adjusted, retail trade rose by 0.1% month-on-month and 1.3% compared to April 2023.
The combination of inflation and high interest rates is squeezing retail spending. Clothing, footwear, and personal accessory retailing saw a decline of 0.7% in April, and food retailing was down 0.5%. Sales of household goods, however, showed a positive trend rising by 0.7%. Department stores also experienced a modest increase of 0.1%, maintaining their positive trajectory over recent months.
Analysts have predicted sales will remain flat throughout 2024 due to rising living costs, high household debt, and economic uncertainty. This could dampen profit expectations for ASX 200 retail shares. JB Hi-Fi advised earlier this month that sales remained resilient, but cautioned that the retail market was "challenging and competitive". Other major retailers like Wesfarmers, which owns Kmart and Target, could also be impacted by the insipid outlook.
Online sales accelerate
Overall retail sales may be down, but the portion of sales taking place online is accelerating. Data from the latest NAB Online Retail Sales Index reveals Australians spent $57.14 billion on online retail in the 12 months to April, making up about 13.4% of the total retail trade. The performance of online retail has consistently outpaced broader retail, leading to an increase in the online share of total retail sales.
Retailers with a strong online presence and diversified product offerings have seen substantial benefits from the ongoing shift towards online shopping. Companies like JB Hi-Fi and Temple & Webster have invested heavily in their e-commerce infrastructure and have seen significant share price gains over the past few years.
The accelerated shift to online could arguably further strengthen the market position of companies that have invested in their e-commerce infrastructure and allow them to stay ahead of competitors with less developed online capabilities.
Foolish takeaway
Despite mixed trading in ASX retail shares following modest retail sales growth in April, the accelerating shift to online shopping could present a silver lining. Retailers with strong e-commerce platforms may be well-positioned to navigate the challenging economic landscape and capitalise on the growing online retail market.
