Retail: Australian retail sales +7.7% yoy in May
About the author:
- Author name:
- By Josephine (Jo) Little
- Job title:
- Former Senior Analyst
- Date posted:
- 06 July 2021, 10:30 AM
- Sectors Covered:
- Consumer Discretionary (Retail)
- Total retail sales in May were +7.7% yoy (seasonally-adjusted) and +0.4% mom. Two-year growth (vs May 2019) remains elevated, +13.9%.
- For the first time we saw the COVID beneficiary categories shift into negative yoy growth (and vice versa), which should be widely expected.
- Online penetration sat at 9.1% (vs peak of 11.1% and pre-COVID levels of 6.7%).
- We are cautious on the sector in the short term, but believe the next 3-6 months could throw up some attractive opportunities in quality retailers should the market harshly treat earnings stepping down from unsustainable peaks yoy.
May retail sales +13.9% vs May 2019
Total Australian retail sales (seasonally-adjusted) grew by 7.7% yoy (+0.4% mom) – still solid growth as retailers start to cycle a strong base.
However, the data shows us that this growth was largely supported by those categories negatively impacted by COVID-19 and vice versa.
Key category highlights
Strongest (those negatively impacted during COVID): Cafes/restaurants (+123%), clothing (+48.7%), footwear (+41%), takeaway (+21%). Pharmacy posted strong growth (+12.%) off a flat base, while furniture (+6%) continues to be very resilient despite cycling a strong base (pcp +18%).
Weakest (the big COVID winners): Liquor (-14%), hardware (-12%), electrical (- 6.5%) and household goods (-6%). Grocery was reasonably flat cycling 10% growth. Other recreational goods posted 0.7% growth despite a strong pcp (+38%).
Online penetration: 9.1% in May. Down from the peak of 11% in April 2020, but well above pre COVID-19 levels of 6-7%.
What the data tells us re upcoming trading updates: We are of the view that most retailers who were COVID beneficiaries over the past 12 months, will report single digit negative comps at upcoming trading updates (and likely through May/June) due to the strong base to cycle. Today’s ABS data seems to validate this view. Two-year growth stacks will still be impressive (+>20%). Recent lockdowns across Australia will have further impacted most, but this is short term and will likely be called out by companies.
Where we are comfortable being in retail: Auto (Eagers Automotive, Peter Warren Automotive), Lovisa (although Australian lockdowns will impact in the short term, northern hemisphere should have emerged with solid momentum and we are hoping for strong store rollout to recommence in FY22), Universal Store (will also be impacted by lockdown timing around school holidays and there is escrow coming up in August, but in the medium-long term we like this growth story and think it could be one of the few to positively cycle a strong base during FY22). Today’s data suggests Super Retail Group could also post resilient sales within its sport and leisure businesses and we are optimistic around the group’s future store footprint potential.
Figure 1: Annual retail sales growth by month and category (seasonally-adjusted)
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