Australian Retail Sales: January 2023 - Jumpin’ Jack Flash

About the author:

Author name:

By Alexander Mees

Job title:

Co-Head of Research and Senior Analyst

Date posted:

01 March 2023, 7:00 AM

Sectors Covered:

Gaming and Retail

• Retail sales bounced back in January 2023 after an unexpectedly sharp fall in December 2022. Sales were up 1.9% month-on-month (having fallen 4% month-on-month in December). Compared to January 2022, sales in January 2023 were up 7.5%. Following the annualisation of the end of lockdown in October 2022, year-on-year growth has occurred at a consistent pace of 7.7% in November and 7.4% in December.
• Department Store and Clothing & Footwear sales grew fastest month-on-month. Compared to last January, which was affected by Omicron, the best year-on-year growth was in Clothing & Footwear and Eating Out.

Volatility in monthly sales is the new reality as promotional sales pick up

December sales fell 4% month-on-month, which is likely to have been a function of a pull-forward from a buoyant Black Friday and Cyber Monday period in the month before. January saw sales bounce 1.9% month-on-month, effectively reverting to trend.

Our sense is that periods of significant promotional activity may have the ongoing effect of creating month-on-month volatility in retail sales, especially as a consumer with less money in their pocket may be more likely to defer expenditure until they can benefit from sector-wide discounting.

Many retailers we have spoken with during reporting season have referred a ‘normalisation’ of promotional activity and some have suggested their customers are ‘looking for a deal’ more often than they were a few months ago.

Although they won’t be as impactful as Black Friday, watch out for Afterpay Day on 16-19 March and Click Frenzy on 16-18 May before the traditional End of Financial Year (EOFY) sales in June and July.

Winter is coming (and that’s a good thing)

Clothing & Footwear sales increased by 6.5% month-on-month in January and were up 17.5% year-on-year. Department Stores grew sales 8.8% month-on-month and 16.6% year-on-year. This is indicative of a catch-up in spending on new clothes and other items with which to re-engage with the world as we get back to normal after COVID.

For how long can this last? The apparel retailers we have spoken with in recent weeks say there’s no clear sign of the consumer pulling back yet. In fashion, we are entering the A/W (autumn/winter) season, the first since lockdown, which may mean there will be a pick-up in demand for new warmer (and often more expensive) clothes.

Some retailers are better placed than others: those with a focus on the youth segment are likely to experience greater resilience of demand given youth unemployment is low, entry level wages are rising and the proportion of their income that goes to the fashion segment is generally higher than for older demographics.

Figure 1: Retail sales (A$m)

Source: Morgans, ABS

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.