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Are ASX retail shares set for a Christmas bust?

Tristan Harrison

There are signs that the ASX retail sector could be having a bit of a dull Christmas retail period after the exciting Black Friday and Cyber Monday sales almost a month ago.

According to reporting by the Australian Financial Review, retailers are cutting shifts for casual Christmas workers, “culling” staff and bringing forward Boxing Day discounts.

The cause of all this? Weaker sales than expected in December, probably because many people fulfilled their shopping needs after Black Friday and Cyber Monday.

Only a couple of weeks ago we learned that Harris Scarfe was going into receivership and planned to close 40% of its stores.

Department stores are retailers with some of the largest staff counts, though Myer Holdings Ltd (ASX: MYR) and Wesfarmers Ltd’s (ASX: WES) Target both denied they had reduced staff in the week before Christmas, although Target said that stores manage their own rosters.

I wonder how David Jones, Wesfarmers’ Kmart and Woolworths Group Ltd’s (ASX: WOW) Big W are going during the Christmas shopping period.   

Gary Mortimer, senior lecturer at QUT Business School, said that for some retailers the six weeks to Christmas accounted for 60% of annual profits for some retailers, so it’s very important to do well in this period.

You can imagine that Christmas is also an extremely important time for retailers like JB Hi-Fi Limited (ASX: JBH) with a focus on electronics.

As long as retailers still achieve overall growth between Black Friday and the Boxing Day sales, I don’t think it truly matters when the sales happen in that month or two period, as long as they aren’t too heavily discounted.

Foolish takeaway

Retail is a tough business, particularly when it comes to discretionary spending. If I had to buy a retailer I would rather invest in something like City Chic Collective Ltd (ASX: CCX) which is growing online and overseas.  

The post Are ASX retail shares set for a Christmas bust? appeared first on Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019