Australia Markets closed

Fears for ASX retailers on soft December sales

Kate O'Brien
Female shop assistant bored leaning on counter

ASX retailers rely on the Christmas season for an uplift in sales to tide them through to the year. This year, however, there are signs that the Christmas spending season has been replaced by the Christmas saving season, which could spell disaster for some retailers.

Australia saw a host of retailers collapse in the face of weak consumer spending this year. Department store Harris Scarfe is the latest in a list that includes Dimmey’s, Roger David, Bardot, Napoleon Perdis, Karen Millen, Zanui, and Stylerunner. Retail spending growth has been slow throughout 2019. Muted wage growth and concerns over the future of the economy has resulted in a reluctance to spend. Tax and interest rate cuts which should have spurred spending have instead been saved as uncertainty over the future trumps the desire to buy now. Retail spending turnover was flat in October, the latest month for which statistics are available.

The Black Friday effect

An increase of 0.6% in retail sales is expected to have been seen in November, according to the Australian Financial Review (AFR), thanks largely to the Black Friday sales. The Black Friday and Cyber Monday sales look to have provided a November boost to retailers, but this may have come at a cost. Savvy shoppers snagged their Christmas bargains in the sales, leading to lower demand in December. The traditional December uplift in sales is being brought forward as consumers chose to buy on sale in November rather than full price in December.

According to the AFR, retailers were reducing shifts for Christmas casuals, cutting full-time staff, and bringing forward Christmas discounts due to December sales being below expectations. The shift in spending patterns may have caught out retailers that failed to plan for the impact of the late November sales. Ad hoc December turnover will put increased pressure on retailers that rely on this seasonal sales increase.

Who is at risk?

Those most at risk include department stores and clothing and footwear retailers. According to, Department stores sell 78% more in December than they do in June. Clothing and footwear retailers sell 57% more. A failure to reach sales targets in December will leave these retailers scrambling to hit targets in the coming year. 

Myer Holdings Ltd (ASX: MYR)

ASX-listed department store Myer will be hoping Boxing Day sales make up for any deficiency in pre-Christmas sales. The Myer share price is currently trading at 49 cents, down from highs of 73 cents in April, as it continues its turnaround agenda.

CEO John Kong’s plan to restore the Myer’s fortune centres on deleveraging the business and focusing on the customer. Myer is working to reduce its retail footprint to free up excess space and reduce occupancy costs. Myer turned a profit in FY19 for the first time in 9 years and reduced net debt to $39 million from $69 million. Nonetheless, total sales were down 3.5% to $2,991.8 million and operating gross profit declined 1.9% to $1,162.4 million. Earnings per share of 4 cents were reported in FY19. The dividend remains suspended.

The store is seeking to align the interests of the board and shareholders by encouraging the former to have ‘skin in the game’. A Shareholding Policy has been introduced which requires non-executive directors to target a shareholding of the equivalent of one year’s director’s fees within 3 years. At the end of October, the directors collectively owned 2.9 million shares.

Myer is executing on its ‘Customer First Plan’ to improve shareholder value. This involves improving the store experience, increasing the number of ‘only at Myer’ brands, continuing to reduce space requirements, improving efficiencies and reducing waste. The online store is a key focus area and now accounts for 9.8% of all sales, making it the largest store.

Myer planned to draw shoppers during the Christmas period by offering unique experiences and exclusive products and brands. Giftoriums and Santalands were set up in stores, with an increased range of personalised products available from well-known brands like Cadbury, Penfolds, and Quicksilver.

Accent Group Ltd (ASX: AX1)

Accent Group will also be hoping for strong Christmas and new year sales so it can continue to deliver on its previously strong results. In FY19 Accent Group delivered earnings before interest tax depreciation and amortization (EBITDA) of $108.85 million, up 22.5% on the previous year, and net profit after tax (NPAT) of $53.88 million, also up 22.5%.

The Group is Australia’s largest footwear retailer, with about 20% of the market, and over 470 stores across Australia and New Zealand. Accent Group currently runs 17 websites, up from 13 in FY18, and expects more than 15% of sales will be made online in FY20. Digital sales were up 93% in FY19 compared to FY18. In FY20, Accent Group plans to open at least 40 new physical stores, increasing store numbers to 519. Low single-digit like-for-like growth is expected going forward, with strong digital growth.

Accent Group purchased the assets of Stylerunner after the business was put into receivership in October. The acquisition provides Accent Group, which until now has been focused on footwear, with a growth platform for apparel offerings. Accent Group plans to expand the brand by leveraging supply chain capabilities and economies of scale. A strategy for bricks and mortar stores is to be developed over time.

Boxing Day relief?

ASX retailers hoping for a late rush in the Boxing Day sales and beyond may be disappointed, with the industry figures warning the AFR that retail sales growth over the Christmas trading period “will languish at levels last seen at the time of the global financial crisis”. While Australian Retail Association Boss Russell Zimmerman had predicted consumers would spend $2.5 billion on Boxing Day, he has admitted he is not entirely confident, with the bushfires and late November sales providing headwinds. The Association and Roy Morgan have estimated pre-Christmas spending totaled $52.7 billion this year, however, no-one will know for sure until the Bureau of Statistic releases its retail trade figures in February next year.

The post Fears for ASX retailers on soft December sales appeared first on Motley Fool Australia.

Our Top 3 Blue Chip Shares for 2019 – NOW AVAILABLE!

You’re invited! For a limited time, The Motley Fool Australia is giving away an urgent new investment report detailing our 3 TOP BLUE CHIP SHARES to own in 2019.

So if you like trustworthy, stable, high-performing companies that pay fat fully franked dividends – we’ve got you covered!

Stock #1 is a beloved old Australian company turning its attention to high-margin businesses... and rapidly returning cash to shareholders with its hefty dividend...

While Stock #2 is an online powerhouse that’s rapidly gaining market share all around the globe... poised for years (or even decades) of tremendous growth...

Even better, Stock #3 offers a whopping 6.5% grossed-up dividend! Which beats the rates on term deposits right out of the water – and offers the potential for capital gains, too.

You can discover all three shares inside our new report right now. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!


More reading

Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. 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