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LTT Business Bulletin - July 2014

 

Positive end to the financial year for the Australian retail sector

 

Insights from the Australian Retail Index

 

The retail industry finished the year strongly, experiencing steady growth of 4.1% for June, according to the Australian Retail Index. After a slump in sales following the release of the Federal Budget, shoppers were quick to forget their concerns, and returned with confidence. This increased activity has coincided with the launch of the midyear stocktake sales period, with sales up 18.4% per cent in the last two weeks.

 

However, according to BDO’s National Retail Lead Partner, Simon Scalzo, “if history is anything to go by, retailers should expect activity to be short-lived over the remaining cooler months, with consumer confidence historically showing a dip in sales between August and October”.

 

Furniture and Homewares proved the most stable segment throughout FY14, thanks to the activity in the housing market, while Fashion and Accessories and Other General Retail experienced the greatest levels of volatility.

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Retail Express’ CEO, Aaron Blackman, stated, “Retailers have continued to invest in their businesses over the last three months.” He added that, “retail clients typically see a decline in sales during the third quarter of each year”, with the exception being winter-related businesses such as sporting goods. “Sales generally begin to increase again around the September school holiday period”, Blackman observed.

About the Australian Retail Index

BDO has partnered with Retail Express to introduce the Australian Retail Index. Drawing information from thousands of retail stores across the country, the Australian Retail Index is the only resource for obtaining in-depth sales statistics on a weekly basis.

The Australian Retail Index monitors week-by-week changes in sales across four key categories, namely:

• Fashion and accessories: clothing, accessories, and footwear
• Furniture and homewares: general household goods, cookware, furniture and floor coverings, lighting, and linen and textiles
• Sporting & recreational goods
• Other general retail: gifts, health and beauty, and leisure goods.

Graph 1 below shows overall activity recorded by the ARI (to June) and ABS (to April)

Graph 2 below demonstrates which subsectors had fluctuations in sales activity across the financial year vs those with stable activity.

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The Index also provides an overall sales differential from one week to the next, which is obtained by collating all the results across categories. It enables retailers to:

• Track movements in sales against the industry average
• Benchmark sales against other businesses in the same category
• Identify strengths and weaknesses in the trading cycle
• Take immediate action if their business is experiencing difficulties.

Later this year, the data will be updated daily, but this information will only be available by subscription. At that time, the Australian Retail Index will provide a state-by-state breakdown, divided into metropolitan and regional sales. The data – dating back to December 2012 – is obtained by collating results from Retail Express clients around Australia and is expressed as a percentage change in retail sales from the previous week.

The Australian Retail Index allows individual retailers to benchmark their performance against the market, enabling them to react more quickly than ever before to upturns and downturns in business.

For more information on the Australian Retail Index, please contact John Bresolin, Retail Lead Partner at BDO – John.Bresolin@bdo.com.au