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Oz Retail Sales Update..Tailwinds For Some
BY ROGER MONTGOMERY - 08/03/2018 | VIEW MORE ARTICLES BY THE MONTGOMERY TEAM

We’re keen to keep an eye on retail sales. You might recall we have previously explained that on the positive side, unemployment if very low, is very good for retail conditions.  On the negative side wages growth has been stubbornly flat and retailers have been unable to pass on any price rises.

Also, the slowing of high rise residential development activity in Australia means that some tradies may start feeling the pinch, unable to be as fully employed as they may have liked.  To the extent that high levels of credit card and mortgage debt affect consumer behavior, it may start to show in consumer sales data.

This week January retail sales data was released.

Retail sales in January were +2.1 per cent year on year (yoy) (seasonally-adj) and +0.1 per cent month on month (mom) (seasonally-adj). This compares to expectations of +0.4 per cent month on month.

Strong numbers came through from cafes, restaurants and catering (+5.5 per cent yoy and +0.5 per cent mom), hardware (+3 per cent yoy and +0.5 per cent mom), and liquor (+3 per cent yoy and -2 per cent mom) the latter continuing a strong trend.  Electrical was also strong  (+2.6 per cent yoy and -0.1 per cent mom) – but we already suspected this from JB Hi-Fi’s update of more than 4 per cent growth in JBH stores.

There were however pockets of weakness. Furniture and floor coverings (-2.4 per cent yoy and -0.2 per cent mom), footwear and personal accessories (-2.3 per cet yoy and -3 per cent mom), takeaway food services (-1 per cent yoy and -0.6 per cent mom), and finally, something we have written about extensively; department stores (-0.9 per cent yoy and -0.6 per cent mom).

For companies in these weakening sectors growth can still occur, but it is important to understand when a tailwind could be morphing into a headwind.

We recently posted some research by Citi  on the retail sector winners and losers this latest reporting season. You can review this here.



View More Articles By The Montgomery Team

Roger Montgomery is the Chief Investment Officer of Montgomery Investment Management, montinvest.com, and author of blog.rogermontgomery.com.

Roger's step-by-step guide to valuing the best stocks and buying them for less than they're worth, Value.able, is available exclusively at rogermontgomery.com. Skaffold is an online stock-picking application that rates ASX-listed stocks from A1 to C5. Watch a demo of Skaffold at www.skaffold.com.



 

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