Criterion: Consumers will shop ‘til they drop this Christmas – but only if they get a bargain
Pre-Christmas retail promotions such as Black Friday show consumers are happy to open their wallets – but only on certain items and rarely at full price.
The retailers’ crucial festive trading season has been extended – and distorted – by promotions such as Black Friday
Despite interest rate fears, household spending has been robust
Investors have reacted harshly to subdued updates from Accent Group and Temple & Webster
In the simpler days of yore, retailers relied on Boxing Day doorbuster sales – which literally were door-busting, feral events – to appraise their festive season performance.
These days, the crucial trading window extends to the loosely defined lead-up events of Black Friday and Cyber Monday.
Spookily, Halloween also is becoming more important in the retail calendar.
At the other side, Boxing Day sales stretch out to the ‘back to school’ promotions. These morph into Easter and – before you even can lodge last year's tax return - end of financial year campaigns.
“Black Friday, and its expansion to a month-long affair for many retailers, has resulted in November being a critical month for Christmas shopping,” Deloitte Access Economics says.
“Despite this, December won’t be completely left out in the cold, with almost a third of consumers planning to do most of their Christmas shopping in that month.”
Hits and misses at the till
So how are the listed discretionary retailers faring?
“Sales growth has moderated across most discretionary retailers, but demand is still robust, and household spending continues to grow,” says broker Morgans.
“Sales weakened through the end of August into September, but anecdotally sales have improved in October and appear to have continued into the early parts of November.”
Indeed, this week's official data shows overall retail spending rose 6.2% in October, year on year, compared with 4.6% in September.
The discretionary categories fared especially well, with household goods up 7% and department store sales climbing 6.3%.
Retailers reporting moderating sales since July include Baby Bunting (ASX:BBN), Beacon Lighting (ASX:BLX), Universal Store Holdings (ASX:UNI), Super Retail Group (ASX:SUL), Accent Group (ASX:AX1).
Th owner of brand such as The Athlete’s Foot, Skechers, Vans, Timberland and Doc Martens, Accent is a window into the sole – er, soul – of consumers.
Last week, Accent Group shares swooned 20% after the footwear specialist downgraded sales guidance because of flagging lifestyle shoe sales (sports categories continue to perform well).
The owner of the Kathmandu and Rip Curl apparel brands, KMD Brands (ASX:KMD) reported September quarter sales of 7.9%, led by Kathmandu’s 13.9% increment.
But in a sign of peak puffer jacket sales, the company has focused on moving aged inventory to improve its stretched balance sheet.
In the case of Super Retail, it’s a division-by-division story: the company's Super Cheap Auto chain hasn’t revved up, but its Rebel Sports and Macpac arms are doing fine.
Housing pain
Retailers exposed to the housing sector have produced mixed updates.
At its AGM last week, Harvey Norman Holdings (ASX:HVN) disclosed decent local comparable sales growth of 6.4%, for the period from July 1 to November 20 (and 9.1% globally).
The shares tumbled 6%, although that might have more to with the stock running so hard.
The dazzling light of the online retail sector, Temple & Webster (ASX:TPW) reported 18% sales increment up to November, with active customers at record levels, etcetera.
Great news? Not really: the shares tumbled almost 30%, mainly because as of August 11 year-on-year sales had grown 28%
In other words: sales have slowed in the last couple of months, although the harsh share reaction seems hard to justify.
But furniture purveyor Nick Scali (ASX:NCK) defied any downturn, pointing to a September quarter uptick to 11.6%, compared with 7.7% in July.
Will a Christmas craze toy save the day?
In short, shoppers will shop but they demand a discount.
Broker Morgans likes cheap-and-cheerful jewellery purveyor Lovisa Holdings (ASX:LOV), if only because the shares have retreated 12% over the last month.
The firm also favours Universal Store for its share rollout program, as well as Breville (ASX:BRG).
We’ll never reach peak coffee.
As always, the retailers’ individual execution is just as important as the overall mood of consumers.
Apart from getting the customer basics such as click and collect right, the retailers who best manage shrinkage (theft) and cyber threats are likely to be the winners.
If they’re lucky, this year’s ‘it’ toy or gadget will save their bacon.
This year JB HiFi (ASX:JBH) and Wesfarmers' (ASX:WES) Kmart arm are surfing demand for Kodak’s Charmera digital keyring camera.
Like Cabbage Patch Dolls and Tamagotchis, Furbies and Tickle Me Elmos of Christmases past, the $49 retro item could make the difference between a drab festive trading season and a jolly one indeed.
Originally published as Criterion: Consumers will shop ‘til they drop this Christmas – but only if they get a bargain
