‘Where there’s smoke’: Aussie retail icon’s shock announcement

Australia’s entire retail industry is propped up by the December sales period – but this year, Christmas never came for one iconic group.

COMMENT

We all depend on a strong economy. For most of us, our jobs are secure when the economy is strong and they’re at risk when the economy is weak.

That’s why news on Tuesday that bushfires had begun to hit retailers should worry all of us.

Household consumption is the biggest single part of the Australian economy. Bigger than imports, bigger than exports, bigger than government. When consumer spending suffers, the whole economy takes a hit.

So when retailer Mosaic Brands announced its December sales were terrible because of fires, it was worth noticing.

Mosaic Brands, a clothing retail company, said the fires had hit its business hard in the crucial Christmas period. Sales in its 1379 stores – under the brands Noni B, Rivers, Rockmans, Katies, etc – were down 8 per cent compared to the year prior.

“Sales through the second half of November and throughout December, a critical sales period for the group, were significantly impacted by the ongoing bushfire tragedy,” the company said.

“20 per cent of the group’s stores have been directly impacted by the fires, and some 32 per cent of the group’s 1386 stores are located in regional areas where consumer confidence has been particularly fragile.”

Mosaic Brands, which includes Noni B, Rivers, Rockmans, Katies, had a bad month because of the ongoing bushfire crisis. Picture: Supplied

Mosaic Brands is just one of the many retailers on the stock exchange. It has come forward early with its trading update, but we will have to wait a bit longer to hear what the story is from other big retailers like JB HiFi, Harvey Norman, Bunnings owner Wesfarmers, etc.

Noni B is just one of the Aussie stores that struggled in December. Picture: Supplied

WHERE THERE’S SMOKE

I can’t help thinking that of all the bushfire effects, it might be smoke haze that is worst for the retail business. Who is keen to go out when you can barely see to the end of street?

Bushfires are devastating for small rural communities. But the truth is those rural communities are usually not big enough to register much impact on the national GDP figures.

When you talk about smoke haze blanketing Melbourne, Sydney and Canberra for weeks on end, that’s something that will show up loud and clear in the statistics.

Unless they are selling P2 face masks, I doubt retailers are doing much business.

I was at a large modern shopping centre in Melbourne on Tuesday, when the air quality was officially deemed Hazardous, and despite all the advice about how shopping centres have great airconditioning, haze was obscuring the view inside the centre. The one shopkeeper I spoke to was furious about the smoke.

Bushfire smoke blanketed Melbourne on Tuesday. Picture: David Caird

Of course, it could be that online shopping is going crazy (although not everywhere – in some places where deliveries have been cancelled due to smoke). I bought an air purifier on eBay and it has been going non-stop since it was delivered.

I bet I’m not the only one who substituted online for shopping in person. But of course my purchase came from a Chinese company and the only real boost to the Australian economy from my purchase was the wages of the postman who delivered it. It’s not the same as buying from a local shop.

DESPERATE TIMES

Retail trade in Australia was already suffering throughout most of 2019. Department chain Harris Scarfe went into administration and announced it would close 40 per cent of stores. In April and July, sales growth was literally zero.

The promised boost in sales from higher tax returns never really materialised, and weakness continued right up until October. But then! November was a surprise success, boosted by Black Friday online sales.

November was a great month for retail – but December looks set to be dire. Picture: Supplied

The November data made it possible to be hopeful we’d put the worst of it behind us.

But the fires make it extremely likely December 2019 will record the weakest growth of any month of the year – probably negative in seasonally adjusted terms.

January won’t be much better – Boxing Day sales are already falling out of fashion, and then the fires have complicated things even more.

Christmas failed to come for Rivers this year. Picture: Julian Smith/AAP

With the start to the year looking like this, it’s going to be a very hard time for retailers, and since we all depend on money going round in that sector, potentially a hard year for all of us.

Jason Murphy is an economist | @jasemurphy. He is the author of the new book Incentivology.