Cashless index points to woeful Christmas for retail

Further signs of a terrible Christmas for retailers have emerged, with NAB data pointing to a drop in sales.

Shoppers in and around Pitt Street and George Street in Sydney on 24th December 2017. (Pictures by Julian Andrews)

Fresh evidence has emerged that the dark clouds hanging over the nation’s $300 billion retail sector caused a slowdown over December and the crucial Christmas trading period, raising fears that a flood of profit warnings and retail collapses could wash through the economy in the next few months.

Sales at cafes and restaurants did remain strong however, but confirming the fears of other retailers year-on-year sales growth at department stores was weaker as spending on clothing and footwear sank.

While official ABS retail trade figures for December are still weeks away from being released, the National Australia Bank has harvested customer data based on around 2 million transactions to provide a snapshot of retail trade — and it doesn’t look good.

The NAB Cashless Retail Sales Index released today shows a slowdown in December following a strong November. The bank said that mapping through to the official measure of retail sales suggests a decline of 0.3 per cent in December after a strong 1.2 per cent rise in November to be published by the ABS when released on February 6.

Retailers and investors have been bracing for bad news since mid-December when the nation’s biggest department store Myer shocked the market by warning that sales had collapsed in the first two weeks of December. Rival David Jones has also recently reported poor sales while pharmacy, beauty and healthcare retailer API issued a profit downgrade this week following lacklustre Christmas sales.

More bad news could flow from the upcoming reporting season as retailers update the market on their first-half financial performance and specifically trading in December.

NAB said the weaker results for December was driven by declines in household goods related to the introduction of the iPhone (the electronic goods subcategory fell 2 per cent month on month following a revised 3.8 per cent increase in November), as well as in food, departments stores and ‘other retailing’, NAB said this morning.

“While retailers may be recording a good Christmas, NAB’s data based on around 2 million transactions per day suggests a slowdown in the month of December,’’ warned NAB chief economist Alan Oster.

Mr Oster said averaging November and December sales trends suggested a “moderate pace of growth’’ in recent months and in the underlying pace of growth in the fourth quarter — however retail was still struggling.

“Despite some tentative evidence that households are loosening the purse strings a little, NAB’s Business Survey continues to suggest that the retail sector is struggling, with business conditions in slightly negative territory which suggests negative growth. This could be because retailers can’t pass on cost increases, as conditions for wholesalers are strongly positive, but also because of competition from offshore and online.’’

The NAB Cashless Retail Sales Index found that yearly growth in cashless retail has been mixed across categories. Cafes, restaurants and takeaways was by far the

fastest growing sector (16.6 per cent year on year), followed by ‘other retailing’ (9.9 per cent).

“There has also been a welcome pick-up growth in the household goods category. Food spending growth also remains solid, and has eased off a touch for department stores. In contrast, spending on clothing and footwear continues to slow.”