Homeware spending spree has legs

The appliance and homeware boom has continued into July.

With so much COVID-19 apprehension and misery in the air let’s start the week with a good news story. The boom in homewares and appliances that transformed parts of the Australian retail scene in May and June has continued into July.

Indeed the network of general managers in the booming areas are saying that store and online sales increases are often running 30 per cent above July last year. And whereas the final months of the financial year are normally slow, July is usually a strong month so the July start is really significant.

The home/appliance May-June sales boom did not extend through the entire retail scene, although car sales also did well. In contrast, a lot of retailers are struggling.

At the weekend, upmarket department store David Jones reported that sales fell by more than one-third at the peak of the coronavirus pandemic lockdowns. Nevertheless DJ stores stayed open during the crisis. Its Country Road affiliate shut stores and suffered a 50 per cent sales decline.

And some of the worst struggles are in the malls where people are becoming nervous and rents are under great pressure. This has ravaged the big department stores.

Confirming these difficulties, Vicinity Centres said values of its properties had fallen by 11 to 13 per cent requiring writedowns of $2.1bn.

Of course part of the home improvement and appliance sales boom is via online trading, and not surprisingly, Bunnings has now emerged as Australia’s top retail website, surpassing Amazon.

Readers will remember that in May and June I documented this remarkable boom and it was later confirmed by a large number of retailers including Wesfarmers (Bunnings), Harvey Norman, JB Hi-Fi, Adairs, Scali, Beacon and many others.

Numerous forces are driving this boom. The first is that a large number of Australians are still earning their full salaries and because they are spending much more time at home they see things that need to be done and they have the money to undertake the purchases. It’s almost as though isolation fosters a desire to spend on selected goods among Australians. Many borrow to satisfy the craving.

At the same time JobKeeper has increased the salaries of low-paid people in some enterprises while it is maintaining the salaries of many others.

Add to that the billions that are coming out of superannuation and we have a considerable stimulus to the retail sector.

Without JobKeeper Australian unemployment would be much higher.

After September 30 there will be less money available from JobKeeper and JobSeeker and that may curb the selective boom. But it would be a brave person who forecasts the end.

We have already been surprised at its momentum and the spending keeps coming.