Country Road Group sales slump on weak consumer sentiment and household savings

The weakest household savings rate since the GFC and a switch from goods to services is stripping sales from fashion retailers, warn the owners of Country Road Group.

Country Road Group sales have slumped on weak consumer sentiment and the weakest household savings rate since the GFC, its South African owners have warned. Picture: Gaye Gerard

The South African owners of Country Road Group, whose fashion brands include Country Road, Witchery and Mimco, have warned near-record low consumer sentiment and the weakest household savings rate since the global financial crisis has worsened the outlook for retailers.

Sellers of fashion and apparel were also being hit by a switch in consumer spending away from goods and towards services.

In a trading update provided to the Johannesburg Stock Exchange, Woolworths Holdings — which in 2022 sold department store David Jones but kept ownership of the Country Road stable of fashion chains — revealed almost a double-digit slide in sales for its Australian retail fashion arm.

“Trading conditions in Australia and New Zealand have deteriorated further, with consumer sentiment in Australia at near-record lows, and household savings the weakest since the GFC,” Woolworths Holdings said.

“In addition, the retail industry has been disproportionately impacted by the shift in spending away from goods, to services.”

Woolworths Holdings revealed sales for Country Road Group — which owns Country Road, Mimco, Witchery, Trenery and Politix — fell by 5 per cent over the 26 weeks to December 24 but were down 9.5 per cent on a same-store basis.

Although, this was also off a high prior period base in which sales grew by 25.5 per cent following the strong recovery from Covid-impacted lockdowns.

Sales growth in the last six weeks of the December half was positive, at 1.3 per cent, Woolworths Holdings said.

The trading warning and commentary on a deteriorating environment for fashion retailers comes as other retailers also reveal softening conditions over the last few months as rising interest rates and cost of living pressures rein in discretionary spending.

This month jewellery chain Michael Hill said it expected to post comparable earnings before interest and tax (EBIT) of $30m to $33m for the 26 weeks to December 31, a slump of up to 45 per cent on the previous first half’s $54.5m performance. It flagged a sharp deterioration in first half earnings amid challenging conditions for the fine jewellery sector.

Last week Domino’s Pizza shares slumped 30 per cent when it scrapped its full-year guidance following a slowing of sales across its Asian store network, with its Australian network of pizza stores finally showing a recovery after a decision to lift prices hit sales last year.

In November Australia’s largest footwear retail Accent Group caused a collapse in its share price when it reported flat sales with like-for-like sales — which included The Athlete’s Foot franchises, digital sales and Glue stores — down 2 per cent as cost of living pressures discouraged shoppers.

Late last year Woolworths Holdings added to growing retailer unease, warning Country Road Group sales had slumped to a 10.7 per cent decline over the 20 weeks to mid-November, admitting its fashion outlets had succumbed to the deteriorating conditions across the Australian retail sector.

“The difficult trading conditions in Australia and New Zealand which arose in the second half of the prior financial year, and which affected the entire retail industry, have softened further throughout the current period, resulting in a marked decline in retail sales, across both store and online channels,” the South African company said late last year.

Woolworths Holdings is pouring more money into Country Road Group after ridding itself of its underperforming David Jones business, and recently unveiled plans to transform the Country Road business into Australia’s most admired “lifestyle brand house”, investing up to $82m to improve operations, open new stores and potentially expand overseas.