Deloitte survey: Retailers bracing for boom or bust over Christmas holidays

Retailers that underperform over the key Christmas holidays could be forced to close their doors for good in the new year.

According to the latest Deloitte Access Economics quarterly retail forecast, a survey indicated a clear polarisation in Christmas spend expectations. Picture: AAP

Australian consumers have been hit by bushfires, COVID-19 and lockdowns, and recession reined in spending in the June quarter at the peak of the pandemic, but they have more than made up for that lull with a rebound by the September quarter.

But not all retail sectors are enjoying the new boom times and retailers that underperform over the key Christmas holidays could be forced to close their doors for good in the new year.

According to the latest Deloitte Access Economics quarterly retail forecast, a survey indicated a clear polarisation in Christmas spend expectations, with a record number of retailers expecting sales to grow by more than 5 per cent, tempered by a substantial number expecting sales to fall by more than 5 per cent.

Deloitte noted that normally 500 retailers enter external administration by this time every year. But there have been far fewer retailers failing in 2020, with a risk of an insolvency catch-up in the first half of 2021 as fiscal stimulus and various support measures come to an end.

 

Deloitte said after a significant drop in spending in the June quarter, the September quarter rebound has more than made up for it, with retail sales sitting well above pre-COVID levels. But not everyone is benefiting, with clothing, cafes and department stores lagging behind.

“Retail spending has been an area of strength for the Australian economy through COVID-19. With social restrictions easing, and a measure of pent up demand unleashed, retailers experienced a surge in spending volumes over the September quarter,” said Deloitte Access Economics partner David Rumbens.

“Retail’s strong performance is due in part to opportunity — consumers aren’t able to spend as much on travel and other services — as well as changing preferences — consumers are spending more on home-centric goods.

“So retailers are capturing a greater share of the consumer wallet. While overall household spending is still down compared to pre-COVID levels, retail sales have surged ahead. And this increase in market share is likely to linger for some time as restrictions to travel remain a barrier to spending on transport and accommodation.”

Mr Rumbens said Deloitte’s survey indicated this year’s Christmas trading period would be a polarised one and that while 39 per cent of retailers expected more than 5 per cent growth in Christmas sales, up from 21 per cent in 2019, a further 24 per cent expected a fall in sales of more than 5 per cent.

He said the December quarter would be the first with limited restrictions since the second wave crisis began in Victoria, and pent up demand was already starting to lift spending in October. This was helped by continuing key government stimulus measures.

“Indeed, the run into Christmas is looking more positive than previously expected. There are three key drivers of this stronger outlook: improved labour market conditions; the extension of JobKeeper for struggling businesses; and upbeat consumer confidence.

“Combined with good news on fewer restrictions, state borders opening up, and vaccines, this has enabled consumers to feel more at ease with spending heading into December.”

However, with Christmas often delivering the bulk of profits for many retailers, a misstep could spell disaster.

“For businesses who relied on stimulus measures that are slowly fading and who haven’t made necessary structural adjustments, there is a risk that a poor sales performance could be the straw that breaks the camel’s back,” he said.