Late winter gives retailers chills

 

sale-bagThe recent run of warm autumn weather is about to send a chill through the nation’s department stores.

New figures show department store cash registers were ringing more often in April, with sales up 2.9 per cent to $1.5 billion.

However the encouraging signs of shoppers flocking back to the likes of Myer and David Jones could be short lived thanks to record autumn temperatures.

“Department store sales are likely to be one of the biggest losers from the unseasonably warm weather that has persisted though May, with anecdotal evidence hinting that some of Australia’s retailers are already feeling the pinch,” JP Morgan’s Tom Kennedy says.

David Jones and Myer usually kick off their mid-year sales in early June.

However Myer is opting instead to hold its first ever one day massive clearance sale on Wednesday, pushing back its mid-year event by two weeks.

Many clothing retailers have already hung out their sale signs as they struggle to entice shoppers to buy winter clothes while the weather remains so warm.

The latest Australian Bureau of Statistics figures released on Tuesday showed overall retail sales rose 0.2 per cent to $23.17 billion in April, largely aided by department stores.

April marked the 12th consecutive month of sales growth, the longest run of rises in seven years.

But many economists branded the overall result as disappointing, saying growth was sluggish after a strong pick up in late 2013.

They believe sales are likely to tail off in May because of the warm weather and worries ignited by the federal government’s planned spending cuts announced in the budget.

“April was the final month before households took note of the federal budget,” Australian National Retailers Association CEO Margy Osmond said.

“While today’s result is a nice surprise for retailers, we would expect May and June to be the deal breakers in retail sales momentum.”

But RBC Capital Markets currency strategist Michael Turner remains optimistic and expects spending to bounce back later in the year.

“It doesn’t seem as if there’s too much persistence in this sluggish rate of growth given that the labour market has picked up a little bit, and once we forget about the budget a little bit more,” he said.

ANZ Bank economic analyst Savita Singh said there were signs that the budget’s impact on consumer confidence may be starting to wear off.

The ANZ-Roy Morgan consumer confidence index rose for the first time since mid April, up 2.9 per cent last week.

“ANZ’s bottom line for the household consumption outlook remains that consumer spending will improve this year, although the confidence impacts from the budget may weigh on consumer spending in the near term,” Singh said.

AAP

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