Retail retreat knocks shine off Christmas April 2, 2010
IN A surprising twist, retail tenants have lost some post-Christmas glow with news that Australian trade in the sector fell 1.4 per cent in February to a seasonally adjusted $19.828 billion. The latest Bureau of Statistics result compares with an already-downwardly revised $20.118 billion in January. The median market forecast was for retail to rise by 0.3 per cent in February.
Economists have said the weaker sales were due to the higher interest rates over the reporting period. But the upside is that the Reserve Bank of Australia may keep the rates steady on Tuesday.
Retail landlords are not getting anxious yet as they have long leases but further declines could force tenants to insolvency.
Vacancy rates are high in the big shopping centres as the landlords work hard on getting the mix correct; there is a current focus on fashion but food and cinemas continue to win the race for the consumer dollar.
The traditional department stores - on the longest-leasing deals at shopping centres - continue to see sales fall as consumers await more discounting in mid-season sales. Already, the discount chains and so-called mini majors such as Priceline are advertising Easter sales, with eggs being offered at sale prices well before the Easter bunny arrives.
A new report from ratings agency Moody's Investor Services said the retail sector should continue to recover from a sharp fall in tenant demand in early 2009.
A Moody's vice president, Maurice O'Connell, said the sector had been buoyed by rising consumer spending due to the government stimulus packages, growing consumer confidence and improving employment prospects.
''However, strong competitive pressures among retailers and the dampening effect of rising interest rates is likely to result in only modest improvement for the sector, with smaller neighbourhood centres lagging prime centres,'' Mr O'Connell said.
A senior CommSec economist, Craig James, said consumers were cautious despite surveys showing confidence was historically high: ''Spending at department stores declined 3.9 per cent and sales of clothing, footwear and personal accessories dropped 3.9 per cent for February. Consumers spent 1.8 per cent more at cafes and restaurants.''
