WEEKLY E-MAIL

26 November 2018

Thanksgiving is a traditional holiday celebrated by many in North America, each year on the forth Thursday in November. Although it’s not a tradition celebrated by Australians, the traditional Black Friday and Cyber Monday online retail sales are.

Black Friday marks the first day of retail spending leading up to Christmas and is traditionally the busiest shopping day of the year. The spending season is crucial for the U.S. (and now Australian) economy as around 30% of annual retail sales occur between Black Friday and Christmas. Whilst the sale results from last Friday will be out soon, there was a 17% increase in sales from 2016 to 2017.

Amazon took last Friday as an opportunity to launch deals on tens of thousands of products in their first Australian Black Friday sales event on their Australian online site. While retail sales have been tough for many within the industry, the Deloitte 2018 Retailers’ Christmas Survey showed that 80% of retailers are expecting to see higher sales this Christmas compared to last year, and 79% of them expect a 10% or more rise in online sales. Deloitte Australia national retail leader David White says that “One of the key aspects that we are increasingly seeing is bringing forward the Christmas sales from December to November”.

Many ASX listed companies within the consumer discretionary sector have not been a fantastic place to invest for the past few years. For example, in the last five years, shares in the retailer Myer have dropped from $2.67 (November 2013) to $0.38 (November 2018). Even the online retailer Kogan has not been immune to a decreased share price, attributing the recent fall in their share price to factors such as the increase in online competition, and the introduction of GST on purchases of goods under $1,000. The ongoing sale of shares by the company’s management have also not assisted shareholder sentiment.

However, throughout this doom and gloom, there may be some early Christmas cheer for retailers. Kathmandu’s shares increased 13% on Friday, following a better-than-expected trading update. Same-store sales grew at 6.3% in the first 15 full weeks to November 11. Sales rose 7.1% in Australia, and 5.2% in New Zealand.

Accent Group, which owns footwear chains The Athlete’s Foot, Hype and Platypus, and owns the rights to shoe brands including Dr Martens, Vans, Timberland and Sketchers also indicated a 15%-20% increase in earnings before interest, tax, depreciation and amortisation for the first half of the 2018/19 Financial Year.

Although the results of consumer spending have been mixed, retailers embracing these traditional U.S. shopping days are creating more opportunities to engage consumers, both online and in store. Hopefully this consumer engagement works and flows through to both companies and shareholders, not just in the consumer sector but those indirectly impacted, such as the food outlets and entertainment providers located within shopping malls.

Nicola Beswick
Certified Financial Planner®
SMSF Specialist Advisor™
Authorised Representative No. 459008

If you have any questions or comments, please email me at nicola@gfmwealth.com.au

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