Department store sales have dropped by 5% in June 2023, down $94.5 million on the prior month, data from the Australian Bureau of Statistics (ABS) revealed.
It is the largest drop across six retail industries, with ‘clothing, footwear and accessories’ in second place alongside ‘other retailing’ at 2.2% - down $64.5 million and $120.4 million respectively.
Household goods retailing fell by 0.1%, cafes, restaurants and takeaway fell by 0.3%, while food retailing (grocery stores) was the only retail sector to see a rise, of just 0.1%.
Overall Australian retail turnover fell 0.8%, following a 0.8% rise in May 2023, and a 0.1% fall in April 2023.
"Retail turnover fell sharply in June due to weaker than usual spending on end-of-financial-year sales,” ABS head of retail statistics Ben Dorber said. “This comes as cost-of-living pressures continued to weigh on consumer spending.
“There was extra discounting and promotional activity in May, leading up to mid-year sales events. This delivered a boost in turnover for retailers, but that proved to be temporary as consumers pulled back on spending in June.”
National Retail Association CEO Greg Griffith said the lack of impact from mid-year year sales shows how far consumer confidence has fallen.
“Consumers are only opening their wallets for non-discretionary spending, if not for special occasions,” Griffith said.
“Big retailers have found consumer loyalty with their own branded products because of how cheap and familiar they are. We encourage other retailers to adopt similar sales tactics to ride out the economic storm.”
Griffith suggested the Government’s recent move to overhaul casual employment - giving employees more access to employee benefits and permanent roles - would need to be mindful of the impacts on small business.
“Casual employment is essential for businesses who are already operating at thin margins,” Griffith said. “It’s not something they will want to lose while consumers are tightening their spending.
“Last month the Reserve Bank paused interest rates but next week they will factor in the 5.75% wage increase that kicked in on July 1, which could mean another rate hike on the horizon.
“Small retailers are hit hardest and need regulators to keep them in mind when making policy decisions.”
Meanwhile, retail sales for June have increased year-on-year by 2.3%.
The most significant year-on-year sales increases were food spending (up 5.8%) and cafes, restaurants, and takeaway (up 8.6%).
However, all other categories recorded negative sales growth compared to June 2022, with household goods down 4.4%, followed by department stores (2.1%), clothing, footwear and accessories (1.5%) and other retailing (1.1%).
All states and territories recorded growth year-on-year, led by ACT (up 6.2%) followed by South Australia (up 5.4%), Western Australia (up 5.4%) and Northern Territory (up 4.5%).
Victoria was up by 2.4%, Tasmania by 1.7%, New South Wales at 1.5% and Queensland recorded the smallest rise by 0.1%.
Australian Retailers Association (ARA) CEO Paul Zahra said sales growth for essentials like food masked an overall decline in retail spending.
“An increase of 2.3% year-on-year is a concerning result for the industry, considering the impact of price increases and with most categories now in sales declines,” Zahra said.
“Food makes up more than a third of retail spending and its performance is being inflated by unavoidable price increases. Despite overall sales growth, the reality is that we’re very much in the grip of a discretionary spending slowdown.”
Zahra said it has become a precarious environment for retailers
“[They] are simultaneously feeling the pinch of this spending slowdown whilst also at the mercy of rising operating costs across the board.
“Shoppers have become far more spending-conscious due to the rising cost of living, and we’re seeing that reflected in these results.
“In last month’s retail trade data, clothing and apparel, department stores and other retailing were recording modest growth – we’re now seeing the lag effect on cost-of-living pressures come to fruition.”
In an economic update in response to the ABS retail trade data, Commonwealth Bank said it expects consumer spending to continue to weaken.
“The material lift in interest rates to date, and the delayed pass-through should add to the impact in H2 23,” Commonwealth Bank wrote. “The resilient labour market is providing some offset.
“The pace of annual growth has sharpened quite noticeably and sits at just 2.3%, the slowest pace since September 2021. Weaker spending in volume terms as well as a slower pace of price gains, as seen in the June quarter CPI, are driving the weaker outcomes.”