Monthly turnover in clothing, footwear and accessories hit $3 billion in August 2023, Australian Bureau of Statistics (ABS) data revealed.
This is up by around $40 million from August 2022 and July 2023, with the sector peaking in November 2022 at $3.1 billion before slipping below the $3 billion mark.
Despite the lift in fashion sales, overall retail turnover has flatlined, hitting just 0.2% month-on-month growth from July to August 2023. This follows a 0.5% rise in July and a 0.8% fall in June.
ABS head of retail statistics Ben Dorber said the nudge up in August shows consumers continued to restrain their retail spending.
“In trend terms, retail turnover rose 0.1%, and was up only 1.3% compared to August 2022 - the smallest trend growth over 12 months in the history of the series,” Dorber said.
“Considering how high inflation and strong population growth has added to retail turnover in the past year, the historically low trend growth highlights just how much consumers have pulled back in response to cost-of-living pressures.”
Fashion recorded the highest percentage monthly lift of 1.3% compared to the six other retail sectors measured by ABS.
Cafes, restaurants and takeaway food services came in second at 0.7%, with department stores at 0.4%.
“Warmer than usual weather and additional promotional activity linked to Afterpay Day lifted spending on discretionary goods, especially clothing, footwear and personal accessories,” Dorber said.
“Spending was again boosted by the 2023 FIFA Women’s World Cup with strong demand for fan gear and increased spending across cafes, restaurants and takeaway food outlets as large crowds attended matches and live sites across the country.”
Meanwhile, household goods retailing recorded a third consecutive fall of negative 0.4%, and is the ninth monthly fall in turnover in the past 12 months. Food retailing fell 0.3%.
National Retail Association (NRA) deputy CEO Lindsay Carroll said a slowdown in consumer spending before the peak end-of-year retail season was expected.
“Consumers have experienced a few months of relief with the Reserve Bank’s rates pause but will continue to hold on to every Aussie dollar until the sales hit, in case the honeymoon period ends,” Carroll said.
Carroll said the increase in sales for August could be attributed to a slight increase in discretionary spending, while non-discretionary spending suffered a decline based on food retailing data and the spend on household goods.
The NRA added that August’s 0.2% lift is good news for retailers, but ABS figures show sales haven’t gone up much at all in pace with Australia’s population boom.
Meanwhile, the Australian Retailers Association (ARA) highlighted that year-on-year (YoY) retail sales lifted by 1.5%, led by the food sector.
Clothing, footwear and accessories rebounded from YoY decline in July, up 1.4% in August. Department stores on the other hand recorded a decline of 0.6%, while other retailing nudged up by 0.1%.
“Clothing, footwear and accessories experienced a slight resurgence from July, likely as a result of additional discounting to clear winter merchandise ahead of Spring,” ARA CEO Paul Zahra said.
“Whilst much has been said about the cost-of-living crisis, retailers are also experiencing a cost of doing business crisis and will be concentrating on offering the best service and value for budget driven shoppers as they lead into the all-important Christmas trading period.”
The slump may continue RBA rate freeze
Stake market analyst Megan Stals said the “sluggish” lift in August retail sales increases the likelihood of a rate hold by the Reserve Bank of Australia (RBA) next week.
“But this was only part of the full picture, with today’s National Accounts Data also revealing that household deposit accounts saw the first quarterly decline since 2007 — signalling that a per-capita recession is becoming the dominant economic narrative for the local market,” Stals said.
“While inflation will remain a concern for investors for some time, it’s likely we’ll see attention shift to the rate of economic growth as we roll into 2024.
Stals warned that investors in the retail market will be positioning portfolios to weather weak consumer spending.
“Naturally, the outlook for discretionary retail stocks appears challenging, yet even consumer staple retailers such as Woolworths and Coles have also entered into a downtrend, as the impact of increasing theft and higher staffing costs hit the bottom line.
Stals said retailers that are geared towards the cheaper end of the market are appearing to benefit, noting a 35% year-to-date lift in its share price.
“It’s particularly important to look for companies with a reliable income and strong balance sheet in the current environment, as they are far more likely to show resilience.”