Retail sales snap the anaemic months

Australia snapped a five month anaemic rout to log a growth figure above 0.2% for the first time in five months, with August sales up 0.4%.

This is not surprising considering the history around federal elections and retail sales. Since 1991, retail sales have tended to move higher in the month leading into an election, rise further in the two months following the election before gradually returning to trend.

The figures could also be a sign the RBA’s 17 month easing cycle is finally prompting consumers to spend - a much needed event for bricks and mortars traders such as David Jones and Myer.

It is these players that will be hoping trade can continue to expand over the fourth quarter months. With Christmas sales starting, coupled with the election, DJS and MYR will be looking to see stronger revenues over the period and will look for like-for-like sales to expand after contracting in FY13.

DJS and MYR has struggled in recent years under the pressure of consumer slowdowns, online competition and ballooning costs. Both DJS and MYR said cost of doing business (CODB) jumped between 2 to 4% last financial year and expect this to grow further in FY14 by as much as 4-5%.

Although gross margins increased across the board, with DJS at averaging 38% and MYR pulling 41.7%, the 30.2% CODB is cannibalising the sales lines. Therefore both DJS and MYR will need retail sales growth to expand and hold over the coming months, to offset the CODB.

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