Following in the footsteps of Billabong and JB Hi-Fi, outdoor specialist retailer Kathmandu (KMD) has warned that Christmas sales are below expectations and that its first half year earnings are probably going to be lower than the previous year.
Mirroring the recent falls of the other embattled retailers, stock in Kathmandu dropped some 38c or 25% to $1.23 per share when the market opened, as the retail sector continues to face headwinds, back at a 11 year starting point as shown in the weekly chart below:
According to the chief executive of Kathmandu, Peter Halkett:
Our trading performance throughout the Christmas period to date has been below expectations, which is a reflection of weaker consumer spending. We believe its more a of consumer related matter.
In a worrying trend, this lack of spending looks like flowing through to retail sector employment, where mass layoffs are expected, according to Rochard Dennis, executive director of The Australia Institute:
The tourism industry and retail sector are being hit very hard by the high dollar and, while mining is booming, it doesn’t employ too many people. The problem is retail doesn’t make a lot of money but employs a lot of people.
Indeed the retail sector employs more than 7 times as many Australians as mining, as the RBA chart below shows:
With the current unemployment queues relatively small by world standards at 5.3% (635,800 unemployed out of labour force of 12,092,000 h/t Stephen Koukoulas) a drop in retail employment, even amidst a mining boom, could see this number rise quickly going into 2012 if retail spending continues to “taper”.