David Jones: Retail in “recession”

Via Domain:

The South African parent company of luxury department store David Jones has slashed the value of the beleaguered retailer on its books due to “unprecedented” economic pressures.

In a trading statement released on Thursday afternoon, Woolworths Holding Limited (WHL) recorded an impairment charge of $437.4 million for David Jones for the 2019 financial year.

A company spokesman said the write-down reflected “sustained and unprecedented” economic pressures.

“The retail sector in Australia is currently in recession and the Australian economy has slowed to its weakest level since the global financial crisis in 2009,” he said.

Tell us something we don’t know. Although, with June figures out today, perhaps it has gotten even worse. The NAB online retail index says so:

  • The NAB Online Retail Sales Index contracted (-1.6%) in June on a month-on-month, seasonally adjusted basis. This follows from a rebound in May (3.4% mom, s.a).
  • In year-on-year terms, the NAB Online Retail Sales Index remains positive, albeit barely, up 0.5% (y/y, s.a.) in June. However, this result is compared to June 2018, and it is worth noting that the period January to September 2018 was one of the strongest growth periods in the NAB online retail sales index history.
  • After a strong May result, June data shows sales for three of the eight online retail categories contracting in month-on-month growth terms. The largest sales category, homewares and appliances (-7.1% mom, s.a.), was a key contributor to the headline result given its relative weight in the index. Media, and to a lesser extent, grocery and liquor, were the two other categories to contract in the month. The smallest sales category, takeaway food, recorded the fastest growth in the month. For more detail, see Charts 3, 5, 7 & 8 below.
  • In month-on-month terms, all states and territories except WA (2.4% mom, s.a.) and ACT (4.5%) recorded a contraction in sales growth. Tasmania (-6.4%) led the monthly decline in sales growth.
  • In June, spend growth in metro areas was higher, at 0.4% (mom, s.a.), relative to regional (-3.1%). WA metro areas went against the broader result to record the highest online retail spend growth (+5.4%) in the month. The above mentioned state contraction in online retail sales for Tasmania was associated with a larger contraction in metro area sales, along with a smaller contraction in regional, albeit with sales for the latter also falling last month. See Charts 15 and 16 for more detail.
  • While contracting, at -1.6%, domestic online retailers performed better in month-on-month terms relative to international competitors (-1.9% mom, s.a.). In year-on-year terms, from our series, considerable weakness in international online sales remains. See charts 13 and 14, and table 3 for category growth and share.
  • We estimate that in the 12 months to June, Australians spent $29.32 billion on online retail, a level that is just over 9% of the traditional bricks and mortar retail sector (May 2019, Australian Bureau of Statistics), and about 12.7% higher than the 12 months to June 2018.

The ScoMo miracle is looking more like a ragged mirage today.

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