Sign of the Times in Retail

Oh well, Friday in the US turned out to be somewhat of a fizzer, the market falling just -3.5%. A year ago a move of that magnitude would have seen major headlines, today however, such moves seem relatively tame.

Markets in asia today continued to slide, the Nikkei opened up and is now down more than -5% as I write. But enough of the market commentary. This post is about somethign much more trivial. Today I had a read of Specialty Fashion Group's annual CEO's report. This is what it had to say on the outlook for 2009.

We anticipate a tough financial year ahead. As mentioned previously, July trading was good and we saw positive growth compared to last year. However, since then we have experienced a decrease in foot traffic through our stores and like for like sales have been negative for the past three months.

We certainly support the Federal Government’s pre Christmas spending package and anticipate the extra cash for pensioners and families will provide some boost for us through the significant Christmas trading period.

The environment is very volatile at present and with the Christmas trading period still ahead of us, our first half results remain unpredictable.

There is nothing special in this, it is just a continuation of a growing trend within the retail industry. If you didn't see it last week, here is what Harvey Norman had to say on their October sales:

Like for like writen sales for the 28 days ended 19th October 2008 from the franchised "Havey Norman" stores in Australia decreased by 5.8% when compared to the same period last year. Retail margins continue to be under pressure.

I'm aware that retailers like JB Hifi seem to be continuing to do well, but for how long can that be sustained? Unemployment in Australia has yet to rise significantly and with households carrying the biggest debt burden in history the stimulus lobbed at Australian consumers by the government will be barely noticed.

Whilst the stock prices of retailers have taken a battering along with the rest of the market, given the headwinds faced by consumers, I believe the extent of the economic slowdown in Australia is yet to be priced in for most of the major retailers. My favourite pick in this sector is TRS, but even they need to get cheaper for me to dip my toe in.