Retailers hit by sales slump, consolidation and discounting

While Australian retailers have been thrown a yuletide lifeline in the form of Kevin Rudd’s stimulus plan, the last two months before Christmas are set to bring hard times.

While Australian retailers have been thrown a yuletide lifeline in the form of Kevin Rudd’s stimulus plan, the last two months before Christmas are set to bring hard times.

Australia’s biggest retailers are bracing for the worst, with Harvey Norman chief Gerry Harvey saying last month’s sales were the worst he has seen.

In a company first, Harvey released the group’s “written sales” results for the 28 days to 12 October (written sales are those placed by a customers that have not been delivered), showing sales fell 4.7% during the period.

He says he expects a 20% drop in profit this year.

“We’ve got stores out there (where sales) are up 5% and 10% and lots of stores that are down 5% and 10%, but the sum total is, we are down 4.7% on last year,” he told Business Day.

“It gives you a good guide for how difficult things are at the moment.”

Harvey Norman’s rival, electronics and entertainment retailer JB Hi-Fi, expects to see further industry rationalisation as the economy slows. But JB’s chairman Patrick Elliot believes the company can benefit as rivals fall by the wayside.

“These more challenging times in retail will prove a catalyst for further industry rationalisation, increased market share for the company and further enhancement of our competitive advantage,” he told the annual general meeting yesterday.

Chief executive Richard Uechtritz says the group is well placed to withstand any economic downturn and believes the group can add 28% to its sales this financial year, bringing its total to just under $2.4 billion.

“Despite the current economic and retail environment, and with the all-important Christmas trading period ahead of us, the company remains confident that it will meet market expectations.”

Not everyone is so rosy. Founder of women’s fashion chain Cue, Rod Levis, told The Australian its stores will discount more heavily in the lead-up to Christmas and he expects others will do the same.

Levis says his company is one of many being smashed by the rapidly depreciating Australian dollar.

“We sit at our computers and watch with horror at the falling Australian dollar. Because we import luxury fabrics from European mills, we are facing a double-whammy; higher import costs and a plunging Australian dollar.”

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