Mr Stewart, lead retail partner at Ferrier Hodgson, says an unprecedented 23 per cent fall in retail foot traffic in the last week of December highlights the uncertainty among consumers and believes there may be worse to come as retailers are forced to clear higher levels of excess stock and landlords come under more pressure to offer rent support for struggling tenants.
According to ShopperTrak, which measures foot-fall in shopping centres, customer traffic fell 15 per cent in the week ending December 23 and 23 per cent in the week ending December 30, dragging traffic for the month of December down 12.2 per cent, well below the 12 month average decline of 2.2 per cent.
“The ShopperTrak data confirmed a lot of anecdotal stories I’d heard from my contacts in retail, particularly in apparel and general merchandise’ ” said Mr Stewart, citing one automotive franchisee whose same-store sales fell 21 per cent in December.
“In my 20 years in retail I can’t think when people had a Christmas like that,” he said.
“It’s not across the board – food and liquor still went very well – but general merchandise and apparel and footwear was smashed.”
Analysts have warned against reading too much into the foot traffic data, saying it is not highly correlated with ABS retail sales figures and the fall in traffic partly reflects the fact that more consumers are browsing and shopping online instead of in-store.
Morgan Stanley analyst Tom Kierath said that while foot traffic was down sharply in December, anecdotal evidence suggested conversion rates – the proportion of visitors who make a purchase – have improved.
“Five years ago they were walking the stores to see what was there,” Mr Kierath said.
Increasingly popular online shopping promotions such as Black Friday and Cyber Monday have also pulled forward retail sales from December into November.
“Trips to the malls are more targeted and there’s less browsing,” said another retail analyst, who declined to be named.
Retailers have described Christmas trading as ‘patchy’, with trading picking up in the last week of December after a slow start, and analysts say some retailers have fared reasonably well, while others have struggled.
For example, while Kmart’s same-store sales fell 0.6 per cent in the December half (implying a 1 to 2 per cent fall in the December quarter after a positive first quarter), The Reject Shop chairman Bill Stevens has indicated same-store sales were “solid” in December after falling 4.9 per cent in November.
Jeweller Michael Hill also achieved a turnaround in momentum, with same-store sales in November and December rising 1.3 per cent after slumping 11 per cent in the September quarter, when the company pulled back on discounting. However, its Canadian stores did most of the heavy lifting.
Outdoor clothing retailer Kathmandu downgraded earnings after Christmas following a decline in same-store sales and womenswear retailer PAS Group now expects first half earnings to be at the lower end of the $5 million to $7 million range forecast in November.
But womenswear retailer Noni B reiterated its full year profit guidance after same-store sales rose 1 per cent in December after falling 5 per cent in the first four months of fiscal 2019.
“It’s clear there are some consumers facing some cost of living pressures but I wouldn’t say it was a bad trading period,” Wesfarmers chief executive Rob Scott said on Monday after warning that earnings from Kmart and Target would fall in the December-half.
The 87-store menswear chain Ed Harry went into administration on Tuesday following “particularly tough” Christmas trading and Mr Stewart expects more retailers to collapse this year as cashflows come under pressure.
“It wouldn’t surprise me if there were more (administrations) – whether they can survive will come down to the strength of their balance sheet,” he said.
Landlords are “really worried,” he said. “There are a lot of other retailers needing a lot of support and the big international chains don’t pay the incremental rents the local ones are asked to pay.”