Comparing the recent profit results of Australian retailers opens a window into consumer behaviour at the moment.
You get a good idea of which retail operations are working and which aren’t.
And the results offer a real world view of economic indicators which show slowing wages growth, falling consumer and business sentiment and a population now more interested in paying down mortgages than in spending extra savings from lower petrol prices and lower interest rates.
When Dick Smith announced its results on Tuesday this week, with sales up 8.9% to $694 million but net profit up just 0.8% to $25.2 million, this is what happened to the share price:
And two weeks ago when adventure clothing retailer Kathmandu announced sales up 6.9% to $179.2 million, the share price looked like this:
Very, very disappointing.
And when electronics retailer JB Hi-FI announced a slowing in sales and profits down 1.9% to $88.5 million, the share price picked up around 4% to $17.47.
A good result.
But when the Reject Shop, a value retail outlet catering to those who don’t want to pay full retail, announced a turnaround in sales with revenue up 4.4%, this is what happened to its share price:
A very, very good result.
The Reject Shop has an expansion plan in place and is managing costs well. But it’s also telling that across the spectrum of value offerings to shoppers, it’s the company catering to the demand for great value and low prices for today’s cautious Australian consumer that the market loves the most.