Even The Rain May Not Save The Retailers As Confidence Continues To Slump

Getty/Matt Cardy

Hopes for a turnaround in the retail sector have dampened, even in the absence of wet weather.

The sun and customers have stayed out longer than expected and left more stock on the shelves over the Autumn quarter.

Commonwealth Bank retail analyst Andrew McLennan said the slower than expected start to winter has already taken a toll on the sector.

“We don’t know how tough it will be, but it will be tough,” he said.

“When it comes to the weather we have such a short winter in Australia and there is not a huge opportunity for Australian retailers to take advantage of it.”

Even a record low cash rate has failed to boost the struggling industry as much as its management or investors would have wished.

McLennan concedes the sector saw improvements at the beginning of the year but said it deteriorated as consumer confidence softened.

“Materially rate cuts have definitely been a positive but it’s more than likely been offset by other negatives.”

Myer CEO Bernie Brookes highlighted a cautious trading environment when the department store retailer posted 0.5% quarterly sales growth today.

McLennan believes this cautiousness is the reason consumers aren’t spending and instead continuing to save and pay-down debt.

“Retailers are in the business of growing gross profit dollars. You can drive sales growth through discounting but it won’t grow the gross profit dollar,” he said.

Nimble management is the answer according to McLennan, who favours Myer’s rival David Jones for its growth prospects.

“We are overweight DJs and we’re neutral on Myer and the reason for that is DJs may be further behind technology but they’re now catching up,” he said.

Now read: Myer Sales Are Growing But Bernie Brookes Is Still Cautious About Retail

Follow Business Insider Australia on Facebook and Twitter

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.