‘Party’s over’: Retailers brace for grim times as spending dries up

“Coupled with the current labour shortages, supply disruption, and massive price increases in shipping costs, it doesn’t bode well.”

Already, international retailers have started to report signs of a marked slowdown in consumer spending, with US behemoths Walmart and Target both recently reporting weak earnings and warning of a downbeat environment to come.

These results could be a canary in the coalmine for the Australian retail sector according to Jarden analyst Ben Gilbert, who believes local retailers run around three months behind their international peers.

“While the US is a different market, we see the directional trends as relevant for Australia given similar themes with respect to inflation, down-trading and reopening are likely to play out, to an extent, in the 2023 financial year,” he said.

Gilbert views discretionary and household-related retailers as facing the most risk from this scenario, highlighting JB Hi-Fi, Harvey Norman, Premier Investments and Wesfarmers as companies that could disappoint investor expectations.

However, it’s clear that many investors are already expecting downbeat results, with most retail companies having almost entirely retraced the gains made in their share price throughout COVID. Some market darlings, such as online retail Kogan, are now trading lower than they were before the pandemic.

Mezrani says his business has “reluctantly” been forced to raise prices and is still struggling to get consistent labour in stores, saying there are precious few positives on the horizon for retailers.

“If you had to pick the settings you want for good retail spending, they’re the exact opposite of where we are now.”

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