Retailers set for pre-Christmas spree as hospitality takes a bigger bite

Australian retailers are heading for another big spending spree over the holiday season with forecasts pre-Christmas spending will almost match last year’s COVID-led boom.

The Australian Retailers Association (ARA) and market researcher Roy Morgan are forecasting Aussies will spend $58.8 billion in the lead-up to Christmas, down slightly from $58.9 million last year.

The figure is still 11.3 per cent higher than retail spending pre-pandemic at the end of 2019.

While state-by-state data shows a pullback in spending expectations for some states, the hospitality sector is expected to be the big winner this year.

Hospitality spending is expected to be up 12.3 per cent to $8.01 billion, with the figure buoyed by an easing of lockdowns.

Department stores and household goods sales are likely to feel the brunt of almost $1 billion swinging back into hospitality, with each of these sectors expecting a fall of 7.9 per cent and 7.1 per cent respectively in the pre-Christmas rush.

Australian Retailers Association CEO Paul Zahra says the broader trend is ‘looking positive’.

“There’s a lot of Christmas cheer in these numbers, with the overall trend looking positive, and that is great news for small businesses and discretionary retailers who have suffered through some of the longest lockdowns in the world this year,” says Zahra.

“The Christmas trading period is critical as it’s the time when most discretionary retailers make up to two-thirds of their profits for the year.

“Although the ARA-Roy Morgan data predicts the impact of COVID lockdowns will continue to suppress retail sales, year-end spending in NSW and Victoria will bounce back strongly in December. And those states not impacted by lockdowns will enjoy a more gradual ramp-up in sales growth leading into Christmas.”

Roy Morgan CEO Michele Levine says the strength of the spending forecasts is surprising.

“No one believed that spending this coming Christmas could match the highs of last year, but as the population emerges from the most punishing crisis in a hundred years, shoppers are looking to reward themselves and their families,” says Levine.

“However, the sales aren’t all going to be in-store. The COVID five-year digital acceleration means many more Australians are shopping online, so this Christmas we will see much more of a mix between in-store and online shopping.”

In a breakdown of the states, the ARA is expecting sales growth in Victoria, Tasmania and ACT, with Tasmania the stand-out at 4.2 per cent.

NSW and Western Australia will remain largely flat, while Queensland, South Australia and the Northern Territory will see some contraction after a strong result the previous year.

Meanwhile, Roy Morgan for the first time has put a figure on the cost of the most recent lockdowns on retail trade, coming in at $131 million a day nationally.

“Unsurprisingly, these impacts have been most keenly felt in NSW and Victoria, at $40.4 million and $55.2 million per day respectively,” says Zahra.

“And it’s also unsurprising that the most impacted categories were hospitality and clothing, footwear and accessories, at $71.7 million and $55.7 million per day respectively.

“These impacts will continue to weigh on annual growth in retail trade and will be compounded by the reduction government stimulus payments and the end of 'mortgage holidays' for hundreds of thousands of Australians in coming months.”