Retailers gear up for strong 2016

Australian retail sales lifted again in FY15, despite some high-profile losses. Meanwhile, the sector is getting ready to leverage ideal consumer conditions in 2016 by increasing marketing investment.

BDO’s 2015 Spend Trend report provides an annual health check for Australia’s $292 billion retail sector by analysing key 2014/15 financial ratios and indicators for 18 ASX-listed retailers, including Wesfarmers and Woolworths, as well as 13 US- and UK-based retailers.

According to BDO partner and retail specialist John Bresolin, this year’s report revealed some positive signs for Australian retailers and shareholders, as last week’s hold in interest rates and the lower Australian dollar combine to make shopping locally more attractive to consumers.

“Australian specialty retailers increased sales revenue by 5.3 per cent [about $1 billion] from 2014/15, but this is in contrast to a 9.4 per cent increase by the international retailers,” he said.

“To help increase their market share and help leverage consumer confidence, Australian retailers boosted their marketing spend by 35.7 per cent in relative terms, including investment in digital marketing to coincide with an increasingly mobile marketplace.

“Many retailers now employ dedicated social media staff or have appointed a digital marketing department to coordinate these efforts, with tools like Facebook, Instagram and YouTube being used heavily in key sales periods such as the lead-up to Christmas.”

According to Mr Bresolin, this social media surge among Australian retailers has coincided with some encouraging growth in online sales, with many recording significant double-digit growth in relative terms.

“However, they still have a long way to go if they are to match their international counterparts, whose online sales represent well in excess of 10 per cent of their total revenue,” he said.

Crucial business KPIs such as sales revenue, net profit margin, gross margin and gearing have improved or remained stable, despite uncertain economic conditions and increased competition from large international retailers entering Australian shores for the first time.

However, despite these promising results, the larger international retailers are still outperforming Australian companies in key areas of revenue growth and net profit margin.

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