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Australian retail sales lifted again in FY15, despite some high-profile losses, as the sector gets ready to leverage ideal consumer conditions in 2016 by increasing marketing investment, as BDO’s annual Spend Trend report reveals.

OVERVIEW

BDO’s Spend Trend provides a comparative analysis of how Australian retailers are performing against their international competitors, in addition to examining whether the effect of the perceived – and much talked about – tough retail trading environment has actually been reflected in the retailers’ published financial results. 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.  

SUMMARY OF FINDINGS:

Our analysis found that whilst the results for many of the ASX-listed retailers for FY15 were varied, overall the key KPI’s such as sales revenue, net profit margin, gross margin and gearing have improved or remained stable, despite uncertain economic conditions and increased competition from the large international retailers entering Australian shores for the first time (such as H&M, Sephora, Uniqlo and Forever 21).

  • Sales revenue: International retailers are growing faster, but Australian retailers are holding their own

  • Gross profit margins: Australian specialty retailers’ gross profit drops 2.9%

  • Net profit margins: Double digit (relative) growth for all, but internationals are still outperforming

  • Online sales: Omni-channel is becoming the norm

  • Stock turnover: Australian retailers holding on to stock a few extra days

  • Salaries/wages, rental and marketing expenses: Aussies spending more on marketing

  • Creditor days: Slight increase in the time taken to pay creditors

  • Gearing: Australian retailers are nearly 2.5 times less geared than internationals

Australian specialty retailers* increased sales revenue by 5.3 per cent (approx. $1 billion) from 2014-15, however, this is in contrast to a 9.4% increase by the international retailers. 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.

Putting the ‘social’ into a social media strategy for retailers

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. This social media surge amongst 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.