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As Australian retailers gear up for the Christmas trading period, it may be the traditional powerhouses that are most at risk of losing market share.Citi researchers believe Woolworths, Harvey Norman and JB Hi-Fi are the retailers most at risk, noting that while overall retail trends are more appealing in Australia, “the divergence in company performance is increasing the risk to margins”, Fairfax Media has reported.
Strong retail sales growth was recorded by the Australian Bureau of Statistics in September, with electrical and electronic goods retailing enjoying a particularly strong month, boosted by the release of the iPhone 6 and 6 Plus, and indications are the positive momentum could be set to carry on.
The Australian Retailers Association and Roy Morgan Research recently released figures forecasting shoppers will spend $45 billion from November 15 up until December 24.
This would represent a 4.3 per cent rise year-on-year, and retailers in the consumer electronics sector will be keen to capitalise heading into Christmas.
However, in a rapidly evolving market, it appears the more established retailers will need to be diligent in maintaining their stake.
While Dick Smith gained market share, Citi researchers found both Harvey Norman and JB Hi-Fi lost share in the September quarter, according to the report, with Citi stating Harvey Norman’s sliding market share may be due to the company being less inclined to drop gross margins.
Despite JB Hi-Fi appearing cheap on a price/earnings ratio basis, Citi researchers stated there may still be risks to earnings in the medium term, Fairfax reported.
Increased competition, reduced sales in products such as music and DVDs, along with increased operating costs were all downside risks to Citi’s forecasts, Fairfax further reported, while upside risks included faster retail spending growth, high profit margin expansion and increased product innovation.
