Retail wreck unfolds

Country Road adds to chorus of woe from shopkeepers

Country Road Group has warned that near-record low consumer sentiment and the weakest household savings rate since the global financial crisis have worsened the outlook for retailers.

Sellers of fashion and apparel were also being hit by a switch in consumer spending away from goods and towards services, said the South African owners of the group, which has fashion brands including Country Road, Witchery and Mimco.

In a trading update provided to the Johannesburg Stock Exchange, Woolworths Holdings – which in 2022 sold David Jones but kept the Country Road stable of fashion chains – revealed almost a double-digit slide in sales for its Australian retail fashion arm.

“Trading conditions in Australia and New Zealand have deteriorated further, with consumer sentiment in Australia at near-record lows, and household savings the weakest since the GFC,” Woolworths Holdings said.

“In addition, the retail industry has been disproportionately impacted by the shift in spending away from goods, to services.”

It said sales for Country Road Group fell by 5 per cent over the 26 weeks to December 24 but were down 9.5 per cent on a same-store basis. This was also off a high prior period base in which sales grew by 25.5 per cent following the strong recovery from Covid-impacted lockdowns.

Sales growth in the last six weeks of the December half was positive, at 1.3 per cent, Woolworths Holdings said.

The trading warning and commentary on a deteriorating environment for fashion retailers comes as other retailers also pointed to softening conditions over the past few months amid rising interest rates and cost-of-living pressures.

This month jewellery chain Michael Hill said it expected to post comparable earnings before interest and tax (EBIT) of $30m to $33m for the 26 weeks to December 31, a slump of up to 45 per cent on the previous first half’s $54.5m performance.

Last week Domino’s Pizza shares slumped 30 per cent when it scrapped its full-year guidance following a slowing of sales across its Asian store network, with its Australian network of pizza stores finally showing a recovery after a decision to lift prices hit sales last year.

In November Australia’s largest footwear retailer Accent Group caused a collapse in its share price when it reported flat sales with like-for-like sales – which included The Athlete’s Foot franchises, digital sales and Glue stores – down 2 per cent.

Late last year Woolworths Holdings warned that Country Road Group sales had slumped to a 10.7 per cent decline over the 20 weeks to midNovember, admitting its fashion outlets had succumbed to the deteriorating conditions.