Retailers are concerned that the board might focus on headline sales rather than underlying profitability. The Reserve Bank is, of course, not so interested in profitability but may be swayed by 2024 financial year sales results that retailers have eked out with heavy and less enriching promotional activity. Retailers are already bearing the brunt of the march of interest rates with consumer confidence in retreat and retail spending sluggish outside the discount promotional periods. The problem for retailers and many other businesses, especially in the hospitality sector, is that the inflation pressures are largely outside their control. Those inflationary pressures include the direct impact of the higher interest rates on housing, rising health costs fuelled by struggling public health systems and increasing insurance premiums fuelled by crime and natural disasters. To the extent that the retail industry is contributing to inflation, the reasons are still largely beyond the control of retailers. Those factors include higher taxes and utility costs, increased wages and employee entitlements and supply chain blips, especially on goods imported from Europe or the Middle East. Many retailers have responded to the challenging retail conditions tactically rather than strategically with heavy discounting, extended promotional periods and early sales for key calendar events. The approach has helped to achieve some sales momentum but at a cost to the bottom line which is likely to be evident in the forthcoming financial reporting period for retailers listed on the Australian Securities Exchange. Releasing financial results for the first half of the 2024 fiscal year and in most subsequent commentary, retailers have all highlighted constrained consumer spending. Despite few trading updates by listed retailers, expectations for the forthcoming full 2024 financial results period are hardly optimistic. The pandemic hangover continues to muddy results with a number of retailers still comparing 2024 sales to 2020 or even 2019 because of the sharp fluctuations Covid-19 caused to trading patterns. The Australian Bureau of Statistics (ABS) noted the December 2023 quarter’s 0.3 per cent seasonally adjusted retail sales increase was the first increase since the June 2022 quarter. The modest gain in that December 2023 quarter relied on a record November month propelled by the Black Friday and Cyber Monday sales events. The most recent March 2024 quarter sales actually returned to negative territory with a 0.3 per cent fall in seasonally adjusted sales. Combined with inflation and cost-of-living pressures on households, consumers have markedly tightened their spending at a time when the cost of doing business has been climbing and squeezing margins. With the ABS yet to release June retail sales, which may be boosted by early and deep end-of-financial year discounting, there is little indication that most retailers have enjoyed solid sales or earnings gains in the second half of the FY24. Monthly sales increases compared to the same month in 2023 reported by the ABS have been 1.1 per cent for January, 1.6 per cent for February, 0.8 per cent for March, 0.1 per cent for April and 1.7 per cent for May. Across the second half of FY24, food sales have only bettered 2023 sales in two months, March by 0.9 per cent and May 0.7 per cent. Clothing and footwear stores started the half well bettering 2023 sales with a 2.4 percent gain in January and 4.2 per cent in February before tanking in March.  Department stores followed suit with January up 1.7 per cent and February 2.3 per cent before losing steam. Household goods, recreational goods and hardware have had modest second half sales according to ABS reports while online sales have grown but apparently with less impetus than in the past four years. In forthcoming results, Coles and Woolworths are likely to post increases sales and earnings although growth would be expected to be weaker than for FY23. Solid sales and profit performances are also likely to be reported by Step One, Universal Store, Kmart, Baby Bunting and Temple & Webster. Bunnings, Super Retail, Shaver Shop, and Officeworks are all expected to be in positive territory for both revenue and earnings. JB Hi-Fi and The Reject Shop could post higher sales for FY24 compared to last year but lower profits, an outcome that may also be reported by Myer albeit the department store’s sales may also show a decline on FY23 revenues. Listed fashion and footwear retailers are expected to post disappointing sales and earnings results with Harvey Norman, Dusk, KMD Brands, Adairs and Nick Scali also performing below FY23 levels. While listed retailers may not be breaking out the champagne to celebrate results for the latest financial year, many other chains and independent retailers may well be even more perturbed about any further RBA increase in interest rates. Credit reporting bureau, CreditorWatch reported a 46 per cent increase in insolvencies for retail businesses for the year to April 2024. The number of walkaways is also running at historically high levels on top of the record levels of insolvencies across all industries. CreditorWatch chief economist, Anneke Thompson, claims the Australian economy is in the toughest phase of the monetary policy cycle with the high cost of debt compounding the inflation challenge. “Monetary policy decisions usually lag what is happening in the broader economy, as data takes time to filter through to the RBA,” Thompson pointed out. “The RBA also wants to see a few months’ worth of data to be more certain that their decisions taken at board meetings are the correct ones. “While this approach is sound theoretically, in practice it means businesses have to endure high interest rates long after consumer demand has plummeted and discretionary spending has significantly weakened.” CreditorWatch expects that business trading conditions for the remainder of 2024 will be some of the hardest in recent memory and that insolvency rates, already sitting higher than their pre-Covid peaks, will rise further. Without some interest rate relief to lift consumer confidence and ease some of the pressure on retailers, the expected sluggish financial results in the weeks ahead may well persist deep into the current 2025 financial year.