ilers, the period showed more promise than for any half of the past few years and it would seem that January continued to provide cause for optimism according to official reports lodged with the Australian Stock Exchange and the buoyant mood of retailers Inside Retail Weekly has interviewed. No one has been predicting a return to conspicuous consumption and most continue to caution about competitive market conditions. In interviews, most also note there have been significant casualties among the improved sales results, including Dick Smith, Laura Ashley, Masters Home Improvement and high street retailers who are driving up vacancy levels in strip centres or at least abandoning them to coffee shops, massage services and, it seems, tattooists. However, the fingernail biting has more to do with the volatile stock market that tested investor resolve in January and early February, and the political machinations over tax reform. Federal elections have long been blamed for a numbing influence on retail sales that certainly worries retailers where the lead up to the polls overlaps pre-Christmas trading. But the immediate worry for the current half of FY2016 is the impact on consumer confidence around the uncertainty about changes in superannuation, negative gearing, the ‘will they or most likely won’t they’ GST, as well as health contributions and subsidies. The federal government said it will not reveal its tax reform package until the May budget, effectively creating at least two critical months of uncertainty in March and April, let alone the possible fallout from those budget decisions. The debate is crucial for consumer confidence and particularly hits independent retirees who have been bruised and battered by the rollercoaster share market and are facing uncertainty about their superannuation and negative gearing positions. While it is unlikely that any government would introduce retrospective legislation, the value of property holdings could be affected along with future deductions or even capital gains concessions. Any changes are almost certain to impact on people still in the workforce and is likely to dent confidence, which underpins retail spending. An appetite for bargains While the weeks and months ahead are likely to be challenging, the recent announcements of financial results show that consumers regained their appetite for retail spending in the December half, especially if there were bargains available. Woolworths, Coles, Bunnings, Super Retail Group and Kmart will all report their results this week but are all expected to show positive growth for the six months. Myer, Premier Retail and Harvey Norman’s first-half performances are also yet to be reported but are also likely to show gains, albeit Myer will probably not match the revenue increases that rival department store chain, David Jones, has posted for the half. David Jones posted sales growth just short of 10 per cent for the half year ended December 27, its strongest result in many years. David Jones’ like for like sales were reportedly 9.7 per cent, but lower margins and slower earnings growth suggest some of the growth may be attributed to clearance programs as the South African owned department store restructures its merchandise offer. As Inside Retail Weekly reported last week, the top specialty chain in Australia, JB Hi-Fi posted a 7.7 per cent lift in half year sales to $2.12 billion, significantly with a comparable sales lift of a very healthy 5.2 per cent. Net earnings after tax were up 7.5 per cent to $95.2 million. The Reject Shop put paid to a lacklustre three years, in part, caused by growth pains, and rebounded in the December half with a 5.6 per cent lift in sales to $424.6 million and a robust 43 per cent increase in net earnings to $18.3 million. While most of the big guns did see an improvement in sales for the first half, there were also encouraging results from the smaller chains listed on the stock exchange. In its first results since its public listing, Baby Bunting, Australia’s largest retailer of baby and infant products, reported an increase of 30.3 per cent in sales to $108.2 million with comparable store sales running above 10 per cent. Baby Bunting posted a pro forma net profit increase of 54.7 per cent $4.3 million for the half year to December 27 and upgraded guidance for the full year for net earnings of between $16.5 million to $18.5 million. The chain expects growth to moderate in the months ahead but is still predicting sales of more than $225 million for FTY2016, compared with $180 for the 2015 full financial year. Furniture retailing Another smaller retail chain, Beacon Lighting, continued its strong performances since it went public in April 2014 with a 8.5 per cent increase in sales to $98.5 million for the latest half. Like for like growth for Beacon Lighting was 5.1 per cent in the half and underpinned a 22.1 per cent increase in net profits to $11.09 million. Beacon Lighting seems to have benefited from a recent uplift in furniture, electrical and homewares sales, which has been highlighted by Gerry Harvey, chairman of Harvey Norman. Harvey Norman, Australia’s largest furniture retailer, is expected to report like for like sales growth of more than six per cent for the first-half and an increase in net profits of more than 16 per cent. Furniture retailers, Nick Scali and Fantastic Furniture, also seem to have been boosted by the consumer trend. Nick Scali posted an increase in revenues of 32 per cent to $102.5 million in the latest period with same store sales up 11.6 per cent. Nick Scali’s first-half net profit rose 40.7 per cent to $14.1 million, bettering market expectations by $2 million with forecasts for full=year earnings above $22 million. Fantastic Furniture is currently trying to soothe shareholders after the sudden and unexpected departure of CEO, Stephen Heath, and CFO, George Saoud, in January. Investors have been concerned about the lack of information surrounding the departure of the two executives, which would not seem to have had anything to do with the financial performance of the listed furniture retailer. Fantastic Furniture has yet to officially report its first half sales but, in an apparent bid to offset the concerns about the management exits, the company provided a trading update that forecast sales of $270 million, a 15.7 per cent increase on 2015. The retailer told the Stock Exchange it expected net earnings to be between $10 million and $12 million, up from just $7 million in the comparable half last year. Back from the brink Another chain that has reported a rebound after some deep soul-searching is the adventurewear retailer, Kathmandu. While yet to officially lodge its half-year results, Kathmandu provided a trading update early in February that indicated a 9.1 per cent boost to sales and a return to profitability after writedowns in FY2015 resulted in a loss of $1.8 million. Kathmandu expects to confirm sales of $195.7 million for the first half of FY2016, up from $179.4 million in the comparable period last year, and net earnings of between $8.5 million and $9.5 million. While the first half was encouraging, Kathmandu is particularly keen to see improved retail conditions to continue as the chain generates around 55 per cent of its annual sales and between 65 per cent and 70 per cent of its profits in the second half on the back of winter clothing, accessories and equipment. While Pacific Brands generates most of its sales from wholesaling, the company has been developing its retail and online sales channels. Pacific Brands has seen its wholesale sales fall from 66 per cent in 2015 to 61 per cent this year, while revenues from a network of 170 stores has increased from 28 per cent to 32 per cent in the same period and online retail revenues by one per cent to seven per cent. Pacific Brands’ retail sales increased by 13.6 per cent for the latest half-year with like for like sales up 10 per cent in Australia. The company, which had been at the mercy of the major retailers pursuing direct sourcing strategies in Asia and Southeast Asia, has backed its brands and its own retail network to lift revenues in the first half by 8.6 per cent to $425.3 million. Pacific Brands booked significant writedowns in restructuring in the 2015 financial year resulting in a $108.7 million. The results were much more palatable for investors for the latest period with a reported $24.3 million net profit result. The hits are expected to keep coming as the big guns report this week and through to mid-March, although Target and Big W are likely to continue to be works in progress notwithstanding some improvement in sales. if not earnings. However, those fingernails could be in for some serious pruning if political and economic headwinds hamper the second half. Want more Inside Retail? Subscribe to Inside Retail Weekly now and get our premium print publication delivered to your door every week.