Retailers cut stock levels ahead of weaker Christmas

afr.com:

Retailers have cut back on stock ordering to prepare for subdued pre-Christmas spending by households buffeted by cost-of-living pressures, with experts predicting an acceleration of promotions and discounts to entice customers.

Retail chains are being careful to avoid being stuck with too much inventory in warehouses and stores. Gerry Harvey, the executive chairman of televisions and furniture retailer Harvey Norman, said the cost-of-living pressures were at their most intense in metropolitan stores and mortgage belt suburbs. His chain had dialled back ordering to about 90 per cent of the usual order volumes for this time of year ahead of Black Friday sales in November and the Christmas spending season. “It is 90 per cent of normal,” he said.

“It is going to be harder than it has in the past,” he said.

Mr Harvey said shoppers were more subdued, but retailers were also grappling with higher costs of doing business. “The big ones are wages and power bills,” he said.

Retailers are facing a tougher pre-Christmas season and have trimmed back order levels in readiness.  

Figures from the Australian Bureau of Statistics released on Wednesday showed rising mortgage repayments and an increasing income tax take crunched household budgets and consumer spending. In real terms, gross domestic product expanded 0.4 per cent in the June quarter, slicing annual growth to 2.1 per cent from 2.4 per cent, the ABS said.

Stockbroking house UBS says retailers with a core customer base of middle Australia will be under the most pressure, with Harvey Norman to be avoided by investors as consumers back off from spending on big-ticket items.

UBS analyst Shaun Cousins also says investors should be cautious about retailers like Premier Investments,