The strong retail performance throughout the pandemic was aided by government stimulus schemes and rent relief while garnering a larger share of consumer disposable income.
"The retail sector is in a great position to face into tougher conditions with an increased focus of efficiency and delivering a customer-centric experience.”
Underpinned by improving consumer confidence, the retail market is expected to record strong revenue growth in the 2021 financial year of 14 per cent. However, this will likely return to pre-COVID levels of around 2 per cent in 2022 as disposable income is increasingly spent on alternatives such as travel and entertainment.
The good news is the retail sector is in a great position to face into tougher conditions with an increased focus on efficiency and delivering a customer-centric experience. As COVID-related risks abate, companies will have significant balance sheet flexibility to support growth and, where applicable, distribute excess capital to investors.
With some bricks and mortar retailers forced to close in 2020, online sales exploded and stock levels were quickly depleted – which means cash balances now sit at record levels.
Businesses with exposure to home and office improvements, groceries, electronics, fitness, clothing and footwear have experienced unprecedented and, in a lot of cases, unexpected growth due to the change in consumer preferences.
While it has been mainly good news for the sector, this kind of growth is not sustainable and those businesses with a clear strategy will be the big winners going forward.
Underpinning the current strong performance of the sector are ongoing restrictions in international travel, the re-opening of the domestic economy, positive consumer sentiment, income tax cuts and the resurgence of the housing market across Australia.