Australian retailers have been chasing volume and sales, at the expense of margins

17 December 2017

Australian speciality retailers were the stand out performers this year in relation to revenue growth, enjoying a significant rise of 11.5% compared to FY16, albeit at the cost of gross margin. BDO’s 2017 Spend Trend report has highlighted a prevalent theme amongst Australian retailers, of discounting in order to maintain market share at the cost of some margin. This is in contrast to their international counterparts who have been less keen to discount in order to maintain margins. 

Now in its fifth year, the report provides an annual health check for the Australian retail sector by analysing key 2016-17 financial ratios and indicators across 22 ASX listed retailers - including both Wesfarmers and Woolworths, as well as 13 US and UK retailers including Target and Macy’s.

BDO partner and retail specialist John Bresolin said this year’s report saw some interesting trends.

“Overall Australian retailers were able to achieve good revenue growth, but are still lagging behind the overall net profit margins and online sales of their international peers. They need to focus business strategies towards controlling costs, whilst maintaining market share.”

In the world of online, Australian retailers have shown some encouraging increases, with many recording significant double digit growth when online sales are expressed as a percentage of total revenue. However, they still have a long way to go if they are to match their international counterparts such as Nordstrom, Next and Foot Locker, whose online sales are easily in excess of 10% of their total revenue. Most Australian retailers are only generating somewhere between 3 to 5% of their revenue online.

“Much like last year, the lessons from 2017 are for retailers to remain agile, alert, embrace the change that is occurring and keep their customers top of mind.” Mr Bresolin concluded.

The full Spend Trend 2017 report is available for download.