STROLL through one of JB Hi-Fi's busy stores and it might appear the boom times are returning to the retail sector as the impact of the global financial crisis (GFC) starts to fade.
STROLL through one of JB Hi-Fi's busy stores and it might appear the boom times are returning to the retail sector as the impact of the global financial crisis (GFC) starts to fade.
Yet the prospering home entertainment and technology company could be the exception to the rule in a sector that was hit hard by the crisis.
Some 18 months ago the global economic downturn, the prospect of rising unemployment and personal debt prompted consumers to tighten their purse strings.
Many small retailers collapsed, and a number of big chains closed stores and reduced their workforces.
But even though consumer confidence improved toward the end of calendar 2009, analysts say the prospect for the overall retail sector in 2010 is only "reasonable''.
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Australian National Retailers Association chief executive Margy Osmond says the willingness of consumers to spend is not following the improved confidence figures.
"Those two things were tracking pretty much together previously and that's not necessarily what we're seeing," she said.
"People still seem hesitant even though the jobs market hasn't been as bad as many expected it would be.''
The ANRA is projecting fairly soft conditions for the sector in 2010, as many companies retain conservative earnings outlooks amid ongoing concerns about interest rates and unemployment.
"It's going to be a little sluggish - reasonable is a way of describing it,'' Ms Osmond said.
"Christmas will be okay but not spectacular - it will be more sluggish than people would have hoped but possibly better than expected in the circumstances.
"The first quarter of next year is going to be the really telling time.''
Retailers will be watching the results of the post-Christmas sales and for any negative flow on impact of three official interest rate increases by the Reserve Bank in October, November and December, particularly given the prospect of another hike in February.
According to independent forecaster Access Economics, retailers can expect only modest sales growth next year.
Access sees annual real, or inflation adjusted, retail sales growing by 2.1 per cent in financial year 2009/10 before slowing to 1.4 per cent in 2010/11. Growth was 1.6 per cent in 2008/09.
FW Holst retail analyst David Spry said the prospect of another official interest rate increase by the central bank in February and lingering fears of higher unemployment could see consumer confidence ebb.
"Interest rates are heading up a bit - whilst I don't think that's going to be a major issue in the short term, it could become a little bit more pronounced if rates continue to go up through next year,'' he said.
"The major issue really is the unemployment rate.
"Providing that stays relatively stable we'll probably see pretty much a similar type of environment'' to 2009, he said.
"There could be some small improvement but I don't expect we're going into boom conditions - I think it will be a reasonable year next year, reasonably good.''
But JB Hi-Fi chief executive Richard Uechtritz remains bullish and said there's no reason the retailer shouldn't continue to grow as economic conditions improve.
"Sentiment seems to be improving all the time,'' he said in an interview.
"I don't think it could get much worse, certainly for the world economy.
"There's no reason to think consumers won't have more confidence, thus spend more.
"Hopefully, as they've done in the past they'll spend it on home entertainment and technology so we'll hopefully get our share of it.''
JB Hi-Fi, often referred to as a market darling, surprised the market in October with better-than-expected first quarter 2009/10 comparable store sales.
Like-for-like sales surged by 8.4 per cent, and the company retained its guidance for full year sales growth of 20 per cent to about $2.8 billion, from the previous year.
It was a very positive outlook given the cautious views of other retailers.
Mr Uechtritz said the chain will continue to expand, having already opened 15 of 22 stores it had planned for the 2009/10 financial year.
"We've always been a very focused company and we got a lot of growth ahead of us,'' he said.
"We're not going to try and reinvent the wheel, we know we've got a strong model, it's a matter of making sure it continues to be strong and is relevant to the consumers.
"To do that we just need to do the little million and one things well.''
Overall, Mr Spry said food retailers and big chains would continue to do well in 2010.
"Food will go alright, it wasn't affected by the downturn at all and clothing will continue to do quite well,'' he said.
"The smaller ones might find it a bit tougher but the branded type stores and chain stores on balance will go okay.
"Certainly JB will do well, it always does - it's always on the shopping list of customers to go into JB Hi-Fi and buy something.''
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