ABS hardware retail stats: April 2024
April 2024 is average (but good average)
While the ABS reports that hardware retail turnover throughout Australia was basically flat for April 2024 as compared to April 2023, results for states were more mixed. NSW continues to show negative growth, while VIC continues to grow.
Tue Jul 09 2024
The Australian Bureau of Statistics (ABS) has released its retail turnover figures for the period up to April 2024. For hardware retail they have largely continued the trends of the previous three months, which is to say that while there is limited positive growth, there has also been limited negative growth as well.
In looking at this data we consider them in terms of "periods" running from May to April. So "p2021" refers to the period from May 2020 to April 2021.
Contrasting p2023 with the current p2024, Australia-wide there has been only 0.03% of growth. That's basically flat, with the added caveat that inflation is running at an annualised rate of over 3.5%. To that we can add a "reverse" caveat that some building supplies are going through disinflation, which means the inflation rate for hardware retail is difficult to determine.
The largest percentage gain in revenue for hardware, contrasting p2024 with p2023, was Western Australia (WA), which increased by 3.3%, with revenue up $88.9 million for a total of $2824.2 million. In revenue dollars, Victoria (VIC) was the strongest state, increasing by $136.0 million, or 2.1%, with total revenue for p2024 of $6633.1 million.
Negative growth in percentage terms peaked with Northern Territory (NT), down by 8.0% or $22.5 million to $259.3 million. In dollar terms, New South Wales (NSW) had the steepest fall, down by $208.4 million to $7547.6 million, a drop of 2.7%.
Both Queensland (QLD) and Tasmania (TAS) were close to flat. QLD had a loss of 0.6%, or $30.0 million to $5323.9 million, while TAS had a gain of 0.6%, up by $3.3 million to $607.9 million. South Australia (SA) rose by 1.8% or $30.6 million $1769.7 million.
The Australian Capital Territory (ACT) managed a gain of 1.9% or $9.8 million to reach $538.7 million.
As mentioned above, Australia saw overall revenues lift by 0.03% or $7.7 million, to reach over $25.504 billion. This represents a gain of 24.9% from p2020 to p2024.
New South Wales
The April 2024 result for NSW could be seen as a slight improvement over the March 2024 result. It manages to be above the result for both p2023 and p2021, though it is below p2022.
The weakness in p2024 originates in the four key months from September to December 2023. For the rest of the 12-month period results track closely to p2023.
Victoria
As with NSW, the VIC result for April 2024 falls within the range of the past three years, slightly above the turnover recorded for the same month in 2021 and 2023.
In some ways, VIC has had the most unique pattern of pandemic and post-pandemic retail turnover. The peak period for VIC was p2021, whereas for most states it has been p2022 - the second pandemic 12-month period. For VIC both p2022 and p2023 saw a contraction in turnover. In fact, it is the state that has benefitted - in percentage hardware retail turnover growth terms - the least from the pandemic.
Queensland
The April 2024 turnover number for QLD has proved surprisingly positive, just nudging above the April 2022 result, to produce an all-time high for this month. Similar highs were reached in both January and February 2024.
South Australia
For SA p2024 has been very positive. Out of the 12 months, only four have trailed behind results for p2023, with the other nine months setting all-time monthly highs for the state. This includes the result for April 2024, which just bested the April 2023 result.
Western Australia
As with SA, WA has seen significant growth in p2024. In fact, every single monthly turnover result has set a new monthly high for the state. Contrasting with p2023, the April 2024 result - which was flat to the March 2023 result - exceeded its p2023 equivalent by the largest margin for the period.
Tasmania
Ever since October 2021, hardware retail turnover in TAS has followed a very tight pattern. Results for p2024 closely matched those for p2023 from May 2022 through to November 2022, then underperformed for December 2022. Since February 2024, the results have improved over p2023, with its April 2024 result setting a new monthly high.
Northern Territory
For NT p2024 has performed significantly below p2023, though somewhat in line with p2022. The April 2024 result has shown a significant improvement, after low turnovers from January 2024 to March 2024.
Australian Capital Territory
While p2024 started off well for the ACT, with new monthly highs set from May 2023 through to October 2023, November 2023 through to January 2024 saw it underperform both p2023 and p2022. However, from February 2024 through to April 2024 the results have been very close to those for the two previous periods.
Analysis
The general news reflected by the ABS hardware turnover results for April 2024 is that there has not been much of a significant shift since the previous year. Any real economic news for the sector will emerge with the results starting from August 2024. Those stats won't be available until October 2024.
The April results, however, provide an ideal position to look at the pandemic-based performance of the states and territories. While the initial pandemic surge in sales did take place in March 2020, April 2020 was the first full month in which the pandemic had its effect.
Also, it's arguable that FY2024/25 will be the first full year that isn't pandemic or post-pandemic. Instead, this financial year represents something of a switch back to "normal" - whatever that is going to mean. Which is to say that the traces of the pandemic in the economy - including higher commodity prices - are no longer transient and based on misalignment of supply chains. Instead, they are at least semi-permanent.
We can also reasonably expect the current elevated spending on hardware, the legacy of the pandemic "jump" of around 25% in topline turnover, to continue for at least over the next couple of years. Turnover might drop back to FY2020/21 levels, but even that seems unlikely with the ongoing demand for housing, and the centrality of dwellings in Australia's culture.
This focuses attention away from the fortunate increase in overall revenues, and towards the prospects for future growth. From that perspective, we begin to see the immediate future does not seem so bright as the immediate past.
Take, for example, the chart of period-on-period percentage increases for turnover:
Comparing the pre-pandemic growth for p2020 with the most recent period (p2024) there is a definite downwards trend (with the exception of TAS).
This can be further clarified by the chart showing these percentage change in a stacked bar format:
One surprise is the extent to which VIC has not benefitted as much from pandemic growth as the rest of Australia in percentage terms (excepting NT). But it is also evident that we are seeing a dynamic slowing in growth, and this seems likely to continue through FY2024/25.
From the immediate perspective of independent hardware retailers, this is concerning, but probably not so consequential. The increase in retail sales has given them a much needed lift and enabled smaller stores to reinvest so as to improve their businesses and reduce ongoing operating costs.
It is a different story, however, for the two major retail operations, Bunnings and Metcash's Independent Hardware Group (IHG). Bunnings in particular is under pressure not only because growth has slowed, but because other retail segments is parent Wesfarmers - notably Kmart - have managed to find growth even in a flattening market.
As HNN discusses in more detail in the upcoming issue of HI News, the core problem with Bunnings is that it has reinvested its "windfall" earnings boost from the pandemic, but those investments - Tool Kit Depot and Beaumont Tiles - are longer-term investments, and unlikely to generate contributory returns before FY2026/27. (That's actually a general problem that Wesfarmers is experiencing.) While additions such as a pet food and accessories line are helpful, rejuvenated growth in 2025 will likely require structural change.
For IHG the picture is somewhat different. With the exit of Annette Welsh as CEO of IHG, and the advent of a new (and highly competent) CEO for Metcash overall, much of the "moral imperative" to retain the initial framing of the acquisition of Home Timber & Hardware Group (HTH, aka Danks) in late 2016 has been lost. That framing was that the acquisition would be more about preservation than transformation.
In the new environment, with decreasing growth per-store, it's likely that IHG will increase its acquisition and joint-venture activities in its lead brand, Mitre 10. While this is, to some extent, "non-organic" growth through simple acquisition, it is also a structural shift from wholesale-only to wholesale plus retail margins.