Why Christmas Sales Came Early This Year

It was the Saturday before Christmas and the shops were empty.

But, let me backtrack.

Christmas is a time of sharing, of spending time with loved ones, of eating…and shopping.

If you are anything like me, you find the idea of Christmas shopping as appealing as a visit to the dentist.

There is usually a lot of traffic. You then have to battle it out to find a parking spot. Once inside, you struggle to find something for your loved ones in a hazy sea of green and red, Christmas carols and crowds.

So, you put it off to the last minute…and it’s always a mad rush. That’s probably why my Christmas shopping experiences usually look like a scene from the movie Jingle All the Way.

But it wasn’t like that this year.

There was no traffic driving into Chadstone. There were enough empty parking spots to choose from. And, while there were people at the shopping mall, once you walked inside the stores it was quiet. In fact, we noticed very few people were carrying any shopping bags at all.

It wasn’t stressful.

Most retail workers were already gearing for boxing day sales. And there were a lot of sales going on. That is, sales had already started BEFORE Christmas.

Our first thought was that it was the weekend. It could be that (unlike us) Melbournians had been well organized this year and had done their shopping earlier in the week.

But, as we learned from one of the workers at a large retailer, it had been the same quiet scene all week.

It wasn’t supposed to be like that.

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Retailers were expecting a big lead up to Christmas

In fact, as The Australian Financial Review (AFR) reported, retailers were expecting a ‘big bang’ on the last days leading to Christmas.

Retailers who have held off discounting to protect margins are counting on a “big bang” finish to the Christmas shopping season to help meet sales and earnings targets.

Shares in most discretionary retailers have fallen sharply in the December quarter in expectation that Christmas 2018 will fall short of expectations and sales growth will not be strong enough to deliver margin growth, leading to a round of earnings downgrades in February.

Due to the timing of Christmas this year – it’s the first time in six years Christmas falls on a Tuesday – many consumers will leave their non-food shopping until Saturday and Sunday and their fresh food shopping until Monday. The ARA expects consumers to splurge almost $15 billion over the next five days…

“I really believe it’s going to happen with a big bang in the last few days,” Mr [Russell] Zimmerman [Australian Retail Association’s executive director] said.

Mr [Craig] Woolford [Citigroup’s head of research] agreed, saying: “Saturday, Sunday and Monday are going to be enormous trading days given the way people have planned their time off and Christmas shopping – this weekend will be bigger than last weekend.”

But it was the same eerily calm scene on Sunday at another large Melbourne shopping district.

Everyone must be at Chadstone,’ we heard from a concerned shopping assistant.

If our experience from the day before was anything to go by then we knew that wasn’t the case. 

Morrison urged Aussie’s to ‘get out and shop’

We also heard a big push from the government in the final days leading to Christmas to get spending. As The Sydney Morning Herald reported:

The Morrison government has urged people to get out and shop in the final day before Christmas, as retailers sweat on a positive end to a torrid year and the Coalition banks on a big spending summer to drive its April budget.

Sluggish household consumption figures have been the dumbbell weighing down Australia’s economic growth over the past year, as consumers shut their wallets thanks to the triple threat of low wage growth, falling house prices and rising energy costs.

The lack of spending has an impact not just on individual shops, but also the government’s revenue – revising down GST collections by $5.8 billion over four years in December’s mid-year economic update.

Mr Morrison told voters to “get shopping for Christmas!” from Kirribilli House on Sunday, while claiming the threat of Labor’s negative gearing policy was having an impact on consumer sentiment…

Despite Mr Morrison’s optimism, bricks and mortar retailers are bracing for what could be their worst Christmas-Boxing Day period since the global financial crisis, as consumers not only tighten their belts, but increasingly shop online in local and international stores.

Yes, maybe shoppers have spent more online.

But we don’t think that explains it all.

Retailers have had a tough year. October sales were slow, with New South Wales seeing a fall in spending. Households are dealing with high debt, higher expenses and slow wage growth.

They are also saving less.

An explanation for this is that households are saving less because they are more confident about the future.

We don’t think that is the case.

We think falling house prices have a lot to do with it. House prices have been falling in both Melbourne and Sydney.

As house prices slide and households feel less wealthy we could see even weaker retail sales this year.


Selva Freigedo,
Editor, Markets & Money

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Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

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