ASX small cap retailers have gained nearly 7% in the last three months on the back of the retail sector showing a recovery from a horror Christmas shopping period.

Retail turnover actually shrank in December by 0.4%. But since then retail turnover has began to grow, in January by 0.1% and in February by 0.8%. This was the biggest monthly increase since November 2017.

February’s increase, revealed by the Australian Bureau of Statistics on Wednesday, was led by department stores, which grew 3.5%. Footwear and personal accessory retailers grew 1.6% and household good retailers by 1.1%.

Chinese-tourist focused Mediland Pharm (ASX: MPH), was one of the best performers, listing at 20 cents in late February and now sitting at 27 cents. Much of its rise came this week when it announced its entry into New Zealand and the acquisition of a competitor.

Also among the best performing retail stocks were Myer (ASX: MYR), City Chic Collective (ASX: CCX) and Vita Group (ASX: VTH) – who you may remember as Fone Zone. While Vita operate 130 telecommunications stores, you’ll only find one that still has branding – in Tamworth.

City Chic Collective was only 11 cents in December 2017 but has risen nearly 1300%. This has occurred from positive financial results after selling off unprofitable brands, paying debt and rebranding.

While Myer has struggled in recent years with the growth of online retail, there are signs it is finally responding, including its recent decision to stop stocking ‘unprofitable’ Apple products. Its financial results reported a $41 million net profit after tax.

Ticker Name Price (Thursday 2pm) Market Cap 3 Month Return (%)
ADH ADAIRS LTD 1.66 $272.0M -3
AU8 AUMAKE INTERNATIONAL LTD 0.21 $57.0M -14
ASG AUTOSPORTS GROUP LTD 1.26 $253.3M 26
BBN BABY BUNTING GROUP LTD 2.22 $279.4M 5
BLX BEACON LIGHTING GROUP LTD 1.08 $235.3M 0
CCV CASH CONVERTERS INTL LTD 0.165 $101.7M -31
CCX CITY CHIC COLLECTIVE LTD 1.55 $307.6M 66
JYC JOYCE CORP LTD 1.43 $40.0M -1
MPH MEDILAND PHARM LTD 0.285 $79.8M 42
MHJ MICHAEL HILL INTERNATIONAL L 0.67 $263.5M 13
MTO MOTORCYCLE HOLDINGS LTD 1.61 $99.3M -13
MYR MYER HOLDINGS LTD 0.63 $509.2M 51
NBL NONI B LTD 2.95 $278.1M 11
TRS REJECT SHOP LTD/THE 2.52 $72.8M -5
SSG SHAVER SHOP GROUP LTD 0.39 $48.3M 9
SRY STORY-I LTD 0.02 $5.9M -23
SBB SUNBRIDGE GROUP LTD 0.012 $5.7M -29
PGR THE PAS GROUP LTD 0.24 $32.8M 0
TGA THORN GROUP LTD 0.41 $68.5M -24
VTG VITA GROUP LTD 1.62 $269.7M 63

 

Will this run continue?

While two months of growth in a row will be welcomed for retailers, after a poor showing in December, economists are uncertain that the run will continue.

Some economists have warned this month’s figures might be inflated by short-term circumstances. NAB’s Kaixin Owyong said there “may be some price impacts at play…likely boosted by higher fruit and vegetable prices due to flooding in Queensland”.

However she noted it was a positive short-term sign that the Reserve Bank would welcome because, “they suggest the trend for the consumer is not quite as weak as the previous few months’ data suggested”.

While JP Morgan has not yet responded to Stockhead’s requests for comment, it told clients last months that employment growth will the key towards retail’s performance. While declaring Australian retail faced a “mixed” outlook, it admitted, “a significant fall in household incomes or assets would be a challenge”.

No doubt the tax cuts in this week’s budget are intended to drive further retail growth. The Coalition have promised an extra $550 per year to 4.5 million Australians who earn between $50,000 and $90,000 – to be effective next financial year if they win the election.

It is anticipated that Opposition Leader Bill Shorten will also promise tax cuts in his Budget Reply speech tonight. But tax cuts will only help if people spend instead of save and their incomes remain stable.

Retail sales figures for March will be released on Tuesday, May 7 at 11.30am.