Australia’s devastating bushfire season will likely have a tangible effect on the country’s big and small retailers, with analysts forecasting mixed results from fires and continued smoke haze.
Both positive and negative flow-on effects are in store for major retailers such as Wesfarmers, Super Retail Group and Metcash, who all could witness a material change in their finances.
Citi analyst Bryan Raymond told The Age and The Sydney Morning Herald the initial impact from the fires, such as ongoing smoke haze and store closures, would “definitely” cause some level of disruption at large listed retailers.
Super Retail-owned outdoor retailers Macpac and BCF would potentially be hit hard due to a predicted drop in outdoor activity because of the bushfire smoke in major cities. Similarly, Wesfarmers-owned Bunnings and Metcash-owned Mitre 10 could also be affected due to lower trade and DIY activity.
“It’s hard to put a number or materiality on [the impact] at this point, it will vary a lot by retailer,” he said. “I think we’ll need to wait and see.”
However, the eventual rebuilding efforts and $2 billion recovery fund would provide a future benefit for those same retailers, Mr Raymond said, but noted the timing of that boost was uncertain.
We’re doing whatever it takes, we’re not trying to quantify the costs.Woolworths chief executive Brad Banducci
Sales of air purifiers and airconditioners could also provide a “small positive” boost to electronics sellers such as JB Hi-Fi and Harvey Norman.
Major supermarkets Woolworths and Coles would likely avoid serious ramifications, he said, noting their size and the strength of the grocery category as a measure of resilience.
Woolworths chief executive Brad Banducci told The Age and The Sydney Morning Herald the company had been forced to close some stores in bushfire-affected regions.
“We’ve had a number of stores closed and opened on instruction from the fire service and the police,” he said.
Woolworths has been tackling the bushfire crisis on numerous fronts, including $3 million in donations and free reign for store managers to use company credit cards to buy goods for the community.
The company has also flown in additional store members to understaffed locations and is receiving police escorts for key supply deliveries down fire-affected roads.
“We’re doing whatever it takes, we’re not trying to quantify the costs,” he said.
“We still have a lot of summer to run, and I think there will still be a very challenging 6 to 12 weeks,”
Mr Banducci said it was not possible for the company to ever do enough. “We need to do more,” he said.
Despite concerns over the effect of bushfires on dairy production, Woolworths confirmed it had seen no impact to its dairy supply as yet. Mr Banducci also said it was too early to forecast any potential product shortages.
Rival supermarket Coles also noted it had seen trading disrupted at a handful of its New South Wales stores, but said the overall impact was “minimal”.
Fifteen Wesfarmers-owned stores were forced to shut due to the bushfires, with the company’s Batemans Bay Bunnings store partially damaged by a nearby blaze.
However, the country’s independent grocers have been feeling the pinch. Fred Harrison, chief executive of Ritchies Supa IGA, Australia’s largest independent grocery chain, has seen sales plummet at bushfire-affected stores.
“At our store in Bright our sales on Saturday were down 90 per cent on this time last year,” he said. “This is supposed to be our peak period, our Grand Final month.”
“We’ve also had to throw stock out in some stores due to power outages.”
As a billion-dollar retailer, Mr Harrison says Ritchies can front the loss, but he said some small business owners in towns he’d visited were in dire straits.
“Many were saying if they fail in January, that could well mean they have to close up later in the year,” he says. “So these knock-on impacts, I think they’ll have a really big effect on the economy.”
Listed IGA supplier Metcash said it hadn’t lost any stores throughout its network yet, though power and road access continued to be difficult.
Jos de Bruin, chief executive of peak industry body Master Grocers Association said he had serious concerns for independent grocers along the southeast coast, especially those relying on summer tourism trade.
“For a lot of these businesses, they don’t make profit in winter, they only make a profit in summer,” he said.
The risk here is that they won’t be able to make the sales for them to survive another year.”
Source: Thanks smh.com