Bushfires and the long-term effect on retailers

15/01/2020

Smoke haze from bushfires in Blue Mountains, seen from Sydney Harbour Bridge.
Sardaka [CC BY-SA (https://creativecommons.org/licenses/by-sa/4.0)]

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, according to a recent Sydney Morning Herald report, who could all witness a material change in their finances. Bunnings, alongside hardware independents, have already seen a dent in sales due to low trade activity in smoke -affected areas.

Citi Analyst, Bryan Raymond recently reported that 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, Bunnings, Mitre 10 and other hardware independents could also be affected due to lower trade and DIY activity.

“It is hard to put a number or materiality on [the impact] at this point, it will vary a lot by retailer. I think we will need to wait and see, he said.

The good news for the industry though is the eventual rebuilding efforts and $2 billion recovery fund would provide a future benefit for those same retailers, although the timing of this remains uncertain, according to Mr Raymond.

Woolworths has already 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, according to the Sydney Morning Herald report.

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. This is supposed to be our peak period, our Grand Final month,” he said.

As a billion-dollar retailer, Mr Harrison says Ritchie’s can front the loss, but he said some small business owners in towns he had 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. So, these knock-on impacts, I think they’ll have a really big effect on the economy,” he said.

Jos de Bruin, Master Grocers Association Chief Executive 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 do not make profit in winter, they only make a profit in summer. The risk here is that they won’t be able to make the sales for them to survive another year,” he said.