Stimulus package assists profits

February 21, 2009

Australian Bureau of Statistics figures released on February 18 showed that retail sales increased by 0.8% (seasonally adjusted) in the December quarter.

The rise was less than what was expected by economists, according to ABC Online, increasing fears that the economy may have already slumped into "negative growth". The figures account for the impact of the $10.6 billion "Harvey Norman" stimulus package that the government gave to pensioners, carers and parents in early December.

While overall trading figures were flatter than expected, some companies did well. Electronics retailer JB Hi Fi posted a half yearly profit of $59 million for the six months ending December, according to ABC Lateline Business on February 11 — a 40% increase on 2007. While claiming that sales would have been strong anyway, JB Hi Fi CEO Richard Uechtritz admitted that the government's stimulus package was "helpful".

Uechtritz also told the February 11 Sydney Morning Herald that his success had come at the expense of others, notably Harvey Norman. The result, he told Lateline Business would be that "the stronger players will come out stronger and bigger. There'll be less store fronts, there'll be, I guess, some acquisition activity, there'll be closures, as we've already evidenced."

The impact, according to Lateline Business reporter Neil Woolrich, could be more unemployment in the sector.

In further evidence that the $10.6 billion stimulus package has mainly helped the largest retailers to get bigger at the expense of their competitors, the hardware giant Bunnings, owned by Wesfarmers (which also owns Coles, K-Mart and Target) increased its earnings by 14% in the six months to December, according to the February 17 SMH.

The hardware mega-chain is also likely to profit from the $3.6 billion set aside by the government to install insulation in homes in the $42 billion stimulus package passed by the Senate on February 13.

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