So David Jones fell into line with Myer in voicing caution about the strength of consumer demand and things are feeling a little flat in the shops. But did you cop a gander at DJ's 40 per cent margin? It's not just the big four banks who have had a remarkably good crisis.
For retailers, the look this season is fat, almost a little obscenely fat given the economic backdrop.
The major retailers are not above talking their own book occasionally in the delicate dance of massaging investor expectations. And I don't doubt that cash registers had a rather quiet February – they usually do – or that the flat spot has continued into the first couple of weeks of March creating a little concern.
But the fatter margins story running below the “uncertain consumers” headline whispers that the retailers are well placed to handle it, providing ammunition for promotions and sales to stimulate demand. The bottom line isn't looking bad at all as all the talk of “fierce competition” and “discounting” simply doesn't match the facts.
Retailers would no doubt like us to believe that the improved margins are the result of superior management, strong cost control and leadership brilliance that deserves ever-bigger pay packets for the CEO. There has been some of that, but a lot simply comes from the windfall they received from our stronger currency making all the imported stuff they sell cheaper.
Thanks to Kev's cash splash, lower interest rates, cheaper petrol and increasing employment, large parts of the Australian retail sector actually haven't had to compete terribly hard for sales over the past year and were thus able to keep the benefits of a resurgent Aussie dollar and troubled foreign manufacturers desperate for orders as the rest of the developed world recessed.
The extent of their extraordinarily good fortune had already been displayed in Woolworths results that showed the basic retail giant increased margins during what was supposed to be Australia's economic slowdown.
With DJs now chiming in at the top of the range with record margin and profit, you have to wonder about the obvious contradiction between what the retailers say and what they've actually done.
If the consumer does prove a little more nervous in light of the Reserve Bank's interest rate rises, the retailers may have to use some of that margin to stimulate desire, but it's hard to see it causing much pain.
What's more, the Reserve Bank is betting on the retailers doing just that, surrendering some of the generous margins they've built up to attract sales. A key reason for the RBA being relaxed about inflation over the next year or two is the belief that we're yet to see the benefits of a stronger currency passed on to consumers through lower prices. It's a lagged process that the RBA expects will continue over the next year and more.
But there's two-way traffic between the RBA and our big retailers. The bank's “market intelligence” picks up what's happening in the shops before the Australian Bureau of Statistics or the ASX are told. The message from the retailers is that the March interest rate increase was felt, that consumers are paying attention to the steady RBA jaw-boning about inevitable further interest rate rises and therefore we don't really need to hike rates with the same urgency that marked the December quarter.
And with unemployment still maybe half a per cent above where wages pressure start to build (the nefarious NAIRU, non-accelerating-inflation rate of unemployment), the currency bonus yet to be passed on, the jaw bone working well and the US and Europe still precarious, the RBA might well leave rates alone for a month or two.
Rates will rise, as we continue to be promised, but Glenn “Biggles” Stevens and the RBA Squadron should be in no hurry to mount the next sortie.
Michael Pascoe is a BusinessDay contributing editor.
