Some of Australia’s best-known fashion and apparel retailers are on struggle street as consumers retreat from shopping centres, sparking a frenzy of heavy discounting.

Kathmandu Brands, which also runs Rip Curl and Oboz, was the latest to report plunging sales on Tuesday, revealing an 11.2 per cent fall in total revenue between August 2023 and July 2024.

Profit margins also thinned as the business discounted more heavily over the fourth quarter, sparking a stabilisation of sales as families stocked up on winter clothing like puffer jackets.

But it was nevertheless an awful year for the specialty retail group and the outlook is cloudy too, with University of Sydney retail expert Lisa Asher explaining that consumers are doing it tough.

“It’s quite shocking,” Asher said.

“People under 65 have negative discretionary spending growth in Australia [this year] – only those over 65 can actually afford to buy stuff outside basic essentials.”

Retailers on struggle street

Kathmandu isn’t alone. A number of the nation’s largest retailers are reporting gloomy sales results.

Department store giant Myer said this month that sales fell 2.9 per cent last financial year after it closed stores in the heart of Brisbane and in the Melbourne suburb of Frankston.

Women’s specialty fashion giant Mosaic Brands, owner of Noni B, Rivers, Katies and Millers, is even facing questions about its ongoing viability in recent weeks as its share price plummets.

The culprit is the massive financial pressures consumers are under as the cost of living soars and the RBA admits that interest rates relief is at least six months away.

It means that retailers are having to discount heavily to move their stock, Asher explained, which ultimately eats into their profitability as competing retailers are encouraged to drop prices too.

“These retailers are going through some very tough and turbulent times,” Asher explained.

Kathmandu’s gross margin fell 30 percentage points to 58.8 per cent last financial year, with the company blaming “increased promotional intensity” over the June quarter.

“It’s actually very important for them to do that through these times,” Asher explained.

“When you rebound you’re still in the minds of consumers, and you’re still relevant.”

Outlook uncertain

Retailers are hoping that a combination of tax cuts, energy bill relief and other cost-of-living relief outlined by governments that’s starting to help household budgets will lift the outlook.

But while the Reserve Bank has inched up its forecast for consumer spending in response to government spending, there is still no prospect of rate relief to underpin a broader recovery.

That means consumers can expect retailers to continue discounting aggressively over the remainder of 2024, though at some point that behaviour becomes unsustainable for brands.

Asher said retailers that prioritise product quality and sustainability in their value proposition are likely to hold up better as consumers look to get the most bang for their buck when they buy.

“How can retailers use this time that’s incredibly tough to think about how they can diversify and future proof their businesses?” Asher said.

“What about quality and investing in quality and being able to deliver that message that products are built to last – you build value and equity within your proposition and it gets people to buy.”