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Woolworths signals recovery as retailers count Omicron costs

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Major retailers appear to be getting on top of a nationwide staffing crisis, after the Omicron spike created food shortages and crashed consumer confidence earlier this month.

In a sign that supermarket shelves will start filling up again in the coming weeks, Woolworths said on Tuesday that the number of warehouse staff missing work because of COVID has almost halved since early January.

Department store chain Myer also reassured investors on Tuesday that it is now well placed to manage Omicron, even though sales have taken a hit from nosediving consumer confidence over the past three weeks.

Though separate, both updates are signs the retail sector – which just a week ago was warning more than half of businesses were being hit hard by staffing issues – is now turning its attention to an expected recovery.

As health experts say Omicron is peaking, there are already signs that consumer spending is rebounding and supply chain issues are easing.

It is leading economists to suggest the economic impact of Omicron may be smaller than previously feared, although it is early days yet.

Woolworths says shortages easing

Woolworths was among those sparking hope on Tuesday after it said the spate of chicken, painkiller and toilet paper shortages that emerged during the Omicron wave earlier this month are improving.

The supermarket said its distribution centres had upwards of 20 per cent of their staff missing earlier this month because of COVID-19, which has now fallen to between 10 and 13 per cent.

The return of staff to work – supported by changes to isolation – has helped improve stock levels in supermarkets, Woolworths confirmed.

It comes after Coles told TND last week that it was optimistic shoppers will start to see shelves fill up in the coming weeks.

That said, neither Coles nor Woolworths have removed buying limits on certain items yet, a sign they’re still not confident in their supply levels.

Myer reassures investors after sales dent

Separately on Tuesday, Myer updated the ASX to say its sales in early January took a hit from plunging consumer confidence amid Omicron.

But chief executive John King is confident the department store is now well placed to manage “this phase of the pandemic”, and is looking to a rebound in spending activity in February and March.

Myer’s performance has been underpinned by a strong end to 2021, with sales for the five months to January 1 up 12.3 per cent annually.

“Whilst we are seeing Omicron impact sales post-Christmas, we will continue to focus on growing our strong online business,” Mr King said.

However, Myer also warned its profits have taken a hit amid higher costs and the absence of JobKeeper support, which propped it up in 2020.

And it is not the only major retailer facing cost pressures at the moment.

Bedding retailer Adairs and homewares chain Dusk told their investors on Monday that sales and cost headaches were created by Omicron.

It came after Target and Kmart owner Wesfarmers issued a similar warning last week, saying Omicron was weighing on its bottom line.

Spending and confidence rebound

Despite the cost headaches, things are better for retailers in February.

Spending and consumer confidence plunged in early January, but the latest economic data suggests a rebound is underway.

Commonwealth Bank’s card spending data for the week ending January 21 showed a recovery in shopper activity, particularly in recreation.

Spending rose across every state, CBA economist Belinda Allen said.

“Consumer spending is holding up much better than feared,” she said.

The ANZ/Roy Morgan consumer confidence measure also rebounded last week after plunging earlier in January.

The index rose 2.2 per cent and is now above the neutral level of 100.

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