Episode #27 - What the Return of Inflation Means for Australian Retail

Episode 27 of the Retail Scoreboard unpacks January 2026 results and the renewed impact of inflation on Australian retail, using anonymised data from 100+ retailers to reveal what's really driving performance. On the surface, January delivered a solid like-for-like sales lift of 2.3%. But beneath that headline number, the story is far more complex. Unit sales declined 2.7% and transactions were also down 2.7%, confirming that growth is not being driven by demand — it's being driven by price. Gross profit dollars rose 3.7%, with GP% up 0.8 percentage points. Average transaction value climbed 5.7%, fuelled by a 5.1% rise in average selling price. Original ticket prices increased 3.7% year-on-year, with final sell prices up 2.7%, as softer discounting allowed more of the inflationary pressure to pass through to consumers. The discussion explores: • The return of inflation and why this is a major blow for retail in FY26 • Price as the only meaningful growth driver across the last three months • Online performance, which continued its exceptional run with 10% growth • Concessions (up 4.3%) and outlets (up 4.8%) outperforming standalone stores • The growing pressure on physical retail, with standalone stores up just 0.4% • State performance, with WA leading the way while QLD and VIC declined • The structural cost pressures facing retailers — rising wages, CPI-linked rents, superannuation increases and store operating costs projected to rise 4–5% We also zoom out to examine what retailers can realistically do next. With demand soft, costs rising and 2–3 potential rate rises still on the cards, the industry faces tough choices: raise prices, cut labour, restructure store networks — or absorb further margin pressure. If the last few years have felt familiar, that's because they are. Inflation, wage growth, rent increases and cautious consumers have collided before. The question now is how retailers respond in FY26. Want full access to The Retail Score Index and deeper January insights? Visit www.theretailscore.com