The holiday shopping boom could mask the cracks
This means “that a significant deterioration in trading conditions is feared [the second half of 2023] are exaggerated”.
Not every retailer had good news to report in January, but reporting conditions were slower than expected for smaller mid-market brands.
There are fears that a “mortgage cliff” will curb buying as fixed-rate mortgages expire.Credit:Peter Ree
Nursery retailer Baby Bunting told investors last week that it expects profits to fall 59 percent for the first half of 2023, partly due to weaker customer demand in December.
Clothing discounter Best & Less, which focuses heavily on budget children’s and baby clothing, fell 6.6 percent on Wednesday after the company reported weaker-than-expected customer demand.
UBS consumer spending surveys released this month indicate that while Australian shoppers’ spending expectations remain high, the pace of growth is slowing and shoppers at the lower end of the income spectrum are already being hit hard.
“Looking ahead, rising pressures on the cost of living are expected to weigh on retail sales, although a significant decline will require a significant deterioration in the labor market and/or depletion of excess savings,” said analyst Shaun Cousins.
The UBS team says it prefers exposure to companies that have wealthier customers and those that target the very young and older consumers who are less likely to be impacted by rising interest rates. These include companies like youth clothing brand Universal Store and jewelry company Lovisa.
E-commerce sales are also expected to take another hit as shoppers continue to adjust to life without COVID restrictions on in-person shopping.
Online sales have declined at Myer and JB Hi-Fi in the six months to December, although both companies are still well ahead of their pre-COVID levels.
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Electronics retailer Kogan.com said this week that the impact of inflation and interest rates is already being felt by its Australian and New Zealand customer base.
Kogan told investors on Tuesday that first-half sales fell 32.5 percent and a profit loss of $31.3 million is expected.
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https://www.smh.com.au/business/companies/christmas-shopping-boom-could-mask-the-cracks-20230124-p5ceyy.html?ref=rss&utm_medium=rss&utm_source=rss_business The holiday shopping boom could mask the cracks
