Retail Stocks

[Basil]

Just an observation.  Kathmandu is widely regarded as an expensive brand.  People are shifting to value brands.  K Mart are doing fabulously well as a result of their trend change so different parts of the retail market are still doing fine.  Red Shed store sales also doing okay, (again affordable stuff) but the group's profit is being smashed with more expensive consumer area's such as Torpedo 7.

[Fiordland Moose]

KMD brand has been in a no mans land for a few years now

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[Waltzing]

Will this hit retail in NZ? OIL and european goods...

https://www.cnbc.com/2023/12/21/container-prices-hit-10000-freight-inflation-soars-in-red-sea-chaos.html

[winner (n)]

Nike stock plunges on poor sales outlook ..... what the heck it's Nike

[Waltzing]

Some spending going on Winner(n*).....

https://www.nzherald.co.nz/business/consumer-spending-on-traditional-pre-christmas-uptick-at-265b-this-month/VTXTTZBKBBG7HN2G6NYK42HLGE/

[Basil]

KMD and WHS hitting fresh multi year lows, probably headed even lower in 2024.  Retail doesn't look like a great place to be in 2024, well, certainly not for the first half anyway, other than stocks that have proven they are highly resilient in the current environment, good examples being TRA and 2CC.  People need transport and demand for basic transport is highly inelastic with economic cycles just like demand for fuel barely changes with different price points.  People see their right of freedom of movement as a core need that must be met regardless of economic conditions, all the more so after the truly diabolical misery of Covid lockdowns, that is how I see it.  People are moving to value brands and value purchases in the vehicle sector so both these listed companies with their cheap vehicle price points should do very well.  Neither are on expensive metrics, and both are probably a good place to be in 2024.  I am content to simply hold one, TRA, but I am pretty sure 2CC shareholders will have another good year in 2024 and good luck to them.

The reality of high interest rates has set in https://www.nzherald.co.nz/business/reality-of-high-interest-rates-has-set-in-bank-lending-data-shows/AAYRMFB6N5EBJEN6XYLDCXU2K4/  Paywalled.  Excerpt:  Christmas will be a subdued event for many this year, with the latest bank lending data showing high interest rates are biting, snip,...."You don't get rid of inflation without inflicting some economic harm," Cameron Bagrie of Bagrie Economics said.
"We are now starting to head into the reality zone."

[winner (n)]

All this talk about hard times in retail .......nz core retail sales continue to reach record highs ...punters are spending

So called bad times must be a sign how useless most retailers are at making a buck

[Basil]

All this talk about hard times in retail .......nz core retail sales continue to reach record highs ...punters are spending

So called bad times must be a sign how useless most retailers are at making a buck

Amazing recent result by WHS.  Less than 1% net margin on sales of $3.4 Billion.

Highlights
o Group sales of $3.4 billion, up 3.2% on prior year, including record sales
result for The Warehouse of $1.9 billion, up 9.6% on prior year
o FY23 gross profit margin decreased 190 basis points compared to FY22 but an
improvement on FY23 H1
o Reported Net Profit After Tax of $29.8 million - down 66.6% on prior year

Can't resist a comment reflecting on the year that was in the context of what you've said. I suppose if you're in the super money league and paid $3m a year, at least in theory you would understand why a simple strategy that I advise clients to do, see below, wouldn't work.

That strategy is simply this, make sure your margins are not eroded by inflation.  If inflation is running at 6% per annum you need to be increasing your prices several times a year by 1-2% a time so nobody is put off or offended, to ensure inflation doesn't eat your profits.  (Those in the construction sector with inflation running at 17% at one point, need to be repricing every month).

A long time ago I started acting for a rose grower and he had miniature roses he germinated, grew for a while and potted up and sold for $2.99 each.  He wasn't making any money so I asked him when the last time was you changed the price.   Oh he said proudly, they've always been that price since I started over 20 years ago. 

I find it staggering that if WHS's average prices across the year were simply 1% higher they would have delivered a profit more than double what they did.

My contention is that Nick is so focused on all his omni channel and ESG B.S he's overlooked the fact that for many consumers their nearest WHS store is simply a convenient way to buy basic goods at a cheap price.  You don't have to be the absolute cheapest in the N.Z. The stores proximity to where people live is also a big factor and they have a vast retail network they can exploit that the likes of Costco doesn't.

[Waltzing]

Yes often a WHS is close if your in the country and there is a local red shed in a town within 50 kilometers...

[KW]

All this talk about hard times in retail .......nz core retail sales continue to reach record highs ...punters are spending

So called bad times must be a sign how useless most retailers are at making a buck

Punters are not buying more stuff, they are simply paying more to buy less stuff thanks to rampant inflation that has been running at over 6% for 2 years now.  

Which is why when looking at company results, one needs to read beyond the headline number "revenue up 6%" and look at whether margins and profits are going up or down as well.  A company that has revenue up 6% and profit up 6% is merely running to stand still.  A company that has revenue up 6% and profits up 8% has pricing power.  A company that has revenue up 6% but profits down 6% is going backwards.  

In a low inflation environment a 6% increase in revenue/profits would be a sign of growth.  In an inflationary one, they need to be increasing revenue and profits by more than 6% each year.  

[Waltzing]

Look forward to seeing the BRISC report and the margins as KW has reminded us ... its the Expenses part of the profit and loss that is going to impact the NPAT figures.

[Waltzing]

And what on earth does the market think is going on with MHJ....

should be down at 75 ....

its recession and who buys this stuff in a recession...

lets hope the next result is a true shocker and it stay down till 2025 ...

[Hectorplains]

Not so much cash register jingle...

"Both peak hourly transactions and peak transactions-per-second were down 3% from 2022, despite a bigger population." 

"The data pointed to a busy Christmas, but one with fewer transactions and purchases, as the cost of living pressure hit."

[Basil]

Yeap, supermarkets packed but malls surprisingly empty today  https://www.msn.com/en-nz/news/national/supermarkets-packed-malls-surprisingly-empty-as-kiwis-prepare-for-christmas/ar-AA1lXQij?ocid=msedgntp&cvid=5740e474e548483dbce46da747145736&ei=14
Retailers will be hoping it reverts back to busy malls on boxing day.

[Basil]

Mrs B took the grandkids down to Lynnmall early this morning to spend their Christmas cash.  She said she was quite surprised it wasn't very busy.  I slept in trying to digest yesterday's glutinous excesses.  Quiet day today needed and drink a lot of water.
Herald reporting it was very busy elsewhere though so who knows.  https://www.nzherald.co.nz/nz/boxing-day-sales-retailers-in-tears-as-crowds-descend-onto-sylvia-park/FJ5QXOMPEJCZFOD3ZCPWD7EILI/