Retail Stocks

[BlackPeter]

well yes stagflation... unless of course the country is structurally stuffed..and there is nothing the reserved bank can do .. but 25... the US will likely go into recession and the US does QE as no one want to buy there bonds... getting a bit carried away of course ... but Chump is all over the place and it will be like a fly wheel coming apart..

 

Well, this would be an event worthwhile waiting for ...

[KW]

Aussie -

Youth wallets tighten, but these younger consumers are still more optimistic than most shoppers
For the investor looking to get exposure to the best retailers catering to the demands of 18 to 34 year olds, UBS is tipping these stocks to soak up market share.

Younger Australians are more optimistic about their income, savings and wealth expectations compared to older age brackets, but they have traded down their spending on sneakers and travel for cheaper items like snacking on burritos and fried chicken.
Still, those in their teens and mid-20s are expecting to spend more on music, arts and gambling than respondents in their mid-20s to 30s, a UBS survey of consumer intentions has found.
While select younger people might get help from the 'bank of mum and dad' for living expenses and housing, they are as a cohort following the lead of the rest of the economy in adapting to the habits enforced by the cost-of-living crisis.
This has compelled 18 to 34 year olds to trade down within categories such as fast food or fashion. And investors should take notice; the nation's 7 million youth consumers make up around 27 per cent of the population.
In fast food for example, Mexican-themed restaurant Guzman y Gomez is booking rising patronage but Domino's Pizza, Hungry Jacks and KFC are tracking weaker.
UBS thinks this supports its opinion that shares in GYG have 16.4 per cent upside to the current price. The broker still has a 'buy' recommendation on local KFC owner Collins Foods. A deep dive into stocks exposed to younger shoppers, and the best operators in their category, has led UBS to slap 'buy' recommendations on fashion chain Universal Store, footwear retailer Accent Group, Solomon Lew's Premier Investments (which owns kids stationery chain Smiggle and sleepwear brand Peter Alexander) and Collins Foods, the owner of more than 250 KFC stores.

The UBS Evidence Lab survey of 1,000 Australian adults polled between mid-May and early June found that younger consumers remained more optimistic financially over the next 12 months compared to all consumers.
For these shoppers, aged 18-34, cost-of-living pressures have moderated slightly quarter on quarter, yet are still mixed versus the average Australian consumer. Spending intentions were lower quarter on quarter, as well as year on year, and are now marginally below the average consumer, driven by lower income and wealth expectations.
"Youth consumers' income, savings and wealth expectations all moderated substantially and at a faster rate versus the average consumer, yet still remain positive and above the average consumer," concluded analyst Shaun Cousins.
The feeling of optimism, despite tougher financial conditions, could be simply a function of hopefulness.
Cost-of-living pressures were most intense for younger people in budget areas such as fuel, rent and interest rates but lower in food and utilities, the UBS survey reported.

Home improvement, clothing and footwear, domestic travel and food takeaway categories declined the most, based on measured spending intentions by category, both quarterly and annually.  For the investor looking to get exposure to the best retailers catering to the demands of 18 to 34 year olds, UBS is tipping retailers that are soaking up market share.  "We prefer strong operators / market share gainers exposed to the youth consumer in their categories of importance," citing Accent, Collins Foods, Premier and Universal Store.

UBS believes there is as much as 38.6 per cent upside to Universal Store's share price, 39.5 per cent upside to Accent's share price - almost one quarter of its stores are in youth-focused shoe banners - and 28.5 per cent upside to the Collins Foods share price.
UBS is 'neutral' on Guzman y Gomez but still sees 16.4 per cent upside to its valuation with 60.7 per cent of sales to the 18-34 year old demographic who are in turn 41.4 per cent of all turnover in the fast-food sector.

Accent, which is the nation's largest footwear retailer with banners like Hype, Glue and Platypus, is not impervious to a downturn. Accent recently issued a profit warning that put a dent in its share price, but this gloomier scenario was now 'built in' to the stock, Mr Cousins told The Australian.
"They've seen this slowdown in this spending, and the rationale for our retention of our 'buy' rating in that instance has been very much around we think a lot of that is in the price. And we look at a company like Universal Store as someone that is a very good operator in that youth apparel space and we are confident that they can perform possibly in spite of what looks more challenging survey responses in this survey relative to what we've had in prior surveys."
A UBS poll published this time last year found a larger proportion of household budgets are being eaten by "pain" categories such as utilities, rent and insurance and eroding discretionary spending.

[Basil]

Should be good for HLG.

[winner (n)]

NZ job numbers still declining and the trend down is about 100 jobs lost per day. That's 700 fewer people earning and spending money - week. A $1m of wages gone. Every week. The reduced demand compounds.

No wonder retail spend continues to suffer

[KW]

NZ job numbers still declining and the trend down is about 100 jobs lost per day. That's 700 fewer people earning and spending money - week. A $1m of wages gone. Every week. The reduced demand compounds.
No wonder retail spend continues to suffer

Stephen Toplis, head of market research at BNZ, says experimental Stats NZ data released on Thursday sheds light on why: overall, households are not better off with lower interest rates — in fact, they are worse off.
Falling mortgage rates are easing pressure on households with debt. Interest paid in the March quarter was down 3.5% on the same period a year earlier.
"But one shouldn't forget there is a significant chunk of the population that doesn't have any debt, many of whom rely on interest income for their day-to-day spending. Believe it or not, the income accruing to these folk has dropped by more than the reduction in the amount paid," Toplis wrote in a note.

[Waltzing]

Yes if the stats are right it may well lead to some knee reactions come voting time as voters panic..

The heat on the government to DO SOMETHING will grow by the public who dont study economics or accounting and really single dimensional accounting was dead the day Simula was created in 1963...

Retail stock will see the pain at some point no doubt... or as the OCR is lowered the economy will just crawl along...

https://www.interest.co.nz/economy/133946/reserve-bank-will-likely-end-sequence-six-consecutive-cuts-official-cash-rate-coming

[KW]

Also this .... (from Australia)

Banks say borrowers aren't reducing home loan repayments as rates fall
Big banks say just one in 10 borrowers lowered their home loan repayments when the Reserve Bank of Australia cut interest rates in May, reducing their mortgages faster instead of spending the savings.

[LaserEyeKiwi]

Don't forget Interest rate drops take a LONG time to flow through to every with a mortgage.

I would post an image of the Total monthly interest costs paid by NZers, but in all truth I have no idea how to post an image on this site. EDIT: THANKS TO BUZZ FOR REMINDING ME HOW TO ATTACH PHOTOS

But in words, the low near the end of 2021 was approx $750 million in monthly interest payments - and as at the end of may we are still somewhere around $1 Billion higher than that at approximately $1.75 Billion monthly. the high reached in late 2024 was around $1.9 Billion, so we have barely seen the interest rate relief arrive yet.

In 6-12 months it shoud have flowed through to everyone's mortgage rate renewals hopefully, and we should be closer to $1 Billion in monthly mortgage interest payments. Which means more than $10 Billion reduction in annual interest payments vs the peak rate, which undoubtedly will mean a big boost in retail spending and people replenishing their savings which are currently being drawn down,

it is taking longer than we all would like (the slow pace of reductions by RBNZ isn't helping) but its basic math, eventually it will kick in.

[winner (n)]

Good stuff LEK

So households will have more than $10 billion (annual) more to spend. Sounds good.

Household consumption is about $250 billion annually

The $10 billion is about 4% of the total household spend

Hope inflation doesn't eat it all up ...esp if wages don't go up much  ...and they can only still but about the same amount of stuff as now.

[Waltzing]

Remember how long recovery took after the GFC.. and this was bigger... in that QE added how much to the national debt.. plus not only did you get the CVD shut down you also got a monster recession... two hits...

that is going to takes... well we will see... more than 5 years? 

600 and counting staff at the Reserved Bank... must be counting something...

they should have a graph right? that web site of the reserved bank should have some nice pictures somewhere...

like right on the front page with a revolving graphical display...

looks like a page for displaying on a DG with a green screen...

all those hundreds of millions of dollars and they have a text display and some excel worksheets....


AMAZING!!!! NOT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[LaserEyeKiwi]

Good stuff LEK

So households will have more than $10 billion (annual) more to spend. Sounds good.

Household consumption is about $250 billion annually

The $10 billion is about 4% of the total household spend

Hope inflation doesn't eat it all up ...esp if wages don't go up much  ...and they can only still but about the same amount of stuff as now.

Discretionary retail spend runs under $50 Billion though.

[mcdongle]

Just did a quick google.. only 32% of new zealanders have a mortgage

[LaserEyeKiwi]

Just did a quick google.. only 32% of new zealanders have a mortgage

that 32% is for those that have a mortgage on their own home. You also have to include the investor mortgages on the one third of households that rent.

Now factor in that those that have a mortgage (either owner-occupiers or property investors) have on average far higher incomes than those that do not own property (renters).

Also, a large portion of owner occupiers that do not have a mortgage are retired people, who also have on average lower incomes.

In other words: those with mortgages are a big driver of discretionary retail spending.

[winner (n)]

Just did a quick google.. only 32% of new zealanders have a mortgage

32% of households have a mortgage .....home ownership rate is about 66%

But rents are tumbling so that will put a rocket under retail discretionary spend 

[winner (n)]

Retaileatch report June sales were DOWN 1.0% on June last year

Offshore online was up 11.3% though