Aus retail

The Australian retail sales data is out.

Surely a warning signal for those long the consumer discretionary names. If you’ve gotta pay more for your mortgage, more for your electricity, more for your petrol, there’s less left over for discretionary. And if you already decked out the house-home-office over the COVID era.

It matches what Walmart (WMT) and Target (TGT) in the US are describing in their outlook commentary. There’s a change in the consumer patterns, which matches what we know about the economy, COVID, and preferences.

And the degree of demand pull-forward (i.e. overshoot from trend) is large. That represents a headwind (eventually!) that should show up in the outlook statements over August, even as the backward looking full year numbers are healthy.

Overall, inventories, margins, carrying values, and valuation multiples, are at risk for the consumer discretionary stocks, which we will continue to avoid.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

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