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.
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