Scott Morrison is going to the polls in May with Australia’s consumer confidence at a 30-year low with inflation and rising mortgage rates weighing on peoples minds i.e. they’re starting to have less cash in their pockets as wages growth fails to maintain pace with the likes of petrol & food costs. COVID helped savings in Australia to unprecedented levels as the government literally threw cash at the problem and although its slipped a bit since its 2020 peak it remains significantly above the average of previous decades i.e. people have a war chest for adversity and to buy flat screen TV’s it seems. If Australia’s economy can withstand a series of rate hikes during 2022/23 the country is well positioned to provide a tailwind for the Retail Sector.
Yesterday saw JB Hi-Hi rally over 4% after the retailer demonstrated strong demand / sales growth in the 3rd quarter of its financial year i.e. for Q1 of this calendar year total sales were up over +11%. However it’s not just turnover that’s robust with profit margins remaining strong as the company continues to benefit from the new norm of increased cases of WFH (work from home). This quality stock may have been range bound for the last 2-years but buying the dip, like for much of the market has proven the best strategy, helped by an estimated 4.1% fully franked yield over the next 12-months – we like JBH but are cautious about buying the stock at the upper end of its recent trading range.
MM is neutral to bullish JBH around $53
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