Retail Stocks – Are they a buy yet?

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Question asked 14/10/2023

Retail Stocks – Are they a buy yet?

Dear MM Team, Thanks for the great job you are doing with your level headed market commentary. So nice not have click bait headlines. My question relates to Retail stocks in general and maybe more specifically: NCK, LOV, SUL, JBH, PMV. At an individual stock level many of these stocks look relatively cheap, however the retail landscape does not look great looking forward. I also note I don't think that you are holding any consumer discretionary stocks in your Growth portfolio. So to my question, what will be your trigger to jump back in to retail stocks? And of the stocks mentioned which would be at the top of your watch list? Regards, Charles

Answer

Hi Charles,

We must be on the same wavelength because we covered this very subject on Thursday morning – Can retailers hold up as savings buffers dwindle?

Our conclusion on Thursday was – “We are unlikely to increase our exposure to Australian retailers into Christmas, but if/when we do SUL is our likely first pick.” We simply believe the risk/reward is unattractive considering the economic landscape unfolding into 2024. At this stage to consider stocks with direct exposure to discretionary spending we would want to feel confident that the RBA et al have manoeuvred the economy into its optimum position of steady economic growth without increased inflation pressures i.e. the next move by interest rates will be on the downside.

If/when we like what we see economically the stocks in your list that we are likely to consider, all things being equal, are – Super Retail Group (SUL), Nick Scali (NCK) and Premier Investments (PMV) which we already hold in our Emerging Companies Portfolio.

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Nick Scali Ltd (NCK)

LAST UPDATED 12/10/2023 16:48

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