Aussie discretionary retailers fall as UBS warns of lower spending, cuts ratings

Harvey Norman Holdings

21/06/2023 05:33

June 21 (Reuters) - Shares of Australian discretionary
retail firms declined on Wednesday after investment bank UBS
forecast a significant slowdown in consumer spending in fiscal
2024 due to a higher cost of living amid slowing global growth.
    UBS lowered ratings on footwear retailer Accent Group
 AX1.AX , Smiggle stationery brand-owner Premier Investments
 PMV.AX  and Super Retail Group  SUL.AX  to "sell" from
"neutral". Their shares are down between 2.7% and 5.6%.
    UBS also lowered its earnings estimates across discretionary
retailers including home products and electronics retailer JB
Hi-Fi  JBH.AX , whose shares are down 2.4%.
    A survey of nearly 1,000 Australian adults between May 16
and June 1 found consumers likely to be more reluctant to spend
on leisure, eating out, and recreational activities over the
next year as household savings decline and inflation continues
to bite.
    "Cost of living is increasing for all income earners but
more for low and middle income earners, with utilities, petrol
and rent increasing most," UBS analysts said.
    "Consumer spending expectations for the next 12 months are
elevated yet converging across income groups, with spend on
entertainment, food out of home and recreation to fall most."
    Australia's central bank in June raised interest rates by a
quarter-point to an 11-year high.
    However, it considered leaving rates unchanged given
consumer spending is slowing, but felt the risks to inflation
had shifted to the upside.
    UBS said that the spending slowdown started early this year
when Australia's biggest electronics retailer Harvey Norman
 HVN.AX  posted a 15% drop in first-half profit as consumers
continued to tighten household budgets.
    The slowdown has now broadened, analysts said, as apparent
in fashion retailer Universal Store Holdings'  UNI.AX  recent
update, which showed that trading conditions have tightened.
    Shares of Harvey Norman and Universal Store fell 2% and
2.4%, respectively, on Wednesday.
    
    
    UBS' latest price targets and ratings for discretionary
retailers:  
    
                      Rating      Price
                                 Target
 Harvey Norman         Sell      A$3.10 
 JB Hi-Fi             Neutral   A$45.00 
 Premier               Sell     A$20.00 
 Investments                    
 Super Retail          Sell     A$10.00 
 Accent Group          Sell      A$1.60 
 Universal Store        Buy      A$3.30 
 Holdings                       
 
 (Reporting by Himanshi Akhand in Bengaluru; Editing by Sonia
Cheema)
 ((Himanshi.Akhand@thomsonreuters.com;))