Rate hikes, inflation make UBS cautious about Aussie retail sector

Harvey Norman Holdings

19/09/2022 22:38

** Analysts at Swiss-investment bank UBS cautious about the
Australian retail sector as consumers face headwinds from rising
inflation and interest rates
    ** Brokerage fears a slowdown in spending from November 2022
onwards, with the resumption of fuel excise and impact of rising
cost of living as key factors
    ** Retail sales in July touched a record of A$34.67 bln
($23.31 bln), ~25% higher than pre-COVID level of A$27.79 bln in
February 2020, according to the Australian Bureau of Statistics
(ABS) (https://bit.ly/3UoNj2g)
    ** Brokerage says headwinds of inflation and interest rates
yet to weigh on spending with strong labour market and elevated
household savings as key drivers of consumer spending
    ** Says retailers exposed to the affluent - Treasury Wine
Estates  TWE.AX  and Harvey Norman Holdings  HVN.AX  - and the
youth - Lovisa Holdings  LOV.AX , JB Hi-Fi  JBH.AX , Accent
Group  AX1.AX , and Universal Store Holdings  UNI.AX  - are
better positioned
    ** While household savings have started to moderate,
according to UBS Economics, significant pool of "excess" savings
remains a support, brokerage says



    
($1 = 1.4872 Australian dollars)

 (Reporting by Sameer Manekar in Bengaluru)
 ((Sameer.Manekar@thomsonreuters.com; Twitter: https://twitter.com/sameer_manekar))