Australian Retail Stocks See Gains Despite Mixed Sentiment

December 16, 2024 04:01 AM EET | By Team Kalkine Media
 Australian Retail Stocks See Gains Despite Mixed Sentiment
Image source: Shutterstock

Highlights

  • JB Hi-Fi and Wesfarmers Lead Gains: Retailing heavyweights continue to perform well, despite Morningstar labeling them as overvalued.
  • Liquor Market Worries: Concerns over softer liquor sales suggest potential structural shifts in consumer behavior, weighing on Endeavour sentiment.
  • Margin Challenges: Morningstar warns of limited margin growth for retailers as higher household savings curb spending growth.

Australia’s retail sector saw some key players record modest gains today, with JB Hi-Fi (ASX:JBH) rising 0.4% to continue its recent uptrend and Wesfarmers (ASX:WES) adding 0.6%. Meanwhile, Endeavour Group (ASX:EDV) edged up 0.4% despite concerns over potential shifts in consumer preferences affecting liquor sales.

Strong Performers in Discretionary Retail

JB Hi-Fi and Wesfarmers have been at the forefront of a rebound rally in the Australian retail sector. According to Morningstar, both companies benefit from highly regarded management teams and their market-leading positions in discretionary retail.

Since October, JB Hi-Fi shares have surged by 18.8%, while Wesfarmers has risen by approximately 6%. However, Morningstar warns that both stocks appear overvalued at current levels, raising caution about their near-term growth prospects.

Flat Volumes with Household Goods Outperforming

Morningstar’s analysis of the September quarter revealed flat retail volumes overall, but household goods emerged as a bright spot. This trend has supported sales growth for JB Hi-Fi, Harvey Norman (ASX:HVN), and Kogan (ASX:KGN). The strong performance in household goods continues to underpin resilience in the discretionary retail sector, even as broader spending slows.

Concerns in Liquor Sales

Morningstar highlighted investor concerns surrounding Endeavour Group, noting that cyclically soft liquor sales could point to deeper, structural changes in consumer preferences. Despite these worries, Endeavour shares rose 0.4% today.

The investment firm also flagged challenges for retailers across the board, citing difficulties in achieving meaningful margin expansion. With household savings on the rise, discretionary spending growth could remain subdued, presenting an overhang for the retail industry.


Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Limited, Company No. 12643132 (Kalkine Media, we or us) and is available for personal and non-commercial use only. Kalkine Media is an appointed representative of Kalkine Limited, who is authorized and regulated by the FCA (FRN: 579414). The non-personalised advice given by Kalkine Media through its Content does not in any way endorse or recommend individuals, investment products or services suitable for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a qualified financial planner and/or adviser. No liability is accepted by Kalkine Media or Kalkine Limited and/or any of its employees/officers, for any investment loss, or any other loss or detriment experienced by you for any investment decision, whether consequent to, or in any way related to this Content, the provision of which is a regulated activity. Kalkine Media does not intend to exclude any liability which is not permitted to be excluded under applicable law or regulation. Some of the Content on this website may be sponsored/non-sponsored, as applicable. However, on the date of publication of any such Content, none of the employees and/or associates of Kalkine Media hold positions in any of the stocks covered by Kalkine Media through its Content. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music/video that may be used in the Content are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music or video used in the Content unless stated otherwise. The images/music/video that may be used in the Content are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated or was found to be necessary.

Sponsored Articles