Consumer stocks grab attention as cost of living rises

Highlights

• Kiwis spend less on consumables as the cost of living rises
• Overall retail spending has been down
• Motor parts and electrical goods and electronics took a hit followed by other retail segments

According to Stats NZ, retail sales in New Zealand fell 2.3% in the June 2022 quarter over a 0.9% decrease in the March quarter while adjusting to price and other seasonal effects.

Ten out of 15 retail industries reported a drop in volumes in the June quarter. The worst hit was the motor vehicle and parts retailing industry followed by electrical and electronic goods. This was followed by supermarkets and grocery stores with a fall of 2.9%; and hardware, building, and garden supply, down 5.3%, compared with the March 2022 quarter.

For motor vehicles, supply chain issues played an important part in the drop in sales.

Against this backdrop, let’s examine how these NZX stocks are doing.

              Source: © 2022 Kalkine Media®

Seeka Limited (NZX:SEK)

SEK is a horticulture company that processes and sells high-quality products across geographies. On 18 August, in its half-yearly results, it reported an increase in EBITDA by 5.3% at NZ$49.4 million and NPAT growth of 4.3% over the previous year. SEK announced these results despite disruptions caused by the COVID-19 pandemic and weather disruptions. According to the Company release, these were tough months for the company. Therefore, it will be focusing on its core business.

On 6 September, the stock was trading down 1.28% at NZ$3.850,  at the time of writing.

Scales Corporation Limited: (NZX:SCL)

SCL is in agri-business with 3 key divisions – Food ingredients, Horticulture, and Logistics. The company reported an increase in revenue by 9% to NZ$514.6 million and a 15% increase in EBITDA to NZ$73.8 million in FY22 with both the Food Ingredients division and the logistics division performing well. In its 1HFY23 results announced on 24 August, the underlying NPAT attributable was down 11.7%, the reported NPAT was up 7.5%.

On 6 September 2022, the stock was trading flat at NZ$ 4.570, at the time of writing.

The a2 Milk Company (NZX:ATM) 

ATM announced its full-year results on 29 August. Despite very challenging circumstances and market conditions, it delivered an EBITDA of 59% in FY22 to NZ$196.2 million. The net profit after tax was up 42.3% to NZ$114.7 million. The Company reported a significant 51.8% jump in earnings per share to 16.5 cents in FY22 compared to 10.9 cents in FY21. ATM’s revenue growth was 20% to NZ$1,446.2 million with 2H22 growth of 18.9 % on 1H22.

On 6 September 2022, the stock was down 0.31% at NZ$6.350,  at the time of writing.

Bottom Line: According to Stats NZ, retail sales dipped significantly in the June quarter. This has impacted consumer companies especially those involved in electrical and electronic retail, groceries, and hardware.