It appears that an interest rate cuts from the Reserve Bank of Australia and New Zealand are finally starting to take effect on the wider economy. This bodes well for the retail space which should benefit from consumers having more discretionary income from lower interest rates. One of ’s top thematic views is that a “Spending Spree” will benefit selected retailers and one of the retail company’s held in our portfolio is up over 30% in the last few months.
Since the global financial crisis, retailers in Australia and New Zealand have performed poorly. There are a number of reasons, but lower discretionary spending, high AUD & NZD and poor business models have been the major drags on the industry’s performance. Retail sales in Australia for the month of October were stronger than expected at +0.5% and this data carries on a recent trend of stronger domestic numbers. Are the interest rate cuts from the Reserve Bank finally taking effect? So far the signs are positive.
Christmas tends to be the most important time of the year for retailers. Despite being competitive, it is when the majority of retailers generate the highest amount of sales. It is critical for their operating performance that they have a strong Christmas period. Myer is one retailer holds and since adding it to our portfolio at the start of October it is up over 30%.