Shoppers flocked back to shopping centres in the weeks leading to Christmas.Credit:Joe Armao
As stock watchers await the Reserve Bank’s February board meeting before making any calls on the health of the Australian consumer,many are predicting household-linked spending on bulkier purchases to slow.
Against this backdrop,retail analysts say youth-focused brands,companies that generate revenues overseas and independent grocery retailers are better placed to weather the tougher conditions,compared to sellers of furniture,white goods and homewares.
Morgan Stanley analysts warn that furniture sales,which have been highly elevated (up by about 30 per cent on pre-COVID levels last year),are vulnerable to a slowdown,especially if house prices continue to drop.
“Housing downturn years such as 2019 and 2012 usually coincide with declining furniture sales. Furniture purchases are also linked to home renovations which are typically carried out when house price growth is positive,” Morgan Stanley’s analyst team wrote in a report on the outlook for the consumer in 2023.
CoreLogic data released this week showed Australian propertyprices dropped overall in 2022, with Melbourne prices 8.3 per cent lower than their February 2022 peak,while the Sydney was 12.7 per cent below where it was in January.
“We would avoid exposure to big ticket and housing linked purchases which we expect will be disproportionately impacted in 2023,” Morgan Stanley’s analysts said.
Instead,the group said it favours consumer stocks that generate earnings overseas,like Domino’s Pizza or Treasury Wine Estates.