Australian consumers are altering their spending habits in response to rising cost-of-living pressures, leading to a reshaped retail landscape, according to UBS analyst Shaun Cousins. In a preview of the upcoming August earnings season, Cousins highlighted a trend of shoppers trading down across various categories, including groceries, alcohol, clothing, and general merchandise. Consumers are also reportedly avoiding big-ticket items, negatively affecting retailers like Harvey Norman and The Good Guys.
Despite these pressures, overall retail spending remains relatively stable, supported by factors such as population growth, low unemployment rates, and consistent spending by Baby Boomers and homeowners. Supermarkets, discount retailers, and private label brands are benefiting from this shift, along with online channels and increased in-home consumption. UBS analysts currently have ‘buy’ ratings on Coles, Accent Group, Domino’s, and Treasury Wine Estates. Coles is a major supermarket chain providing groceries and household goods. Treasury Wine Estates is a global wine company that owns brands such as Penfolds.
UBS anticipates potential relief on the horizon, with cost pressures expected to ease and interest rate cuts projected for August and November. However, Cousins suggests a stock-specific approach is currently more appropriate, with UBS maintaining a cautious outlook on JB Hi-Fi due to valuation concerns.
