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Thread: Retail Stocks

  1. #1
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    Default Retail Stocks

    Instead of having the same conversation over multiple different stock threads, thought it worth creating a catch all discussion area for macro events on the entire NZ retail industry.

    So Omicron has now arrived, what’s everyone’s thoughts on the length and severity of the impact on NZ retailers?

    It is early days, so we likely wont see the widespread staffing and local logistics issues show up for a another few weeks, so sometime around mid-February perhaps is when things start getting seriously disrupted.

    Seen mention of 24 days required isolation for household contacts of positive Omicron cases. That would likely lead to widespread staff shortages across all of retail one would imagine, as well as the logistics supply chains for retail (which would mean more impact for those businesses with high stock turnover rates).

    I think it will be a rough Feb/March, but if the overseas experience is anything to go by (hard to say for sure as they are still in it), hopefully by April omicron will be past the peak and staffing/logistics issues subside.

  2. #2
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    Mark Lister ...Guru of Craigs ...has labeled Retail along with hospitality and tourism as worse sectors of 2022 ...so maybe party is over fully

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    Quote Originally Posted by alokdhir View Post
    Mark Lister ...Guru of Craigs ...has labeled Retail along with hospitality and tourism as worse sectors of 2022 ...so maybe party is over fully
    I agree.. can’t see much value unlike 2021. Seem fully priced or downside risk even.

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    Quote Originally Posted by Rawz View Post
    I agree.. can’t see much value unlike 2021. Seem fully priced or downside risk even.

    Agree with that too

  5. #5
    percy
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    Quote Originally Posted by alokdhir View Post
    Mark Lister ...Guru of Craigs ...has labeled Retail along with hospitality and tourism as worse sectors of 2022 ...so maybe party is over fully
    From a recent Keith Woodford article.
    "For the last 12-month period to September 2021, New Zealand ran a record deficit on its external current account with the rest of the world of $15.9 billion. This is in part because earnings from export services, largely tourism and the education of foreigners, have crashed. Conversely imports have ballooned to record levels.

    This deficit has been financed by capital flows from overseas. At some stage the rest of the world is likely to question the economic sustainability of New Zealand. If that occurs then the exchange rate will crash.

    If the exchange rate crashes, then that will be very bad for most New Zealanders. The exception will be for those New Zealanders who produce products for export.

    A significant decline in the exchange rate may be what is needed to convince New Zealanders that export industries lie at the heart of our national well-being."

    So I agree with Mark Lister's comments ,as well as Woodford's,and think a lower NZ$ add to retailers' challenges.
    Last edited by percy; 23-01-2022 at 04:46 PM.

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    down at 62 in 9 2019.

    on that basis of these expectations under 60 could come up but that would fuel more inflation expectations.

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    Ultimately pricing power will be key for the retailer that performs the best this year, in my view. Interesting basket of companies, in no order:

    * HLG: good & conservative mgmt w/ glassons a strong brand in AU. Trans-tasman exposure & young customer demographic. Margins under pressure in recent years, up to 3 store openings in AU in FY22. Opening trade & peacocking?
    * BGR: strong management & ongoing margin expansion. NZ only, 2 brands w/ distinct channels. Arguably done the best on logistics and stock. But nesting done & dusted?
    * KMD: two pistons firing on different cycles. Outdoor spend leveraged to domestic & international travel - yet to open, but that will fire when it does, but is also why much more depressed than other comps. Rip Curl going well.
    * MHJ: beauty of a turnaround. Only retailer posting 2h growth.
    * WHS: diversified w/ loss making markets platform. Performed better than many would have believed.

    What's the court's view on who has the best pricing power during this bout of inflation?
    Last edited by Muse; 31-12-2022 at 10:34 PM.

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    What I'm reading is there may be good buying opportunities for folks with medium to long term outlooks.

    I remember in 2008 pondering if I should buy more Briscoes. They were around 87 cents if memory serves me right. I didn't. Pity that given the dividends over all those years, and the capital gain over the last few years. I bought some more in 2020. No regrets there. Maybe 2022 is the time to buy a few more given retail may well fall out of favour? I can't think of an operator who has their interests more aligned with mine than Rod Duke. Nor can I think of a more consistent performer over the decades than him. Maybe I'm just a Rod Duke fan boy?

  9. #9
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    Don't forget that only 13% of KMD sales, 20% of MHJ and 60% of HLG sales are in NZ so thinking about the NZ retail scene/climate and applying it to what might happen those three isn't really good thinking - they may have already had the gloom and doom stage (globally) expected to happen here.

    The discussion (so far) is totally relevant to WHS and BGR

    Anyway HLG< MHJ and KMD performance in NZ over the years is pretty useless - no or at best little growth and unattractive as an investment.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

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    HLG the only retailer I hold, have had them for more than a decade and have no plans to sell. Whatever happens they will come through in good shape and pay a good dividend along the way IMO.

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