Australian fashion stocks have slumped since late March and early April this year, lagging behind global counterparts in the United States and the United Kingdom.
This comes from a Jarden equity research report shared to investors over last weekend, which pointed out that Australian stocks are trading below global peers across all sectors except grocery, with a notable derating since early March following the onset of geopolitical conflict.
A graph that covers fashion’s share price relative performance index shows Australian fashion was leading in late January, and peaked in mid February, but has since slumped to a startling low. The US market also saw a slip in fashion share prices in March, but has since recovered, while the UK jumped in early March.
Similar trajectories were seen in household goods and travel in Australian stock prices, but supermarkets grew in the same time frame, alongside the US.
Looking at the leading stocks in fashion – including the likes of Accent Group, Myer, Premier Investments, Lovisa and Super Retail Group – most show notable slips in stock prices over the last four months, with many slipping stronger in February and March.
Accent Group, for instance, shot up to $1.165 around the time of its first half trading update, but has since slipped to a long-time low of $0.64 this week.
Super Retail Group – Rebel, Macpac, BCF, Supercheap Auto – had a similar movement this year, shooting up to $15.82 around its half year update, and is now at $12.03.
The jewellery space is no stranger, with low-price retailer Lovisa peaking at $33.17 on February 10, ahead of its half year trading update on February 19. When its results were released, its stock slipped dramatically to a low of $20.27, but has since gained traction, lifting to $23.40.
Even the bigger conglomerates like Wesfarmers – owner of Kmart Group, Bunnings, Officeworks and a few businesses outside retail – are seeing challenges this year. Wesfarmers’ share price peaked at $89.26 on February 18, but has since slipped to $72.49.
The only one that appears to be bucking these trends, at least on trend wise, is Kogan.com, which peaked at $4.00 in early January, slipped to $3.00 around a month later, then shot back up to $4.20 in late February, before balancing out at $3.75
Diving into the details, Jarden told investors in the note that consumer spending in Australia has slowed, adding that history shows the best time to buy retail stocks is when the economy is looking grim and share prices have already fallen sharply — even before company profits take a hit.
Jarden believes the market has already priced in profit downgrades of more than 20 per cent, and that a buying opportunity in discretionary retail is approaching — though we’re not quite here yet. Historically, retail stocks have delivered average returns of 28 per cent when economic conditions are at their worst, and three of their five key indicators suggest the cycle is nearing a low.
In the meantime, the broker has trimmed profit forecasts across discretionary and travel stocks, upgrading JB Hi-Fi to its top pick and lifting Wesfarmers to Neutral, while downgrading Harvey Norman and Flight Centre. Its preferred discretionary names are JB Hi-Fi, Universal Store, Lovisa and Super Retail Group, with Sigma Healthcare and Woolworths the picks in staples.