There’s still some life left in the retail game

IF the Reserve Bank really wants to break the spirit of shoppers, it’s going to have to try harder. Consumers are digging in like a tennis champ deep into a five setter, deftly returning the central bank’s volley of rate rises.

A slew of discretionary retailers has reported sales numbers that largely defy a downturn and lingering supply chain disruptions.

This week Myer Holdings (ASX:MYR) showed why the storied chain has been in the sights of major shareholder Solomon Lew: sales in the five months to December were almost 25 per cent higher.

If anything, the retail resilience is being driven by physical stores, even though there’s fewer of them in the case of Myer.

Conversely, the onlineonly Kogan (ASX:KGN) reports a “subdued” 33 per cent sales decline to $471m, albeit cycling the strong lockdown period.

The owner of Supercheap Auto, BCF, Rebel and Macpac chains, Super Retail Group (ASX:SUL) served up an update of an 11 per cent sales increase for the half on a like for like basis, to $1.96bn.

Exceeding investor expectations, JB Hi Fi (ASX:JBH) smashed it with unaudited sales of $5.278bn, up 8.6 per cent and a record half year profit of $330m.

Of course there’s a ‘needs’ rather than ‘wants’ element to JB’S sales, given demand for home office essentials such as laptops and chargers.

The same can’t be said for jeweller Michael Hill International (ASX:MHJ), which attributes a 12 per cent sales increment (to $363m) to pent-up demand.

There’s always a spoilsport and in the case of retail it’s Baby Bunting (ASX:BBN), which expects flat comparative sales and a 59 per cent profit decline.

It remains to be seen whether retail spending will continue to return serve, or be aced by the RBA’S further hikes rates aimed to quell inflation, which remained disturbingly high in the December quarter.

Bear in mind the central bank is deliberately aiming to slow the economy – and consumer spending.

So, the rate rises will keep coming until consumers finally do lob one into the net. But it’s a circular argument because when retail sales (and inflation) do abate, that’s likely to pause further rate rises to the benefit of … the retail sector.

Despite being one of the nation’s least enthusiastic shoppers, your columnist likes the look of many of the smaller ASX retailers after recent share retractions. Many trade on earnings multiples of less than 10 times and yield 5 per cent or more. We’ve mentioned candle purveyor Dusk Group (ASX:DSK) and the wellmanicured Shaver Shop (ASX:SSG) in recent dispatches.

While Baby Bunting shares have fallen more than 50 per in the last 12 months, the well-run chain is far from a cot case.

Another one to watch is the battling plus-sized clothier City Chic Collective (ASX:CCX), given retail value-sniffer Brett Blundy has secured himself a 7 per cent stake.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.