The deep sharemarket rout and broad shopper pessimism may have most fund managers steering well clear of major Australian retailers, but at least a few investors are seeing a big opportunity to bag a bargain.
Despite the Reserve Bank of Australia poised to deliver a fourth interest rate rise this year, Morningstar director of equity research Johannes Faul said retailers were underpriced and investors were underestimating the strength of consumers, even as they reprioritise their spending.
“[Shelf] price increases and income growth will underpin solid discretionary spending growth despite subdued consumer sentiment,” he said, naming Harvey Norman and Domino’s Pizza Enterprises as two of his best bets for a rebound as demand for electronics and store growth returns.
“Shoppers are baulking at steep price hikes of computers, as manufacturers pass on rampant inflation in memory chips – a fallout from the data centre boom. But we think consumers will gradually adjust to higher prices over the coming months, which should drive sales growth.”
Those views are at odds with some major fund managers, who are still sceptical about a rebound in retail stocks despite a 23.2 per cent slump in the S&P/ASX 200 consumer discretionary index over the year.