Australian Electronics Retailers Need to Embrace the Online Trend

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Equity Bottom-Up

Harvey Norman Holdings / Equity Bottom-Up

<ul><li>Following the recent release of retail trade data for the 2016 calendar year, Evidente has undertaken a review of Australia’s retail sector.  Overall growth in retail sales has moderated over the past three years, primarily reflecting a slowdown in growth of food spend, which has adversely impacted the cash based operating profitability of the supermarket retailers. </li><li>In the past six months however, food retailing has re-accelerated while discretionary goods spend has stagnated.  Within discretionary spending, the standout category during this period has been clothing, footwear &amp; accessories, as reflected in this week's stronger than expected trading update from Premier Investments.</li><li>Evidente remains optimistic about the outlook for discretionary good retailing as the household sector gradually gets its mojo back the more time passes since the financial crisis.  Ultimately, the scale of the divergence between food and discretionary goods retailing is unsustainable.  Further, Evidente expects supermarket retail margins to struggle until market shares stabilise.  The key risks to the outlook for discretionary retailers are the imminent entry of Amazon.com and renewed weakness in house prices.</li></ul>

Following the recent release of retail trade data for the 2016 calendar year, Evidente has undertaken a review of Australia’s retail sector.  Overall growth in retail sales has moderated over the past three years, primarily reflecting a slowdown in growth of food spend, which has adversely impacted the cash based operating profitability of the supermarket retailers. In the past six months however, food retailing has re-accelerated while discretionary goods spend has stagnated.  Within discretionary spending, the standout category during this period has been clothing, footwear &amp; accessories, as reflected in this week's stronger than expected trading update from Premier Investments.Evidente remains optimistic about the outlook for discretionary good retailing as the household sector gradually gets its mojo back the more time passes since the financial crisis.  Ultimately, the scale of the divergence between food and discretionary goods retailing is unsustainable.  Further, Evidente expects supermarket retail margins to struggle until market shares stabilise.  The key risks to the outlook for discretionary retailers are the imminent entry of Amazon.com and renewed weakness in house prices.

Harvey Norman Holdings

Australian Retail Sector Review