Markets punished retail stocks in the opening week of reporting season as investors reassessed the outlook for Australian consumers amid early signs of deteriorating demand, and a more hawkish Reserve Bank.
While retail stocks shot out of the blocks to start this year on evidence of a strong holiday trading period, the sector retreated this week as investors reevaluated the hit to consumption caused by a cash rate which bond markets now expect to peak at around 4 per cent. “We see the current macro environment of higher interest rates and slowing housing turnover a headwind for furniture retailers, with the order bank support now largely unwound,” Macquarie analysts said. “We expect a risk of spending shifting away from the category.”
Not even a bumper result from Cettire on Tuesday could escape the bearish sentiment, as the luxury online platform delivered an $8 million bottom-line profit in the December half, marking a turnaround from an $8.3 million loss a year earlier. The correction in Cettire’s share price this week followed a 50 per cent surge in January, highlighting that investors are reevaluating the outlook for Australian consumers and the broader retail sector following the hawkish commentary by the RBA.
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