Macro Intelligence: Black Friday & Cyber Monday in Australia, retail sales to surge by $69.7 billion

Article written by Juliette Saly (ausbiz)

Retail relief

In this week’s edition of IG Macro Intelligence, we take a look at the retail sector in the lead-up to Black Friday and Cyber Monday sales.

Festive spirit

Australians are expected to embrace the upcoming Black Friday/Cyber Monday shopping period, as cost-of-living pressures see consumers hunting for bargains.

Roy Morgan predicts there will be a $69.7 billion boost to retail sales in the weeks leading up to Christmas, a gain of 2.7% on 2023’s figures.

Retailers prepare for record sales

The latest research from Roy Morgan, commissioned by the Australian Retailers Association (ARA), tips that a record $6.7 billion of that amount will be spent in the four days from 29 November to 2 December, which would be a 5.5% increase on last year’s sales during the same period.

On average, Australians will spend $707 each in the lead-up to the festive season, according to Roy Morgan, a jump of $61 on 2023’s average spend.

The ARA says competition for the consumer dollar is at an all-time high, amid higher interest rates.

“They’re looking for the best value when it comes to buying presents for their loved ones, which is why sales events like Black Friday/Cyber Monday weekend are consistently growing in popularity.

Retailers are pulling out all the stops to ensure they have the best product lines and gift solutions, customer service offerings and enhanced online platforms to make shopping during this peak season more seamless than ever,” said Australian Retailers Association CEO Paul Zahra.

Consumer sentiment rises ahead of sales

Meanwhile, ahead of the upcoming shopping period, the latest reading on consumer sentiment is encouraging.

The Westpac-Melbourne Institute Consumer Sentiment Index ticked up 5.3% to a reading of 94.6 in the latest survey. The index has now risen 14.4% from its mid-year lows and is only 5.4 points below the ‘neutral’ level of 100.

Jason Ireland from McGrathNicol told ausbiz the uplift in consumer sentiment is an encouraging sign for retailers: "There's some money there. There's some. There's some dry powder. So if we look at November sales, we've already had Singles Day.

We're now about to enter, I think, the Click Frenzy. And then we have Black Friday and Cyber Monday all through this November. It's a time for retailers to actually get out there and offer these more optimistic consumers, but still value-conscious. It's the perfect time to have a sale."

Shopping for sentiment

The S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) includes 23 listed companies on the ASX 200 classified under the Global Industry Classification Standards (GICS). Rebalanced quarterly, the constituents of the index are influenced by economic cycles, encompassing services and retail.

Year to date, the index is up almost 20%, while it has risen 27% over the past 12 months. This compares with a near 9% year-to-date gain in the S&P/ASX 200 Index, which has risen 17.5% over the past 12 months.

ASX 200 consumer sector

Australian benchmark index

Australia 200 daily chart

Stocks for your stocking

Retail stocks in the index include:

1. Premier Investments (ASX: PMV)
2. JB Hi-Fi (ASX: JBH)
3. Harvey Norman (ASX: HVN)
4. Breville Group (ASX: BRG)
5. Wesfarmers (ASX: WES)

Premier Investments

Shares in Premier Investments have risen almost 22% year to date and more than 40% over the past 12 months. ASX Tradewatch data show that shares are in a long-term bullish pattern, while the average broker recommendation on the stock is a 'Hold', with a price target of $34.09 according to Refinitiv. Citi analysts cite the potential for Premier's shares to re-rate on a successful overseas expansion.

However, analyst James Wang at Citi has cut his call on the stock to 'Neutral' from a 'Buy' amid the likelihood that some investors will sell the stock as Premier distributes the proceeds of its apparel brands divestment.

However, Wang sees long-term upside amid Premier's agreement with department-store operator Myer, and the rollout of its Peter Alexander and Smiggle brands into new markets. Citi has a $36 target price on the stock.

Premier Investments daily chart

Premier Investments stock performance and analyst ratings

JB Hi-Fi

When it comes to JB Hi-Fi, technicals also show the stock in a long-term bullish pattern.

However, most analysts recommend holding the stock, rather than accumulating at these levels, with the average target price according to Refinitiv at $73.15, which is an 18% downside from current levels.

Morgan Stanley is underweight JB Hi-Fi with a $67.10 price target, preferring consumer staples stocks over the consumer discretionary space as consumers seek to save amid cost-of-living pressures.

Sector overview

Morgan Stanley is underweight the entire discretionary sector, although the broker does note JB Hi-Fi, along with Super Retail Group (ASX: SUL), are in a stronger position due to strong balance sheets and zero interest cost debt since the pandemic. Harvey Norman is a 'Hold', according to average broker recommendations.

JB Hi-Fi daily chart

Harvey Norman

ASX Tradewatch data show shares are in a downward trend with the 20-day moving average falling, implying investors find better value elsewhere.

Morgan Stanley is underweight the stock, with a $4 price target and sees Harvey Norman as less likely to return capital, as its balance sheet remains geared at 16% net debt/equity. Citi, meanwhile, has a 'Buy' on Harvey Norman with a $5.50 target price.

Along with JB Hi-Fi, Harvey Norman is Citi’s preferred pick in the sector, saying both companies stand to benefit from an acceleration in robot vacuum sales growth. The analysts note sales of robot vacuums grew around 24% in Australia in the September quarter. Citi anticipates sales of robot vacuums will eventually hit a similar penetration level as dishwasher sales.

Harvey Norman daily chart

Analyst recommendations and stock performance

Breville Group

Technical indicators show Breville Group’s 200-day moving average is trending higher; however, recent price action has shown a lack of confidence in the stock.

Breville Group is one company tipped to suffer from imposed tariffs on China, as the Australian company manufactures appliances such as espresso machines, toasters, juicers and microwaves in the area around Shenzhen, a Chinese city on the border with Hong Kong.

Breville Group's CEO told investors recently the company is already responding to Trump’s victory by moving more of its production out of China as quickly as possible to protect itself against any new tariffs. RBC Capital sees some risks that a shift of production out of China may result in impacts to gross margin and/or product quality.

The average broker recommendation on Breville Group is a 'Hold' with a price target of $37.42.

Breville Group daily chart

Breville Group stock performance and analyst ratings

Wesfarmers

Finally, Kmart owner Wesfarmers shares have rallied more than 20% year to date; however, sentiment on the stock is weak. The 20-day moving average is falling as upward momentum wanes, suggesting investors are cautious about holding the stock at these levels.

Citi has a 'Sell' recommendation with a $61 price target, saying Kmart unit sales are growing, but there is evidence of consumers trading down, while a slowdown in business spending is impacting Officeworks.

Wesfarmers daily chart

Analyst recommendations and stock performance