Macro Intelligence: retail data reveals potential interest rate cuts in Australia

Written by Juliette Saly

In this week’s edition of IG Macro Intelligence, we examine the retail sector.

Retail outlook

November’s retail trade data fell short of market expectations, raising the likelihood of a February interest rate cut.

Retail trade rose 0.8% month-on-month (MoM), compared to expectations of a 1.0% gain. Over the year to November, retail sales increased by 3.0%.

Monthly retail trade chart

Black Friday frenzy boosts sales

The rise in retail sales marked the biggest monthly jump in ten months as the Black Friday discount frenzy attracted consumers. In October, retail trade rose 0.5%, while in September, it increased by 0.4%.

The Australian Bureau of Statistics (ABS) highlighted the November increase as a change in consumer behaviour, with more Australians waiting for the sales period.

My Bui from Australia and New Zealand Banking Group (ANZ) suggests there may have been a shift in consumer behaviour, indicating December retail sales could be weak.

Interest rate relief?

The retail trade data, combined with November’s consumer price index (CPI) data, has pushed the probability of a February rate cut to around 75%, according to bond traders.

Both ANZ and Commonwealth Bank of Australia (CBA) have moved forward their rate cut predictions to February, while Westpac and National Australia Bank (NAB) economists have a more conservative prediction of May.

Retail radar

The Australian Securities Exchange (ASX) 200 consumer discretionary sector has gained around 24% over the past 12 months, outperforming a 9.2% gain in the broader market.

Analysts see many of the stocks in the sector priced to perfection, with potential downside ahead.

ASX 200 consumer discretionary chart

Challenging conditions

• Myer Holdings (ASX:MYR)

Myer experienced a rocky start to 2025, following a market update earlier this week in which it cited that its year-to-date performance was impacted by several factors, including 'challenging macroeconomic conditions.' Henry Jennings from Marcus Today told ausbiz that 'challenging' is a term investors don’t want to hear; yet, the statement contained four references to the word.

Myer shares sank following the update, dragging Premier Investments down as well. Nevertheless, Myer shares have risen nearly 40% over the past 12 months.

Myer daily chart

Ord Minnett has a ‘sell’ on Myer, with David Lane telling ausbiz that if investors want to be in the sector, Premier would be a better pick. The average price target on Myer is $0.97, according to Refinitiv data.

Myer recommendation chart

• Premier Investments (ASX:PMV)

Premier will hold an annual general meeting (AGM) on Thursday, 23 January, regarding its Apparel Brands business merger with Myer. Premier downgraded its Apparel Brands division, including Peter Alexander and others, predicting earnings to fall by $16 million to $20 million.

Brands like Smiggle and Just Jeans highlighted cost-of-living pressures despite Black Friday sales. Retail conditions remain challenging in the first half of 2025, with a focus on value.

Premier shares are trending higher, according to ASX Tradewatch data, with both the 20-day and 200-day moving averages (MA) up. However, the 5-day MA is below the 50-day MA, suggesting long-term investors should proceed with caution.

Premier Investment daily chart

The average recommendation on Premier Investments is a ‘hold’, with a price target of $34.06, suggesting a 21% upside from current levels.

Premier recommendation chart

Kyle Rodda from Capital.com says the updates from Myer and Premier Investments align with what the official data tells us, ‘that household activity is practically stagnant. It's a reminder of the weak fundamentals in this market and that share prices have been going up because of strong global market sentiment and not stellar local earnings growth.’

• JB Hi-Fi (ASX:JBH)

Mark Gardner from MPC Markets told ausbiz JB Hi-Fi stock is too expensive at these levels.

Bell Potter has a ‘buy’ on JB Hi-Fi with a price target of $98, which is a 2% upside from current levels. Meanwhile, Ord Minnett sees the stock falling a further 26% from here to $71 and has downgraded the stock from ‘hold’ to ‘lighten.’

JB Hi-Fi daily chart

• Lovisa (ASX:LOV)

Lovisa shares have underperformed the overall sector over the past 12 months and were recently sold off following a broker downgrade from UBS.

The broker has a $27 price target, which is 6% higher than where Lovisa is currently trading.

Lovisa daily chart

The UBS analysts say Lovisa’s consensus estimates for new store expansion are overly optimistic for the first half of 2025, and like-for-like sales growth has remained 'subdued' despite benign comparatives, while competition is also intensifying.

Other analysts are divided on Lovisa’s outlook.

Lovisa recommendation chart

• Harvey Norman (ASX:HVN)

Finally, when it comes to Harvey Norman, shares seem to be in a near-term uptrend; however, the direction of its 20-day MA suggests investors see an opportunity for profit.

The average price target on the stock is a ‘hold’, according to Refinitiv, with a price target of $4.89, a near 6% upside from current trading levels.

Harvey Norman daily chart