If you were hoping consumer stocks would get a boost from the latest retail sales figures, you'd be disappointed.
There had been hopes that the stimulus offered in the federal budget along with the improved consumer confidence and record low interest rate would translate to greater spending in April but the government figures showed spending was flat for the month.
Economists were tipping a 0.3% increase in seasonally adjusted terms.
The S&P/ASX 200 Consumer Discretionary Index was trading 0.7% lower in afternoon trade and just about every stock in that sector was wallowing in red ink.
Myer Holdings Ltd (ASX: MYR) tumbled 2.8% to a one-month low of $1.40 as department store sales were among the weakest categories in the April sales data, and food and beverage franchisor Retail Food Group Limited (ASX: RFG) suffered a further 3.9% sell-off after yesterday's 6.4% whipping on the back of a poorly received market update.
But there is a standout in the gloomy sector. Furniture and electronic retailer Harvey Norman Holdings Limited (ASX: HVN) is bucking the trend with a 2.3% jump to $4.49 probably because Macquarie upgraded the stock to "neutral" as the broker is expecting a strong second half for the industry.
But the risk to Harvey Norman's earnings is on the upside as the retailer said its Irish operations are on track to break even in 2015-16. That may be too conservative given the Irish economy is coming back to life.
The weaker-than-expected April data is unlikely to prompt many to change their full year outlook for retail sales. One data point doesn't make a trend and the monthly retail sales figures have been registering good growth over the past several months.
I have a positive take on retail and my stock preference is music and electronics retailer JB Hi-Fi Limited (ASX: JBH), footwear retailer RCG Corporation Limited (ASX: RCG) and apparel and stationery company Premier Investments Limited (ASX: PMV), even though the stocks have risen strongly over the past few months and are close to what I would consider fair value.
Female apparel retailer Specialty Fashion Group Ltd. (ASX: SFH) has a lot more upside potential but the stock is only suited for those with a higher tolerance for risk as the group is in the midst of turning around the embattled Rivers chain that it acquired at the end of 2013.
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