Bricks-and-mortar retail has always been a staple of Australian life, and by extension, Australian share portfolios. But since 2018 all I’ve seen is more and more headwinds for Australian retailers and this has been reflected in the share price performance of some of Australia’s biggest retailers and real estate investment trusts (REITs).
Why is the Retail sector performing poorly?
Globally, we’re seeing a trend of slowing economic growth which is translating to more bearish consumers and lower consumption. This economic cycle looks to have peaked or is arguably just at the end of its peak, and this lower consumption, combined with a move towards online marketplaces such as Amazon.com Inc. (NASDAQ: AMZN) and Kogan.com Ltd (ASX: KGN), has seen Aussie retailers falter.
Which companies’ share prices have struggled in 2019?
The Woolworths Group Ltd (ASX: WOW) share price is up just 3.77% year-to-date (YTD) while the Coles Group Ltd (ASX: COL) share price is down 2.48%, well short of the 11.62% YTD gain posted by the S&P/ASX200 Index (ASX: XJO). The ever-troubled Myer Holdings Ltd (ASX: MYR) jumped 23% last week following its profit rebound in its half-year results on Wednesday but has otherwise been flat in a disappointing start to the year.
In the REIT space, the news hasn’t been much better, with retail REITs including the Shopping Centres Australasia Property Group Re Ltd (ASX: SCP) and Vicinity Centres Re Ltd (ASX: VCX) share prices, down 2.37% and 0.01% for the year, respectively.
What’s the outlook for 2019?
On the surface, these numbers probably wouldn’t worry too many investors. However, it’s more the macro environment than the micro that would be making me a little nervous if I held significant retail exposure in my retirement portfolio.
While there are several blue-chip names that have seen their share prices trade flat or slightly higher in the early part of this year, I think investors are in for a little more pain, particularly if the broader Australian and/or global market experiences a correction or downturn.
We’ve seen data from the Reserve Bank of Australia miss estimates by quite some way in recent months and a continued stream of Aussie retailers folding under margin compression and greater online competition, which I think points to the fact there could be some more big names to go under in the next 12-24 months.
Should I keep my retail shares?
While things aren’t exactly dire for the Retail sector at the minute, it’s certainly worth reviewing exposures to all industries as we arguably reach the latter stages of the economic cycle in the coming months or years. I am a big fan of some countercyclical exposure at this point, including the likes of AGL Energy Limited (ASX: AGL) or even the likes of Altium Limited (ASX: ALU) in the tech space.
With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.
Hint: These are 3 shares you’ve probably never come across before.
They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”
We think these 3 shares offer solid growth prospects over the next 12 months. The first two currently offer fat, fully franked yields. The last is a surprising REIT offering you the benefits of being a landlord with none of the hassle! You’ll discover all three names and codes in "The Motley Fool’s Top 3 Dividend Shares for 2019."
Even better, your copy is free when you click the link below. Fair warning: This report is brand new and may not be available forever. Click the link below to be among the first investors to get access to this timely, important new research!
The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Shopping Centres Australasia Property Group. The Motley Fool Australia has recommended Amazon and Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.