ASX 200 retail shares in focus amid bumper Christmas forecast

Retailers could be set for another big windfall during the pre-Christmas trading period…

A woman Christmas shopping while holding bags and a credit card.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Christmas is fast approaching and research is indicating it will be another big season for spending. The cash-splashing festivities place ASX 200 retail shares back in the frame as potential beneficiaries. This follows another calendar year of sporadic lockdowns and restrictions throughout Australia due to COVID-19.

While financials have been the best performing sector across the S&P/ASX 200 Index (ASX: XJO), predictions of a spending binge towards the end of the year might boost consumer discretionary shares.

Pocketed cash ready to be unleashed

In a release from the Australian Retailers Association (ARA) today, pre-Christmas retailer trade has been given a price tag. According to the ARA, in conjunction with Roy Morgan, it is believed pre-Christmas spending will broadly match last year's figure. This would suggest retail trade in the ballpark of $58.8 billion.

The pandemic has undoubtedly put a dent in our lives in various ways. Yet, retail trade has increased from its pre-pandemic levels in spite of the toll it has taken on the economy. In fact, the ARA's forecast for this year's pre-Christmas spending is 11.3% above what was recorded in 2019.

Furthermore, the forecast comes at a time when Australian savings remain elevated above historical levels. Although the household saving ratio has been in decline since June — as Aussies begin to increase spending — there seems to be plenty of spending fodder in the tank, potentially to be spent at ASX 200 retailers.

Source: Australian Bureau of Statistics – Australian National Accounts June 2021

Speaking on the bumper pre-Christmas spending forecasts, Roy Morgan CEO Michele Levine said:

Our sales forecasting reveals a country on the move; a consumer economy exhibiting all the signs of pent-up demand. No one believed that spending this coming Christmas could match the highs of last year. But as the population emerges from the most punishing crisis in a hundred years, shoppers are looking to reward themselves and their families.

The sales aren't all going to be instore, however. The COVID 5-year digital acceleration means many more Australians are shopping online. So, this Christmas we will see much more of a mix between instore and online shopping

ASX 200 shares supporting a fresh new look

The ARA also outlined some key categories that could be set for a boost in trade. These include clothing, fashion, accessories, and hospitality. Such categories are ones that haven't received as much attention prior to lockdowns lifting.

However, as ARA chief executive Paul Zahra mentions, the reopening could change that:

I think there's no doubt there will be a focus on experience because we have not been able to connect, so people will be out and about and we are obviously seeing that in restaurant and cafe numbers.

Clothing and footwear and accessories are a big opportunity as consumers will be able to go to events, they will be able to go out, face to face and want to refresh their wardrobe because they have not done that for some time – and people's waistlines might have changed through lockdowns.

Another big season will likely benefit the ASX 200 top dogs, such as JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN). However, with a focus on clothing, footwear, and accessories, other ASX-listed retailers could also see a boost.

Companies like Accent Group Ltd (ASX: AX1), Lovisa Holdings Ltd (ASX: LOV), and City Chic Collective Ltd (ASX: CCX) stand out.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Harvey Norman Holdings Ltd. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Consumer Staples & Discretionary Shares

A couple of friends at a rooftop party enjoying some hot and tasty Domino's pizza
Dividend Investing

Own Domino's shares? Today is pay day!

Eligible Domino’s shareholders can expect some welcome passive income today.

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Photo of two women shopping.
Earnings Results

Premier Investments share price jumps 9% on results and demerger plans

The Smiggle and Peter Alexander owner has released its results. How did it perform?

Read more »

a woman with lots of shopping bags looks upwards towards the sky as if she is pondering something.
Consumer Staples & Discretionary Shares

How a potential demerger could deliver a 10% upside for this ASX 200 stock

Investors might have even more reasons to love this ASX 200 stock if rumours are true.

Read more »

A smiling woman sits in a cafe reading a story on her phone about Rio Tinto and drinking a coffee with a laptop open in front of her.
Consumer Staples & Discretionary Shares

Why Goldman Sachs expects market-beating returns from Super Retail shares

Goldman Sachs thinks this retail share could offer big returns for investors.

Read more »

A happy boy with his dad dabs like a hero while his father checks his phone.
52-Week Highs

Why is the A2 Milk share price up 46% year to date and at a 52-week high?

This infant formula company's shares have delivered the goods this year.

Read more »

Happy man on a supermarket trolley full of groceries with a woman standing beside him.
Consumer Staples & Discretionary Shares

2 things I'm waiting for before buying Coles shares

I'm waiting for two things before I add Coles to my share portfolio.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Consumer Staples & Discretionary Shares

If I'd put $5,000 in Wesfarmers shares at the start of 2024, here's what I'd have now

Are investors smiling this year? Let's see how its shares have performed.

Read more »