It may have been Black Friday in the stores but it's been a green day on the market with the benchmark S&P/ASX 200 Index (ASX: XJO) lifting to a new 25-week high.
The ASX 200 reached an intraday peak of 7,268.5 points today — up 0.37%. The last time we saw it above that level was on 31 May. It closed a little lower at 7,259.5 points, up 0.24%.
It seems appropriate that on one of the biggest shopping days of the year, the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) was the top-performing sector among the ASX's 11 sectors, up 1.15%.
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Why did ASX 200 retail shares take the lead?
A range of ASX 200 retail shares did some heavy lifting for the benchmark index today. The top movers include Harvey Norman Holdings Limited (ASX: HVN) shares, up 3.2% to $4.31.
Super Retail Group Ltd (ASX: SUL), the owner of Supercheap Auto and Rebel, finished 2.06% higher at $10.91.
Shares in shoe retailer Accent Group Ltd (ASX: AX1) were up 1.81% to $1.685. JB Hi-Fi Limited (ASX: JBH) shares were up 1.8% to $44.79.
With inflation and interest rates rising all year, there's been plenty of fear-mongering about householders needing to tighten their belts.
And sure, that threat is a worry for the economy. After all, the Australian Bureau of Statistics says household consumption is worth about 50% of Australia's gross domestic product (GDP).
But we're not seeing any reduction in retail spending yet. The latest ABS figures on retail trade show sales volumes have been growing for four consecutive quarters.
In fact, spending in the September quarter reached a new record level.
But that trade growth is slowing down amid rising prices due to inflation. Retail sales volumes went up by just 0.2% in September, down from 1% in both the June and March quarters.
But consider the impact of Black Friday. The Australian Retailers Association predicts consumers will spend $6.2 billion between Black Friday and Cyber Monday.
Sheesh…
No recession in sight
Harvey Norman executive chair Gerry Harvey says Australia is nowhere near a recession, according to the Australian Financial Review (AFR).
The retail king pointed out that unemployment was still very low, and it was difficult to find staff.
Harvey Norman is a quintessential ASX 200 retail share. The company held its annual general meeting (AGM) yesterday and presented a trading update for FY23.
It revealed a 6.9% global sales revenue bump year over year during the first four months of FY23.
Harvey said:
We'll have a really strong Christmas, but next year is a great unknown.
I don't think there's any doubt as retailers we will be affected, it's just as a matter of some sectors more than others.
We have 65 per cent of our stores in regional areas, and because agriculture and mining is so strong they shouldn't be affected as much.
Retail shares 'way too cheap'
Motley Fool Australia's chief investment officer Scott Phillips says many high-quality retail shares are "way too cheap right now".
A number of them are trading on single-digit price-to-earnings (P/E) ratios.
Phillips said ASX investors were too focused on current short-term risks like rising inflation.
He said: "With a long-term lens, I think we'll look back and see retail on single digit P/Es and say, 'Man, really?'".
He used using JB Hi-Fi as an example. It has a P/E today of 9.2, according to the ASX website.
Harvey Norman has a P/E of 6.5, and Super Retail has a P/E of 10.2.
Perhaps this is another reason why ASX 200 retail shares lead the market today.
Perhaps value investors are looking into ASX 200 retail shares since the Reserve Bank of Australia has reduced its monthly rate rise increments.
The RBA increased rates by 0.25% this month and in October, following four consecutive months of 0.5% rises.
The market was also surprised by a lower-than-expected increase in inflation in the United States this month.
