One of the main concerns for investors at the moment is consumer spending. Or the lack thereof.
With the cost of living going skyward, investors are tasked with figuring out which ASX shares are going to struggle and which are going to carry on as normal.
The good news is that the team at National Australia Bank Ltd (ASX: NAB) is looking to make life easier by revealing what consumers are saying about their spending plans. This could give investors an opportunity to position their portfolios accordingly.
What is NAB saying about consumer spending?
According to date from the NAB Consumer Sentiment survey Q2 2023, which included approximately 2000 respondents, eating out and takeaway food is top of the list of items that consumers would be most willing to cut back on.
This could be bad news for KFC operator Collins Foods Ltd (ASX: CKF) and Domino's Pizza Enterprises Ltd (ASX: DMP).
The top five items that consumers are most willing to cut back on are as follows:
- Eating out at restaurants/takeaway (55%)
- Micro treats: coffees or lunches out (50%)
- Trips to the movies or entertainment (49%)
- Car trips to save on petrol (45%)
- Holidays (43%)
The inclusion of holidays in the top five may come as a surprise given how strongly Flight Centre Travel Group Ltd (ASX: FLT) and Qantas Airways Limited (ASX: QAN) are performing in FY 2023. Perhaps this is an indication that trading conditions could weaken in FY 2024 as the cost of living crisis starts to bite.
Which ASX shares could be winners?
NAB's survey reveals the top five items that consumers are least willing to cut back on despite the tough economic environment. They are:
- Children's private school fees (10%)
- Children's activities: sport, hobbies (12%)
- Spending on pets (18%)
- Outsourced home services/cleaning (21%)
- Insurances: health, home, car (21%)
School fees topped the list with only 10% of consumers willing to cut back on these costs. After which, children's sports and pets were next on the list.
The former could be good news for Super Retail Group (ASX: SUL), which owns Rebel, and Accent Group Ltd (ASX: AX1), which is a leader in performance and lifestyle footwear retail with its countless brands. These include Platypus and The Athlete's Foot.
Whereas the latter looks set to give Woolworths Group Ltd (ASX: WOW) and its growing pet care and food exposure a boost. Late last year, the retail giant spent $586 million for a major stake in PETstock.
NAB's Head of Everyday Banking, Claire Righetti, commented:
Despite feeling the pinch, people are making cutbacks on things like coffee and cinema outings, so they can still dedicate funds to their kids and pets.
Australians are becoming more 'considered consumers' and saving an average of $286 each month through small thoughtful cutbacks – it means they can still spend on those things that really matter – for some people it's the family pet and for others it's getting extra help around the home.
Finally, as a fur baby parent, I can confirm that this survey aligns with my own spending plans!
