Improved pre and post-Christmas retail sales expectations are pointing to a stronger year, so while all eyes are on store revenue and customer traffic, investors should track the performance of consumer discretionary companies in general also.
Over the past six months the strongest share price performers in the S&P ASX 100 Index (ASX: ^XTO) for consumer discretionary stocks covered the types of services you would expect to see expand as more consumers start to spend.
Crown Resorts Limited (ASX: CWN) leads the pack with an impressive 39.6% gain from $12.80 to $18 since July. It has a lot of irons in the fire with international casino development, working its way through the approvals process for a second Sydney gambling venue, and competing with Echo Entertainment Group Ltd (ASX: EGP) for the opportunity to build a new integrated resort and casino in Brisbane.
It has a PE of 26.7 and analyst forecast consensus is estimating earnings-per-share (EPS) to be around $0.91, or 35.8% more than its 2013 $0.67 EPS.
Harvey Norman Holdings Limited (ASX: HVN), the furniture and electronics retailer, fits right in for products in demand through higher discretionary spending and a rising property market. Its share price is up 28.9% since July.
It saw a surge in share price when the total sales and like-for-like sales finally went positive after several quarters of sagging data. We will have to see how much discounting was needed to drive the sales it achieved during the holiday season, and that will tell a clearer story for net profits.
David Jones Limited (ASX: DJS) is expected to see more sales both in store and online for the holiday season. Investors are expecting a lot from them because it's now $3.07, up 19.5% since July.
DJs and Myer Holdings Ltd (ASX: MYR) have developed new distribution centres dedicated to online sales. Some findings show that multi-channel marketing and sales are actually increasing store foot traffic with higher average spends per person.
Flight Centre Travel Group Ltd (ASX: FLT) has started to expand its Escape Travel franchise model to attract independent bookings agencies as well as those affiliated with other franchise groups. Although a higher Aussie dollar gives more purchasing power to travelers overseas, the company itself will benefit in international earnings by having exposure to currently stronger US$ denominated revenue. It is pursuing more store fronts in the UK and US, and is targeting lucrative corporate travel business.
It has risen in share price by 5% over the last six months, to its current $46.35, hitting a $53.12 high in early November.
Foolish takeaway
Individual investors can do a lot of research just by going to shopping centres and entertainment venues and seeing how busy they feel. I periodically walk around in my local shopping malls, noting where many people are, what they are buying and if there are any new stores that are attracting attention and sales.
If you spot a new and interesting store, you should go in and talk with staff to get a feel for the business. It may even be owned by a publicly listed company, so you might be able to find a stock lead before the analysts do.
