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.
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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.
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.
