We are positioned for a weak 2016 Christmas trading period with SUL our only non-food retail OW. We are cautious given the current weak environment, the petrol tailwind reversing, declining housing volumes and the online headwind accelerating. We lower valuations for MYR, SUL and HVN, respectively.
Petrol tailwind reversing: For the past couple of Christmas trading periods, petrol prices have been significantly lower than the preceding Christmas.For the upcoming Christmas trading period – the first since 2013- the petrol price won’t be lower than the prior year. We believe the stimulatory impact of a lower petrol prices is often underappreciated given the high purchase frequency and direct cash saving (as opposed to interest rate cuts where cash flows are often unchanged).
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
