How will ASX retail shares go in 2022?

Aussies will be weaned off government support and won’t be trapped at home for most of the year (we think). Is this the end of the party for retailers?
The post How will ASX retail shares go in 2022? appeared first on The Motley Fool Australia. –

ASX retail shares have endured the COVID-19 pandemic reasonably well.

As Australians received government support and spent less money on discretionary items like travel, supermarkets like Woolworths Group Ltd (ASX: WOW) cashed in on increased demand for staples. And online merchants such as Temple & Webster Group Ltd (ASX: TPW) went gangbusters from customers trapped at home.

But perhaps they all had their strong upwards run in 2020, because 2021 wasn’t super-impressive for the prices of retail shares.

“Retail stocks mostly tracked sideways for the better part of 2021 despite delivering big growth and increased dividends and buybacks,” Tribeca Investment Partners portfolio manager Jun Bei Liu told The Motley Fool.

Indeed Woolworths shares are up 11% this year while Temple & Webster is down 11%, cancelling each other out.

So how will 2022 fare for Australian retail as the world battles inflation, supply constraints and new coronavirus variants?

The year of ‘small returns’

Unfortunately, Liu predicts next year will be another period of “small returns” that will mostly come from “higher dividends”.

“Retail sector has been the key beneficiary of COVID stimulus/handouts and lack of travel,” she said.

“Many of the mega-cap retailers are going to experience some of the toughest comparable periods — most will have revenue declines.”

International border blocks, now exacerbated by the Omicron variant of COVID-19, remain a worry.

“Costs will be going up for them with severe global supply chain disruptions as a result of border closures.”

Liu feels like Wesfarmers Ltd (ASX: WES) and food retailers — such as Woolworths, Coles Group Ltd (ASX: COL) and Metcash Limited (ASX: MTS) — already have “stretched valuations” while seeing “declining earnings”.

The election could bring a windfall for consumers

However, merchants selling discretionary products might have better luck.

“Aside from just cheap valuations, Australian elections generally prove to be positive for the consumer sector,” Liu said.

“We see possibilities for tax cuts to be pulled forward which will be positive for the discretionary retailers such as JB Hi-Fi Limited (ASX: JBH).”

A federal election must be held no later than 21 May, with both major parties already in campaign mode.

“We are likely to see more stimulus to consumers though not meaningful in comparison to the handout over the past few years,” said Liu.

“Fiscal spending will be another area of focus, though most have been discussed in the past 12 months.”

The other angle for discretionary retailers, of course, is increased foot traffic in shopping centres. 

“Retailers whose earnings will benefit from a reopening economy such as Lovisa Holdings Ltd (ASX: LOV) will likely to outperform.”

The post How will ASX retail shares go in 2022? appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More reading

Top brokers name 3 ASX shares to buy next week

2 fantastic ASX tech shares tipped for big things in 2022

What’s the outlook for the Coles (ASX:COL) share price and dividend in 2022?

Monopoly, expansion, dividend: the ASX share with everything

Broker gives its verdict on the Woolworths (ASX:WOW) share price after 8% decline

Motley Fool contributor Tony Yoo owns Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Temple & Webster Group Ltd. The Motley Fool Australia owns and has recommended COLESGROUP DEF SET. The Motley Fool Australia has recommended Lovisa Holdings Ltd and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!