• Goldman Sachs analysts break down the recent Global Retail Conference
  • While consumers are resilient, those earning less are more selective
  • Which ASX stocks does GS recommend in the retail space?


The Goldman Sachs (GS) Global Retail Conference was held on 12 September and was webcast around the world.

There are a few major takeaways from the conference, and although these are particularly relevant to the US, GS says they can also be extrapolated to the Aussie market:


A resilient, but bifurcating consumer

Despite negative headlines, on-the-ground trends suggest more consumer resilience, especially across Staples categories due to still-strong employment and excess savings.

There are however notable differences between income groups of more than US$100K household incomes, versus those less than US$100K.

Households with income more than $100K are still spending, whereas those in less than US$100K bracket are becoming more selective and gravitating towards extreme value, especially on discretionary big ticket items.


A normalised retail environment

Most retailers note that the retail environment has largely normalised with supply chain speed, agility and service levels largely back to pre-Covid.

Lower international freight should provide flexibility on pricing vs margin.

Most retailers are also comfortable on the size and quality of their inventory heading into the holiday period.


Market share is a key goal

The year 2024 will likely be one of inflation moderation vs volume growth focus.

Market share is a key goal for most retailers given the broader industry slow-down.

Focus for most Staples retailers next year: customer personalisation, loyalty and supply chain improvement.

For Discretionary retailers, focus will be on: product innovation, physical store roll-out and omni-channel experience including e-Commerce.

Many retailers stated that they have invested into consumer data, digital, automation and loyalty capabilities – which enable better precision execution in an increasingly complex environment where labour inflation remains high.


GS likes the look of Walmart

In the US, Goldman Sachs says it likes Walmart (NYSE:WMT) stock.

This is because the operating model for grocery retailers continues to evolve from a store based model, to an omni-channel, eco-system based model.

Walmart called this the “new P&L” where it will be more of a consumer-centric view, including 1P/3P market place, loyalty, retail media etc.

1P/3P describes a marketplace where the retailer buys the product wholesale from the supplier, whereas in a 3P, the suppliers themselves are independent sellers on the platform.

Walmart CEO has noted that the profitability of this integrated “new P&L” can be higher than the “old P&L”.


Which ASX retail stocks does GS recommend?


F&B (food & beverage) retail

In Australia, GS believes that F&B grocery retail in FY24 will begin to moderate – with mid-single digit industry growth.

In this category, GS says it continues to prefer Woolworths (ASX:WOW) over Coles (ASX:COL).

“Early investments by Woolworths on the store network, technology and automation as well as digital and omni-channel capabilities are beginning to pay-off,” noted GS.

“We believe FY24/25 will be a period for WOW to take market share, while still expanding EBIT margins…”.


Discretionary retail

Within the Australian discretionary retail space, GS continue to prefer Super Retail Group (ASX:SUL), over Premier Investments (ASX:PMV).

SUL is the owner of four brands: Supercheap Auto, rebel, BCF and Macpac. PMV meanwhile owns Just Group, and stakes in Breville and Myer.

GS believes SUL’s auto and outdoor categories are likely to be more resilient in demand when compared to mass-market apparel sold by PMV.

For JB Hi-Fi (ASX:JBH) and Harvey Norman (ASX:HVN) meanwhile, GS remains cautious on ongoing industry demand weakness, similar to the US.


Home improvement

GS expects sales growth of the home improvement sector to remain largely stable, given home prices and transactions are resilient.

The return of immigration should also help sustain demand.

GS says it like the looks of Bunnings, which is owned by Wesfarmers (ASX:WES).

“That said, with already 60%+ market share in DIY, we believe that Commercial is the largest growth opportunity for Bunnings,” GS said.

“As such, for us to turn positive on WES (currently Neutral), we would like to better understand how Bunnings is building capability in Commercial to deliver consistent share gain,” said GS’ note.


Global brands

GS says it is encouraged by the effectiveness in successful innovation and newness stimulating sales, especially in mid-high end brands.

In this space, the broker continues to prefer Treasury Wine Estates (ASX:TWE) and Breville Group (ASX:BRG) over A2 Milk (ASX:A2M) and Domino’s Pizza (ASX:DMP) – with both these latter stocks getting a Sell recommendation from GS.

“TWE is focusing on brand and innovation including 19 Crimes rebranding, ONE by Penfolds, and multi country of origin launches of Matua and Frank Family,” says GS.

For Breville Group, brands like Barista Touch Impress, Vertuo Creatista, Joule Turbo Sous Vide and the Breville+ platform continue to shine, says GS.

“There continues to be strong demand and a penetration run-way for products that solve under-served demand, in less price sensitive categories.

“In contrast, we expect A2 Milk to still be dragged by underwhelming demand in China and lower child births,” said the note out of GS.



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