Consumer-focused ASX small caps have had a positive year; but will this continue into Christmas?

Consumer spending may be weak but consumer-focused ASX small caps have had a good year in 2019.

Overall the sector is up by 5 per cent and nine stocks have more than doubled.

The pack of consumer focused stocks is led by bookmaker Betmakers Technology Group (ASX:BET) which is up 195 per cent.

Research as a Service analyst Finola Burke covers the stock and credited its success to strong revenues, partnerships and reputation.

“The company is unique in that all main racing authorities in Australia use its official price solutions, race day management and data distribution,” she said when initiating coverage on the stock.

Also more than doubling in 2019 is plus size retailer City Chic Collective (ASX:CCX), online marketplace Redbubble (ASX:RBL) and electric scooter manufacturer VMoto (ASX:VMT).

Here are all the ASX small cap consumer staples & consumer discretionary stocks (by their official ASX GICS code) and their performance in 2019:

Swipe or scroll to reveal the full table. Click headings to sort

What will Christmas bring?

Yesterday unofficially kicked off the busiest period of the year for consumer spending with Singles’ Day in China. More than $80 billion in sales were made by Alibaba and JD alone in the 24-hour period.

November 29 and December 2 will be Black Friday and Cyber Monday, traditions among American retailers of offering large discounts on the Friday and Monday after thanksgiving.

Both of these events have become increasingly popular in Australia in recent years.

But consumer confidence and spending continues to be weak despite record low interest rates, tax cuts and relatively low unemployment.

CommSec chief economist Craig James suggested that consumers were reluctant to spend. He said they were still adjusting to wage growth, and record low interest rates actually spooked consumers.

‘Unprecedented split’

There is some good news though in that there is likely to be an uptick in consumer spending.

ANZ head of Australian economics David Plank said consumer-focused firms may see a small improvement but a boom large enough to declare consumer spending and confidence had recovered from current levels was unlikely.

“I think we’ll have to wait and see. We think it’ll be OK, that it’ll get a bit better but still soft relatively subdued,” he said.

“We were surprised by the weakness in retail spending in the third quarter.”

Plank did note that a distinction had to be made between consumer sentiment on their own finances and the outlook.

“One is positive and the other is negative, what that tells you is they are kind of uncertain,” he said.

“It’s an unprecedented split – so it makes it difficult to predict”.

He cited food prices as one of the reasons why spending was weak in the last quarter.

Retail sales in the September quarter were low enough to lead to the first drop in annual retail volumes since the early 1990s recession.

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