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Mass CE Retailer Stocks Tank On Concerns Over Next Quarter

Mass CE Retailer Stocks Tank On Concerns Over Next Quarter

The uplift in the last quarter could “Well be felt in the next quarter” said a Citigroup observer who believe sales will run flat prior to a strong last quarter for 2015. 

On Friday share in consumer electronics retailers fell after latest retail results for May from the Australian Bureau of Statistics revealed that the federal budget has done little to support the consumer sector.  

Shares in Harvey Norman Holdings led falls in the sector with a 3% crash to $4.52 as the company is seen to be one of the biggest beneficiaries from Joe Hockey’s small business stimulus package that was announced as part of the federal budget on May 12.

Fellow retailer Dick Smith Holdings was not far behind with a 2.9% drop to $2.04 while JB Hi-Fi Limited only fell 1.1% to $19.60 at the close. 

Small business owners didn’t rush out to spend with seasonally adjusted retail turnover rising 0.3% for May compared with economists’ forecast for a 0.5% rise following a 0.1% fall in April.

It was household goods and food retailing that contributed the most of the May rise at 0.9% and 0.7%, respectively, but shoppers shunned department stores with sales in that category falling 1.4% for the month.

That’s not good news for the likes of Myer Holdings whose shares are already trading at record lows despite rumours that Myer is a takeover target.

ChannelNews is tipping that the three big mass retailers Harvey Norman, Dick Smith and JB Hi Fi will deliver improved sales and profitability in coming weeks. 

This is particularly so for JB Hi-Fi even though some analysts believe the stock is looking expensive after its 24% rise since January.

But the stock is trading on a current year forecast price-earnings multiple of 14x and has a yield that’s close to 7% if franking credits are included. 

Motley Fool said on Friday that they thought the JB HI Fi stock represented reasonable value given its track record and I would be a buyer on dips”. 

On the other hand they were not too keen on Dick Smith on the basis that their small electronic store format delivered limited floor space that means they have to be extra careful in picking the right products.

They saw Harvey Norman as a good stock at the wrong price for their analysts.