Discretionary retailers will be crunched by the weaker $A, so why does the market choose to ignore it
Discretionary retailers will be crunched by the weaker $A, so why does the market choose to ignore it? Whilst the falling $A is a potential rescuer of the Australian economy, we believe there has been little analysis on its likely effect on discretionary retailers who face a surge in the cost of doing business from a weaker currency. A dollar of retail inventory 12 months ago will cost around $1.20 in about a year's time as hedges run out. Retailers will respond by seeking to increase retail prices to maintain gross margins in those imported areas such as clothes, white goods and textiles. But that push comes at a weak time for the economy and consumer sentiment. Despite the looming crunch, investors have recently been bidding up retail stocks such as Harvey Norman, Dick Smith, Super Retail Group, JB HiFi, and even Woolworths. Read more: (VIEW LINK)
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