Reporting Season Preview: Key picks in Retail ahead of results

We expect a relatively upbeat reporting period from most companies in the consumer discretionary sector given more conducive consumer conditions in the second half and housing still a major tailwind for some. We identify plenty of strong investment opportunities, but retain a Neutral sector stance given the materially lower AUD will have a meaningful impact on pricing and margins for most retailers from 1H16. Our predictions for positive earnings surprise this reporting season include: Domino's Pizza (DMP), Adairs (ADH) and Beacon Lighting (BLX). Candidates for negative surprise include: Automotive Holdings (AHG). Key picks: In a sector that will be impacted by the falling AUD, we stick with the retailers who are best placed to deal with the cost inflation. We are also mindful of the potential for the strong housing tailwind to ease in the future. Our top picks include: Adairs, Domino's Pizza, Burson Group, Lovisa and Super Retail Group. See reasons why on morgans.com.au: (VIEW LINK)