The recent weakness in retail is creating a buying opportunity in our view

The recent weakness in retail is creating a buying opportunity in our view. Whilst the federal budget is being blamed for creating an air pocket in consumer confidence our analysis suggests that the impact on household disposable income is actually very modest, particularly in the short term. As a result, we expect consumer sentiment to bounce back quickly. Retail sector downgrades have been a recent feature, exacerbated by the unseasonably warm May which kept consumers out of the shops. Added to this has been a number of company specific issues from The Reject Shop and Pac Brands that are more related to internal problems that genuine market softness. With retail as a whole now trading on a meaningful discount to the market, there are some good buying opportunities in large, well-managed companies with strong competitive positions. We like AHE, SUL and JBH.