The 2025 festive season is shaping up as a good one for consumers. They are opening their wallets and buying bargains. The challenge for retailers is the spend is not evenly distributed. Consumers bought more in November and may buy less in December. We have had positive sales feedback for furniture, auto and online and expect these to do well over 1H26e. At the other end of the spectrum, we have had weak sales feedback on footwear and liquor. The challenge for electronics is lapping incredibly good growth from November and December 2024. Using Visible Alpha consensus as the reference point, we see downside risk to sales for JB Hi-Fi, Harvey Norman and Endeavour. Retail has been more promotional and 1H26e risks to gross margin also exist. At EPS, we see downside risk for Accent, JB Hi-Fi, Endeavour Group and Myer. For those wanting a more light-hearted take, further down we have our Christmas gift ideas.

Australian retail is setup for a good Christmas this year. The growth rates leading into Christmas has been far stronger than last year and while supply chains are not seamless, they are functioning better. Our feedback indicates low single digit sales growth for many with some stronger anecdotes. Given the timing of Omicron last year, sales feedback should strengthen further into Christmas and January 2023. We expect strong trading to lead to upside risk in near-term earnings for retailers.

It’s shaping up to be a great Christmas for Australian retailers, but the share market remains cautious. Sales feedback is positive. Margins are likely to surprise on the upside. We are hearing strong feedback in appliances, apparel and footwear. Given November-December can be more than one-third of annual earnings, there is upside to consensus expectations for FY22e in our view. While sales look good, investors are nervous about buying into a peak in retail earnings.