As we know, fiscal and monetary stimulus caused a rapid and broad-based upswing in consumer spending during Covid-19. This saw both high-and low-quality retailers deliver strong revenue growth over the last three years. Even retailers with a poor customer proposition saw strong sales growth, which coupled with government cost support delivered strong short term profit growth.
Understandably the market assumed that most of this benefit would fade across all retailers, forecasting large revenue declines across the whole sector. The market’s core thesis was the consumer would slow, and when it did, revenue would mean revert possibly below the trendlines of FY19. But this view failed to differentiate between those companies that reinvested and those that did not. The better management teams in our view had predicted that outsized sales results might be fleeting and they sought to buttress earnings with three years of investment in better distribution, increased range and store refurbishment.
In comparison, other retailers capitalised too much of their Covid sales boost without making significant changes to the way they served customers. The pathway for companies that reinvested and those that did not over the 1H19 to 1H23 period is now beginning to diverge. We look at the differences in recent sales and share price results for 1H23 in the attached. Download below.
Ethical Partners are pleased to see Australia take the next steps to implement mandatory climate reporting with the release of draft climate standards, which we provided feedback on.
Ethical Partners have continuously called for the provision of high quality, comparable data on company’s climate governance and carbon metrics, which we believe is imperative for investors to fulfil the potential of responsible investment.
Ethical Partners have been proud to have been active supporters of the TNFD Forum over the past few years, and to provide regular feedback on the development of the official TNFD recommendations, which were launched in December, as well as to be active members of the RIAA Natural Capital Working Group.