Macquarie has a more bearish outlook on consumer expenditure amid rising inflation and interest rates and a rebound in service consumption.
While the Wesfarmers portfolio is well-placed in a downturn, the broker believes rising interest rates will pressure its customer base more than most. The broker updates its forecasts to reflect increased economic uncertainty over the next 12 months, with the US entering a recession and Australia slowing significantly.
Over consumption of goods over the last two years is the key risk to the near-term performance of the Wesfarmers retail businesses. Rating is downgraded to Underperform from Neutral. Target is reduced to $43.30 from $47.50.
Sector: Food & Staples Retailing.
Target price is $43.30.Current Price is $40.21. Difference: $3.09 – (brackets indicate current price is over target). If WES meets the Macquarie target it will return approximately 7% (excluding dividends, fees and charges – negative figures indicate an expected loss).
