Morgans expects the trading environment for retailers to deteriorate in FY23 due to inflationary impacts on household budgets. It’s noted retailers are also experiencing significantly higher costs from labour, energy and many key inputs.
As a result, the broker lowers its FY23 earnings (EBIT) estimates (but still expects growth) across its coverage of the Retail sector by -5.6%, while FY22 estimates are unchanged.
Lovisa Holdings, Breville Group and Universal Store are the broker’s key picks based on network growth opportunities.
Add-rated Lovisa Holdings may yet become one of the biggest success stories in Australian retail, according to the analyst. The target falls to $21.50 from $24.00 on lower peer multiples.
Sector: Retailing.
Target price is $21.50.Current Price is $15.93. Difference: $5.57 – (brackets indicate current price is over target). If LOV meets the Morgans target it will return approximately 26% (excluding dividends, fees and charges – negative figures indicate an expected loss).
