This may well be the retailers’ last hurrah before we enter into a tougher environment, and this Christmas is looking increasingly like it will be a particularly a hard one.
For an active investor, there is nothing more exciting than reporting season. It is a time when fundamental research is rewarded with strong company results and, hopefully, a rise in the share price .
Consumers are already feeling the pitch with food prices rising in the high single digits, energy price inflation hitting double digits, and many also facing the rollover of fixed home loans into more expensive rates in the next six to 12 months. Rising costs, particularly labour costs, have been increasing for the better part of 18 months, thanks to supply chain disruptions and Moscow’s war on Ukraine. This reporting season we will see some of the worst impacts and possibly the beginning of a sharp rise in wages already witnessed in broad macro measures and bargaining agreements.
. In addition, companies are running lean with a decade-long focus on cost control, and a quick decline in broad inflation pressures will help alleviate the need for long-dated wage increases.Corporate Australia is in excellent shape in terms of balance sheet strength, with many companies reaching almost debt-free levels and with a limited need to tap capital markets given the influx of raisings that occurred throughout the pandemic.
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