ASX News Today LIVE | XJO Flat as Market Mulls Inflation Data

Advanced memory tech developer Weebit Nano [ASX:WBT] closed 11.4% lower on Thursday, extending losses this week to over 30%.

The selling was kickstarted by the resignation of director Fred Bart, announced on Tuesday.

Weebit shares sank 18% on the news before trading in the stock was suspended.

Today, trading resumed with WBT releasing an update on its ReRAM IP along with its response to ASX queries surrounding Bart’s exit.

In the release to the market on Tuesday announcing the resignation, Bart offered these comments:

“With all the pillars now in place for Weebit Nano’s next phase of growth, and increasing demands on my time from my other Board roles and private companies, now is the right time to step down from the Weebit Nano Board.”

Investors thought now was actually the wrong time to leave, if it really was true that the firm was set for the next phase of growth.

In its response to the ASX, Weebit’s board said it does not consider Bart’s resignation price sensitive.

If his resignation was not price sensitive, how did the board explain the share price slump?

Short sellers, among other things:

‘Since entering the ASX300 WBT shares have regularly been the target of short sellers, and the share price has fluctuated significantly during this time.’

Struggling purveyor of olfactory delights (home fragrance products like scented candles) Dusk [ASX:DSK] is mending its fire.

After dropping over 50% year to date, Dusk is staging a mini comeback.

Over the last few days, Dusk is up ~15%.

Have the bargain hunters sniffed out value?

Dusk is currently trading at a trailing P/E of 3.8.

Let’s see if this rally lasts.

What’s happening with luxury retailer Cettire [ASX:CTT]?

After falling from over $4 a share in November 2021 to under 40 cents in June 2022, the retail stock rebounded over 600% and just hit a new 52-week high of $3.05 a share today.

Quite the impressive turnaround.

But why? Especially given the macroeconomic climate?

Surely Cettire is flying despite the macro headwinds, not because of them?

Retail turnover through the year has been falling since August 2022 yet Cettire has bucked that trend.

Source: ABS

Was the stock so oversold last year (it did fall 90% from the all-time peak) that its steady sales growth surprised the pessimistic market consensus?

The answer may not lie with strong sales but with improving earnings.

Most of the market took Cettire’s strong sales growth as a given. The question was can the sales growth scale profitably.

The latest EBIT analyst revisions suggest the market believes Cettire can:

Source: Market Screener

A few days ago, the Australian Financial Review profiled Regal Funds Management portfolio manager Jessica Farr-Jones, who spoke about Cettire extensively. (Regal is the stock’s cornerstone investor).

Here’s a snippet:

‘Farr-Jones says luxury retail has been slow to move online because it has traditionally focused on providing wealthy customers with a “white glove in-store experience”.

‘Today, about 22 per cent of the luxury market is online, but the portfolio manager says that is expected to grow to 30 per cent by 2025. It’s for this reason that Regal is “very bullish about the market that [Cettire is] operating in”.

‘So far, the fastest increase in borrowing costs in a generation has not appeared to hurt big spenders. Cettire’s sales are up 122 per cent over the first four months of calendar 2023 to $141.3 million, according to the company’s market update in April. The shares have doubled to $2.55 since the start of the year.

‘Another quality Farr-Jones likes about Cettire is its “capital light” balance sheet because it does not hold any inventory. “The downfall of the ASX-listed retailers over the past couple of years has been stuck with too much inventory,” she says.

‘She also expects Cettire to “imminently” launch in mainland China, the world’s largest luxury market, and notes that “unlike its domestic peers, the company has a global addressable market”.’

Here are the unfortunate stocks hitting their 52-week lows today:

• Bega Cheese [ASX:BGA] is down a further 4% today. Bega is not only hitting 52-week lows but multi-year lows after another strained profit update
• Gold producer St Barbara [ASX:SBM] is hitting new lows today and is down 40% over the past 12 months
• Two real estate firms are in the dumps, too — GDI Property [ASX:GDI] and Elanor Commercial Property [ASX:ECF]

How about stocks notching yearly highs?

• Magellan Global Fund [ASX:MGOC] is up 15% for the year and hitting fresh 52-week highs
• Employee benefits provider Mcmillan Shakespeare [ASX:MMS] is up 85% over the past 12 months and hit new highs today
• The retail outlier — Cettire [ASX:CTT] keeps resetting its 52-week high in recent weeks, now up over 600% in the past year

Our small-caps expert Callum Newman thinks the protracted draw-down in small caps is looking enticing now.

Accumulate while you can I reckon pic.twitter.com/CNYp2wJ6NX

— Callum Newman (@CalNewmanFT) June 28, 2023

May’s monthly CPI indicator revealed further pain points for retailers like Universal Store and Best & Less.

Dis-aggregated by group, the monthly CPI release showed a continued fall in the price level for clothing & footwear.

In fact, prices for the category fell 0.4% in the 12 months to May 2023.

Source: ABS

This fall in prices is likely coming from discounting and ‘promotional activity’ in retail lingo.

Which reminds me of an earlier piece I wrote here, where I discussed Lowe’s Law:

‘If demand is strong, a business doesn’t discount. If a business does discount, demand isn’t strong.’

This ‘law’ facetiously refers to a comment RBA governor Philip Lowe made before the Senate in February:

‘On pricing, they [businesses] don’t say this, but when demand is strong, you don’t discount. If demand for your product is strong, why would you discount? That’s one of the reasons, I think, why inflation has been high recently. Demand is strong and firms don’t discount. Some firms, no doubt, take the opportunity to put up their price when demand is strong. That’s how it works. Higher interest rates will mean that demand won’t be so strong, and firms will once again start discounting and prices will have to be a bit skinnier. We expect that to play out over the course of this year. That’s the process of bringing inflation down. That’s what we hear. But firms don’t talk about pricing; they normally say, “Our costs are going up, so we’ve got to put our prices up.” But we know that when demand is strong, you don’t discount and you put your prices up.’

Discounting is a great economic tell. And plenty of retailers have started discounting in recent months.

https://www.moneymorning.com.au/20230228/what-are-asx-retail-stocks-telling-us.html

The excitement is palpable.

In less than an hour, the ABS will release not one but two key data points — retail trade volume and job vacancies.

Along with yesterday’s monthly CPI indicator, the trio of releases will go a long way in informing the Reserve Bank’s upcoming decision.

The ASX 200 finished 1.1% higher yesterday, its best day since April.

That was probably driven by the monthly CPI indicator for May.

Headline inflation came in lower than expected at an annual rise of 5.6% in May, with forecasts of a 6.1% gain.

However, when excluding volatile items, the decline in inflation was much more modest.

The annual increase for the monthly CPI indicator excluding volatile items like travel and automotive fuel was 6.4% in May, slightly lower than the 6.5% rise recorded in April.

Trimmed mean inflation — a measure tracked by the Reserve Bank — dropped from 6.7% to 6.1%, stilled quite elevated.