How Resilient is NZ’s Consumer Discretionary Sector Amidst Inflationary Concerns - 2 Stocks to Consider

Company Overview:

Delegat Group Limited (NZX: DGL) is a New Zealand-based wine company. The company invests in wineries and vineyards in the prime grape- growing regions of Australia and New Zealand. Michael Hill International Limited (NZX: MHJ) is an Australia-based jeweler retailer, with a portfolio of brands, operating a network of more than 302 stores across Australia, New Zealand, and Canada, with multiple international digital platforms.

Kalkine’s Sector Report covers the Key Financial Metrics, Risks, Outlook, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock.

1. Sector Landscape and Outlook

As per Stats NZ, the total volume of retail sales in NZ witnessed a rise of 0.8% in the March 2025 quarter as compared to the December 2024 quarter. The growth momentum in retail activity was modest during the quarter ended March, with majority of the industries contributing positively. The motor vehicle retailing, and pharmaceutical and other store-based retailing encountered the largest increases during the quarter. Overall, 10 of the 15 retail industries encountered increased retail sales volumes in the March 2025 quarter as compared to the December 2024 quarter, after adjusting for price and seasonal effects.

 The biggest contributors to the increase in retail activity during the March 2025 quarter were motor vehicles and parts retailing (up 3.1%), pharmaceutical and other store-based retailing (up 3.7%), clothing, footwear, and accessories (up 3.2%) and accommodation (which was up by 2.9%).

Exhibit 1: Change in Seasonally Adjusted Retail Sales Volume, By industry, December 2024–March 2025 Quarters

Data Source: This work is based on/includes Stats NZ’s data which are licensed by Stats NZ for reuse under the Creative Commons Attribution 4.0 International Licence; Chart Created by Kalkine Group

International Trade: March 2025 Quarter

Stats NZ released data about international trade for the quarter ended March 2025. The total exports of goods and services for the quarter ended March 2025 amounted to $29.6 Bn, reflecting a rise from $25.9 Bn in the March 2024 quarter. Notably, the total imports of goods and services for the quarter ended March 2025 stood at $27.9 Bn, a rise from $26.1 Bn during the March 2024 quarter.

Notably, the total services exports witnessed a rise of $675 Mn to $9.6 Bn in the March 2025 quarter as compared to the March 2024 quarter. The travel services were up by $183 Mn to $5.6 Bn and the charges for use of intellectual property services increased $78 Mn to $511 Mn. With respect to transportation services, there was an increase of $67 Mn to $1.2 Bn.

Electronic Card Transactions: April 2025

Stats NZ released data about electronic card transactions (April 2025). In April 2025 month, the spending in retail industries was unchanged and spending in the core retail industries rose 0.2% (or $12 Mn) as compared to March 2025. By retail spending category, consumables witnessed a rise of $13 Mn (or 0.5%), hospitality was up by $2.1 Mn (or 0.2%), durables rose by $0.9 Mn (or 0.1%), and motor vehicles (excluding fuel) was down by $5.6 Mn (or 2.9%).

The non-retail (excluding services) category witnessed a fall of $33 Mn (or 1.5%) from March 2025. This category consists of medical and other health care, travel and tour arrangement, postal and courier delivery as well as other non-retail industries. The total value of electronic card spending, which includes the 2 non-retail categories (services and other non-retail), fell from March 2025, down by $18 Mn (or 0.2%).

Exhibit 2: Retail Card Spending ($ Bn)

Data Source: This work is based on/includes Stats NZ’s data which are licensed by Stats NZ for reuse under the Creative Commons Attribution 4.0 International Licence; Chart Created by Kalkine Group

Key Risks and Challenges:

Recently, RBNZ stated that uncertainty related to the global tariffs and policy are expected to reduce the global growth. The US tariffs can lower global demand for NZ’s exports, mainly from Asia, impacting the domestic growth. Furthermore, the heightened global policy uncertainty could weigh on the business investment and consumption in NZ. Overall, the consumer discretionary sector is exposed to the risks related to macro-economic slowdown, increased interest rates, global trade tensions, reduced consumer confidence, lower spending power, etc.

Exhibit 3. Key Risks in Consumer Discretionary Sector:

Source: Analysis by Kalkine Group

Outlook:

RBNZ stated that the NZ economy is starting to recover, after contracting over the middle of 2024. There is spare productive capacity in the broader NZ economy. This is expected to dissipate over the medium term as the economy witnesses a recovery. Notably, increased export commodity prices as well as reduced interest rates have been helping the overall economic activity in the NZ economy. Furthermore, the nominal wage growth has been slowing, while companies are reporting that it is easier to find workers. Notably, the employment growth is presently modest but is projected to increase from H2 of the year in line with the broader economic recovery.

RBNZ also added that the annual CPI inflation is expected to increase to 2.7% in Q3 2025 and then return to near the 2% target midpoint from 2026. As per the release, the near-term rise in headline inflation consists of increased food and electricity price inflation. The non-tradables inflation is projected to decline, consistent with spare productive capacity.   

Apart from the sector-specific factors, an analysis on 2 NZX-listed companies is provided. This report covers their insights, outlook, performance and potential as expected to be delivered in the near to medium term.

1)  Delegat Group Limited (Recommendation: Buy, Potential Upside: Low Double-Digit) (M-Cap: NZD 374.18 Mn, Annual Dividend Yield: 7.51%)

Business Description:

Delegat Group Limited (NZX: DGL) is a New Zealand-based wine company. The company invests in wineries and vineyards in the prime grape- growing regions of Australia and New Zealand.

Outlook:

The Oyster Bay brand has been holding a leadership position in the US market and has a robust network of US distributors who are working with the Group in order to navigate through the current uncertainty. During H1 FY 2025, DGL made investments of $43.2 Mn in New Zealand vineyard developments and winery expansion. The company remains well placed to finance current operations and future capital investment in NZ and Australia.

Technical Overview:

DGL Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

On the daily chart, DGL’s stock prices are undergoing a downtrend characterized by lower lows and lower highs, indicating a negative bias. Moreover, the momentum oscillator RSI (14-period) is trading below its midpoint, providing further support to the previous observation. Prices are trading below both 21-day and 50-day SMAs, which might function as dynamic resistance levels for the stock; in contrast, the stock’s nearest round level may act as a sentimental support level. A significant support level for the stock is positioned at NZD 3.65, while critical resistance level is located at NZD 3.84.

Fundamental Valuation

P/E Based Relative Valuation

Stock Recommendation

Considering the facts above, a ‘Buy’ recommendation on the stock has been provided at the closing market price of NZD 3.70 pr share, down by 0.27% as on 5 June 2025.

2)  Michael Hill International Limited (Recommendation: Speculative Buy, Potential Upside: Low Double-Digit) (M-Cap: NZD 165.4 Mn)

Business Description:

Michael Hill International Limited (NZX: MHJ) is an Australia-based jeweler retailer, with a portfolio of brands, operating a network of more than 302 stores across Australia, New Zealand, and Canada, with multiple international digital platforms.

Outlook:

The company’s management have deployed targeted initiatives to deliver ~$5 Mn of cost reductions in H2 as it aligns resources to its strategic priorities as well as trading performance. During H1 FY 2025, the business was committed to a reduced capital expenditure profile throughout both technology and stores, leading to a closing net debt position of $9.8 Mn. Considering that each brand remains uniquely placed for the target customer segments, and that both product and brand propositions are established, MHJ would be well-positioned to grow revenue and profits via more productive and expanded distribution network.

Technical Overview: 

MHJ Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

On the daily chart, MHJ’s stock prices are forming a trading range characterized by identical highs and lows, suggesting that the sideways period in the stock might continue to persist in the near future. Moreover, the momentum oscillator RSI (14-period) is trading near its midpoint, providing further support to the previous observation. Prices are trading between its previous peak and trough, which might function as resistance and support for the stock, respectively. A significant support level for the stock is positioned at NZD 0.420, while critical resistance level is located at NZD 0.460.

Fundamental Valuation

Stock Recommendation

Considering the facts above, a ‘Speculative Buy’ recommendation on the stock has been provided at the closing market price of NZD 0.430 per share, down by 3.37% as on 5^th June 2025.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is June 5, 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4:  Annual Dividend Yield is on a Trailing Twelve Month (TTM¹) basis and are subject to change based on factors such as company performance, stock price changes, etc.

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.