Key Trends Impacting NZ’s Consumer Discretionary Sector Amidst Macro-Economic Worries - 2 Stocks to Consider

Company Overview:

Restaurant Brands New Zealand Ltd (NZX: RBD) is a corporate franchisee specialising in managing multi-site branded food retail chains. 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, food prices rose 4.6% in the 12 months ended June 2025, after the 4.4% rise in the 12 months ended May 2025. The increased prices for the grocery food group and the meat, poultry, and fish group made the most contribution to the annual rise in food prices, up 4.7% and 6.4%, respectively. Furthermore, the price rise for the grocery food group was because of increased prices for milk, butter, and cheese. As per the release, the dairy products have been driving the higher cost in food prices.

The rise in the meat, poultry, and fish group was because of increased prices for beef steak and beef mince, up 22.3% and 15.6%, respectively. Notably, the food prices increased 1.2% in June 2025, after the 0.5% rise in May 2025.

Exhibit 1: Food Prices (Annual % Change)

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

Electronic Card Transactions: June 2025

Stats NZ released data about electronic card transactions (June 2025). In June 2025, the spending in the retail industries increased 0.5 percent ($32 million) and, in core retail industries, there was an increase of 0.7% ($40 million) as compared to May 2025. By the retail spending category, the consumables witnessed a rise of $29 Mn (or 1.0%), durables were up $10 Mn (or 0.6%), and apparel increased $10 Mn (or 3.1%). The non-retail (excluding services) category fell $41 Mn (or 1.8%) from May 2025. Notably, this category includes medical and other health care, travel and tour arrangement, postal and courier delivery, as well as other non-retail industries.

Exhibit 2: Retail Card Spending ($ Bn), Mar 2025 – June 2025

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

Overseas Merchandise Trade (May 2025)

Stats NZ released data about overseas merchandise trade (May 2025). In May 2025, goods exports witnessed a rise of $676 Mn (or 9.7%) to $7.7 Bn, and goods imports declined by $499 Mn (or 7.2%) to $6.4 Bn. Overall, the monthly trade balance was a surplus of $1.2 Bn. With respect to exports, the fruit exports amounted to $1.0 Bn in May 2025, a 25% rise ($201 Mn) as compared to May 2024. Talking about China, the total exports rose $231 Mn (or 13%) and the largest increases were in milk powder, butter, and cheese (up $156 Mn), fruit (up $105 Mn), and logs, wood, and wood articles (up $30 Mn).

With respect to Australia, total exports increased $72 Mn (or 10%).

Key Risks and Challenges:

Recently, RBNZ stated that the global growth is anticipated to slow over H2 FY 2025, demonstrating the uncertain consequences of trade protectionism. The Committee assessed numerous risks related to the economic outlook. There is significant uncertainty about the global tariff policy, and how this would be impacting the global economy. The costs of trade might witness a rise by more than assumed as global supply chains adapt to the trade barriers. Overall, the consumer discretionary sector is exposed to the risks related increased competition, changing consumer trends as well as economic sensitivity.     

Exhibit 3. Key Risks in Consumer Discretionary Sector:

Source: Analysis by Kalkine Group

Outlook:

As per RBNZ, the Committee highlighted that, despite global factors, domestic financial conditions have been evolving broadly as projected. The mortgage and deposit interest rates continued to fall, implying a lower OCR, robust bank liquidity as well as soft credit growth. Furthermore, the average interest rate on the stock of mortgages can continue to decline over the upcoming quarters, with more mortgage holders refixing at the lower one to two year fixed-term interest rates.  

Furthermore, RBNZ also stated that there is significant spare capacity in the broader NZ economy. The increased export prices as well as monetary policy easing can contribute to a gradual recovery in economic activity. The inflation is anticipated to decline over late 2025 and then return to around the mid-point of the target band by early 2026, with significant spare capacity reducing the domestic inflation pressures.

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) Restaurant Brands New Zealand Limited (Recommendation: Buy, Potential Upside: Low Double-Digit) (M-Cap: NZD 384.2 Mn, Annual Dividend Yield: 8.12%)

Business Description:

Restaurant Brands New Zealand Ltd (NZX: RBD) is a corporate franchisee which specialises in managing multi-site branded food retail chains. 

Outlook:

RBD was focused towards protecting and improving margins via cost control and revenue optimisation, while retaining brand strength and customer relevance. Moving forward, the company is focused towards store development programme, with new builds, refurbishments, and portfolio optimisation planned for FY 2025. Overall, the emphasis is towards improving margins, deploying capital carefully, and reinforcing the strength of the brands.

Technical Overview:

RBD Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

On the daily chart, RBD’s stock prices are forming a trading range characterized by identical highs and lows, suggesting that the current 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, adding further evidence to the previous observation. Prices are trading between its previous peak and trough, which might function as resistance and support levels for the stock, respectively. A significant support level for the stock is positioned at NZD 2.84, while critical resistance level is located at NZD 3.30

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 3.08 per share, up by 3.36% as on 17 July 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 stores across Australia, New Zealand, and Canada, with multiple international digital platforms.

Outlook:

MHJ’s management has deployed targeted initiatives to deliver ~$5 Mn of cost reductions in H2 FY 2025 as the company aligns resources to its strategic priorities. The company has reported closing net debt position of $9.8 Mn (H1 FY 2024: $11.6 Mn), and the business is committed to a reduced capital expenditure profile throughout both technology and stores. Also, after the acquisition of Bevilles, the store network was expanded to the new territory of Queensland.

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 current sideways period in the stock might continue to remain in place. Additionally, the momentum oscillator RSI (14-period) is hovering near its midpoint, providing more support to the mentioned recommendation. Prices are trading between its previous peak and trough, which might function as resistance and support levels for the stock, respectively. A significant support level for the stock is positioned at NZD 0.400, 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, up by 2.38% as on 17^th July 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 July 17, 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.