It seems like reporting season has only just finished, yet we’re already getting updates for how FY19 is going for some companies at their annual general meetings (AGMs).
It’s a good time do it because the first quarter of FY19 has just finished for most companies.
This season of AGM season will probably be more closely watched than most for three reasons:
Is the housing downturn having an effect?
The ‘wealth effect’ has helped many businesses over the past six years, perhaps even 25 years. However, now house prices in the key markets of Melbourne and Sydney are heading downwards so the wealth effect may work in reverse.
So, if that’s the case we’ll see it happening at consumer facing businesses like JB Hi-Fi Limited (ASX: JBH), Nick Scali Limited (ASX: NCK), Harvey Norman Holdings Limited (ASX: HVN) and Beacon Lighting Group Ltd (ASX: BLX).
How are importer businesses going?
The Australian dollar has fallen heavily against the US dollar in recent times. A year ago it was at 78 Australian cents per US dollar and now it’s 71 Australian cents.
If the Australian currency is weaker by 10% then importer costs may rise/have risen by 10%. If those importers can’t pass on costs to consumers then there’s going to be a hit to the bottom line.
Of course, the falling Australian dollar will benefit those ASX businesses that earn US dollars.
Are CEOs being more pessimistic about the outlook?
CEO comments can give great insight into a business’ performance before the numbers tell the story in the report.
The CEOs are usually one of the most optimistic people in the company, so if they’re saying things are looking harder then it could be telling.
For example, Bank of Queensland Limited (ASX: BOQ) CEO Jon Sutton recently said “Slower housing credit growth, lower house prices and stagnant wage growth will have an impact on revenue across the industry… We remain in a highly competitive environment.”
I think it will be particularly interesting to read the words of retail business CEOs as supposedly they will be the first to see the effects if consumers are closing up their wallets.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.