The Consumer Discretionary sector has rebounded on the back of a softer than expected interest rate rise. Among the sector’s top gainers was women’s apparel retailer, City Chic Collective Ltd (CCX), which rose more than 9% on Wednesday.
More broadly, the interest rate sensitive Consumer Discretionary sector was up more than 2.5% for the day.
The Reserve Bank of Australia (RBA) increased its benchmark interest rate by only 0.25% on Tuesday, instead of the 0.50% that many analysts expected. That has somewhat eased fears of a future recession, which could hurt consumer spending, and therefore retail stocks.
Retail sales figures are strong
City Chic Collective’s stock surge, along with the retail sector’s gains more broadly, also come on the back of strong recent Australian retail sales figures.
Australian retail sales increased 0.6% in August, marking eight consecutive months of growth in the sector, according to the latest Australian Bureau of Statistics report. Food and department stores were among the strongest retail segments.
The report showed resilient consumer spending amid the rising interest rates. Despite the recession worries, analysts have remained excited about the prospects of a number of ASX retail shares for long-term portfolios.
Is CCX a good buy?
City Chic Collective’s stock is a Moderate Buy, according to TipRanks insights, consisting of three Buy ratings and three Hold ratings.
With an average price target of AU$2.36, the stock has over 60% upside potential.
Despite recent gains the stock is down more than 30% over the last three months, and around 75% since the start of the year.
Closing thoughts
While interest rates are set to raise further in the months to come, they may become less severe as signalled by the RBA’s softer than anticipated rate rise this week. That’s likely to see improved market sentiment for interest rate sensitive stocks in the consumer sector, such as City Chic Collective.
