Retail stocks exposed to the housing sector will do best this reporting season but supermarkets may not fare as well, according to Macquarie, UBS and Credit Suisse.
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All three noted the strong growth of June retail sales figures, released on Tuesday, which pointed to strong growth in most non-food sectors.
That boded well for most retailers during the reporting season with the exception of supermarkets, they concluded.
"Within the retail space, we continue to favour those companies exposed to housing-related categories, namely Harvey Norman, Adairs, JB HiFi and Breville," said UBS. All of those were ranked a buy.
"We expect growth to continue with Harvey Norman offering the best listed exposure with upside potential via successful execution of labour and supply chain efficiencies.
"We maintain our negative view of supermarkets; our sell ratings on Woolworths and Metcash are unchanged."
Retail caution
Macquarie stated that "we remain cautious on the overall retail sector outside of housing related categories, which have benefited from the strong housing outlook and fiscal stimulus...JB HiFi remains our preferred consumer staples exposure compared to Harvey Norman and then Myer.
"Wesfarmers remains our preferred consumer staples exposure relative to Woolworths and then Metcash."
Credit Suisse was also bullish on Harvey Norman, predicting the stock would be "the stand-out result" of the season. "Reporting season risks are positive for Harvey Norman, negative for Super Retail Group, and Myer, and neutral for other companies under our coverage."
But independent fund manager Peter Morgan said while the analysis by the three banks was "simplistically correct", "you can't really make a sector call with so many moving parts...you can't lump them all in together".
Myer was a "gamble" he said, whereas for Harvey Norman, "Gerry Harvey has had a good run... the results for them should be solid but I think a lot of that is reflected in the share price".
The non-food retailers "all have to contend with the currency moving about the way it is," he said.
Management issues
With regards to the Woolworths and Wesfarmers, management issues rather than retail sales were the main issue, he said.
"One's gone off the rails management-wise and the other's benefited from improving management."
June's better than expected retail figures were nothing to get excited about, he said. "Not really, because I don't like the way the mining downturn has played itself out and the next move in interest rates will probably be up."
