Lovisa sales dip highlights best and worst charts in Aussie retail

Lovisa (ASX: LOV) shares are trading lower today on the back of a disappointing first half sales update. For the first 20 weeks of FY24, Lovisa said global comparable store sales were down 6.2% compared to the same period last year. But total sales for the period are up 17%, thanks in part to 35 new store openings. Lovisa's AGM is also being held today.

Lovisa is generally considered to be relatively resilient in the Australian retail landscape because it sells lower priced fashion and cosmetic services which tend to be the last items to cross off the shopping list during an economic downturn. Today's update potentially indicates shoppers are tightening their belts and reducing discretionary spending ahead of the crucial Black Friday and Christmas shopping periods.

Further evidence of this scenario came from Universal Store Holdings (ASX: UNI), whose AGM trading update on Monday noted a similar 6.4% slump in like-for-like sales over the same period compared to FY23 (below analysts' estimates for a 5.1% drop). Last week, Accent Group (ASX: AX1) kicked off AGM confession season by reporting a comparative 2% fall in like-for-like sales for the first 19 weeks of FY24.

Best of times, worst of times

This week is shaping up as a crucial week for Aussie retailers as Black Friday sales have already begun in earnest ahead of the official November 24 sale. Retailers are trying to navigate higher input costs, both in terms of goods and labour, against a slowdown in the local economy as increasingly higher interest rates eat into household spending.

Lovisa, Universal Store Holdings, and Accent group were three of the key market beaters in the Aussie retail sector in the post-COVID period as each appeals to younger, cashed up, and fashion conscious consumers.

But each stock is trading well down from its 2023 highs. Lovisa, which rose over 1,000% since its 2020 COVID low of $2.34 to its April 2023 high of $27.21, is now down over 50% since then. Comparatively, Universal Store Holdings is down 45% from its 2023 high, and Accent Group is down over 30%. Given the magnitude of the losses in this trio, are they looking like bargains here?

What do the charts say about LOV, UNI, and AX1?

Lovisa's rise and fall from grace has been spectacular

The first place I start when looking at the chart is the trend, specifically the trend in the short term and long term. On the chart above, you can see the trend ribbons I use to identify these trends. The ribbons are colour coded, so green denotes an uptrend, red/pink for a downtrend, and orange for a neutral trend.

In order to buy a stock, I require a short term uptrend (light green ribbon), and at the very least a long term trend which is showing signs of turning up. Preferably the long term is up (dark green ribbon), as this instils even greater confidence.

The trend directions tell me whether on balance short term traders and long term investors are net buyers of a stock. They are an excellent indicator of excess demand. If that excess demand continues, it should lead to further gains in a stock’s price.

In the Lovisa chart, I note both the short and long term trends are clearly down. Forget excess demand from traders and investors, this chart is a picture of excess supply.

Universal Store Holdings has also suffered in 2023 as higher interest rates crimped discretionary spend

The Universal Store Holdings chart isn't much better. The short term trend is neutral at best, and the long term trend is clearly down. Again, short term traders are probably neutral, while long term investors appear to be selling into rallies.

The other thing which sticks out like a sore thumb here, is the predominance of black candles. A black candle occurs when a stock's price closes below its open. Clusters of black candles are a great indicator fund managers are steady sellers of a company's stock. Again, I can see plenty of excess supply here.

Accent Group rounds out a trio of young at heart retailers which whose fortunes have turned

Strike three on Accent Group. The short term trend has turned lower, tripped up by the negative response to last week's trading update. The long term trend is neutral at best, and is at risk of slipping to the downside. Again, the Accent Group chart is hardly a picture of excess demand.

Aussie retail stock charts to watch

It's not all doom and gloom in terms of Aussie retail sector charts. I just ran an eye over each chart in the sector and here are a few charts which show strong signs of excess demand for the company's shares.

Collins Foods chart is starting to look finger-licking good

The next three retail sector charts are consistent with stocks experiencing excess demand for their shares. The Collins Foods (ASX: CKF) chart shows short and long term uptrends, as well as attractive price action since the 30 October low.

Attractive price action to me is higher peaks and higher troughs. Higher peaks indicate supply removal, while higher troughs indicate building demand. Candles are predominantly white. This is a good indicator of steady fund manager accumulation.

Again, it's all about measuring excess demand or excess supply. Collins Foods looks very much like the former.

Cettire's chart is showing strong short and long term trends

Cettire's (ASX: CTT) chart also shows strong short and long term trends, attractive price action, and plenty of white candles. There's potentially going to be some excess supply around the 13 July major peak, but the building momentum to the upside makes me confident of an imminent breakout.

JB Hi-Fi could be shaping up for a very merry Christmas

No discussion of Aussie retail stocks would be complete without a gander at the JB Hi-Fi (ASX: JBH) chart. I include this here for completeness, but I do observe short and long term uptrends, attractive price action, and a good spattering of white candles.

If I have one minor criticism, it's that the price range between roughly $49-$50 has demonstrated motivated excess supply. JB Hi-Fi is approaching that zone again, and must continue to log good price action and candles to increase the probability of a meaningful breakout. Sill, there's plenty to like here.