Australian Consumer Discretionary Stocks to Watch as Inflation Cools

Australian inflation has edged down to 3.8% in June, with monthly CPI slipping 0.1% and trimmed mean inflation steady at 3.6%. That shift may ease some pressure on the Reserve Bank of Australia to lift rates further, which can change how investors think about consumer focused stocks. If borrowing costs stabilise or move lower, companies linked to discretionary spending can look different on a risk and reward basis. This article unpacks what that backdrop might mean and highlights 3 Australian Consumer Discretionary stocks from our screener that appear positively exposed to the latest inflation news.

Coast Entertainment Holdings (ASX:CEH)

Overview: Coast Entertainment Holdings operates the Dreamworld and WhiteWater World theme parks in Coomera and the SkyPoint observation deck and climb in Surfers Paradise, offering leisure and entertainment experiences to domestic and tourist visitors on the Gold Coast. The group focuses on attractions, events and in-park spending to drive revenue from families and holidaymakers.

Operations: Coast Entertainment Holdings generates A$110.8 million in revenue from its Theme Parks & Attractions segment, all sourced in Australia.

Market Cap: A$205.9 million

Coast Entertainment Holdings gives you exposure to Gold Coast theme parks at a time when easing inflation may support discretionary spending and tourism. Management has been working hard on procurement and corporate cost savings, with executives highlighting meaningful reductions in retail sourcing costs and head office expenses despite earlier price pressures. The company has only recently moved closer to break even after years of losses, so any setback in ticket volumes, in park spending or weather events can still hit earnings hard. With new attractions, a growing annual passholder base and an improving handle on costs, investors watching consumer linked stocks may want to understand what is driving interest in Coast Entertainment beyond the headline inflation story.

Coast Entertainment Holdings is pushing for leaner operations just as inflation begins to cool, which could reshape the whole thesis. To see how that trade off between cost control and earnings risk compares, review the analysis report for Coast Entertainment Holdings

Collins Foods (ASX:CKF)

Overview: Collins Foods operates KFC restaurants across Australia and Europe, as well as Taco Bell outlets in Australia, giving you exposure to quick service dining anchored to globally recognised brands.

Operations: Collins Foods generates about A$1.24b in revenue from KFC Restaurants Australia and A$351.3 million from KFC Restaurants Europe.

Market Cap: A$950.6 million

Collins Foods sits in a position where easing inflation can reduce pressure on household budgets, which may support spending on affordable treats such as KFC and Taco Bell. The company reports sales of A$1,592.62 million and earnings of A$44.15 million. Digital channels now account for a significant share of orders, which can help lift basket sizes and support margins. At the same time, investors need to factor in higher labour and energy costs, a funding mix that leans on external borrowing, and pockets of weaker affordability in parts of Europe. For investors considering a consumer stock that combines brand strength with real cost and balance sheet considerations, Collins Foods may warrant closer analysis.

Collins Foods sits at an interesting crossroads as digital ordering and global brands intersect with rising costs. Get the fuller story in the analysis report for Collins Foods including one factor that could quietly tilt the risk reward balance.

Crown Resorts (ASX:CWN)

Overview: Crown Resorts is a large Australian entertainment and casino group that owns integrated resorts in Melbourne and Perth, combining gaming, hotels, dining, retail and event venues, plus a London casino and online wagering and social gaming operations.

Market Cap: A$8.9b

Crown Resorts sits at the heart of discretionary leisure and travel spending, so easing Australian inflation and less pressure on interest rates could support demand across its casinos, hotels and entertainment venues. Forecasts in the source data point to earnings growth of about 51% a year and revenue growth ahead of the broader market, although the business is still reporting losses with a return on equity that remains weak. The stock trades slightly above one estimate of fair value and on a richer P/S than many hospitality peers. This puts more focus on the path to profitability, use of external borrowings and a relatively inexperienced management team. For investors watching consumer focused stocks that may benefit as inflation cools, the next phase for Crown Resorts could be decisive.

Accelerating earnings expectations and a richer P/S suggest investors may not have fully joined the dots on Crown Resorts yet. Scan the analyst forecasts for Crown Resorts to see what the market might be missing next.

The three Australian Consumer Discretionary stocks in this article are just a starting point. The full Australian Consumer Discretionary Stocks screener surfaces 8 more companies with equally compelling stories tied to inflation, interest rates and spending trends. Use Simply Wall St to identify and analyze the specific catalysts and narratives that matter most to you so you can focus on the highest conviction opportunities in this space.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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