Latest / Best of Business / Jeremy Hutton: Milford Asset Management expert on the market reactions to the Warehouse bouncing back?

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Jeremy Hutton: Milford Asset Management expert on the market reactions to the Warehouse bouncing back? · Best of Business

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  Speaker 2: Jeremy Hutton, Milford Asset Management's with us. Hi, Jeremy. Hi, Heather. Now,
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  Speaker 2: the warehouse, what do the markets make of the financial
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  Speaker 2: result today?
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  Speaker 3: Yeah, it was a better result by the warehouse. I mean,
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  Speaker 3: back into profit at the bottom line. So that's something,
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  Speaker 3: you know, it's coming off a very low earnings base.
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  Speaker 3: And the market reacted today, sent the share price up 1%,
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  Speaker 3: but it has still battled this year, down 6% or so.
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  Speaker 3: But there is a lot of hard work going on here.
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  Speaker 3: The business has taken a lot of cost out, but
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  Speaker 3: it is really struggling still at the top line revenue
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  Speaker 3: growth and getting that gross margin through as well. And
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  Speaker 3: the red warehouse sheds, that business unit, still under a
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  Speaker 3: bit of pressure. A little bit of a better story
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  Speaker 3: at Warehouse Stationery and Noel Leeming. But they are developing
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  Speaker 3: a new strategy that will be delivered soon, later this year.
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  Speaker 3: But still a lot of work to do on this
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  Speaker 3: unloved NZX stock.
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  Speaker 2: Listen, on the global markets, the performance during September has
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  Speaker 2: been a bit of a story of AI versus everyone else,
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  Speaker 2: hasn't it?
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  Speaker 3: Yeah, correct. And we've talked about this a few times,
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  Speaker 3: just that massive concentration and one theme, that AI theme
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  Speaker 3: in financial markets at the moment. And September was an
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  Speaker 3: absolute prime example of this. You had the tech-heavy NASDAQ
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  Speaker 3: up 3%, the semiconductor component of that up 9%. And
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  Speaker 3: these indices contain all those AI beneficiaries, so have done
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  Speaker 3: quite well. But in the background, as has been discussed
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  Speaker 3: quite a lot, we've had interest rates rising aggressively, bond
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  Speaker 3: prices getting sold off, we've had oil and energy prices
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  Speaker 3: through the roof as well. So normally a pretty ugly
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  Speaker 3: cocktail for markets and all other market segments have been
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  Speaker 3: impacted by that, except that AI and tech theme. So unfortunately,
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  Speaker 3: also down under in Australia and New Zealand, our share
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  Speaker 3: markets haven't been spared any of that pain either.
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  Speaker 2: Do you think that this bifurcation that we're seeing in
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  Speaker 2: the markets is really sustainable, though, you know, medium term?
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  Speaker 3: Well, that is the million dollar question in markets currently,
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  Speaker 3: one that all investors are grappling with. I mean, can
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  Speaker 3: this AI tech chip led rally continue despite rising energy
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  Speaker 3: prices and interest rates? I mean, on one hand, you're
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  Speaker 3: getting consistently strong data points out of AI. That model
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  Speaker 3: capability just keeps improving, keeps becoming more useful and a
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  Speaker 3: lot of hype around it. I mean, we had Meta
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  Speaker 3: and their AI agent Muse this month. It's widened the
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  Speaker 3: use case for AI, which is very important to proving
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  Speaker 3: up those return drivers, which remains an unanswered question for
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  Speaker 3: the market. And Meta had a huge month, you know,
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  Speaker 3: its share price is up. 29% just in September alone.
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  Speaker 3: So I suppose in summary, I mean, the view from
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  Speaker 3: markets is there's great earnings growth still in this AI
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  Speaker 3: adjacent theme and that they are more immune from interest
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  Speaker 3: rates and oil. But everything else, unfortunately, is under pressure.
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  Speaker 3: And that's going to remain a key risk in markets,
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  Speaker 3: just how reliant it is on that AI and chip trade.
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  Speaker 3: And I don't think that's going away anytime soon.
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  Speaker 2: Yeah, it's good to talk to you, Jeremy. Thanks for
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  Speaker 2: talking us through it. Jeremy Hutton, Milford Asset Management.
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