It’s been a tough month for Australia’s leading retailers.
The above chart shows the price movement of Wesfarmers Ltd (ASX: WES), JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) shares over the past month. As can be seen, shares of Australia’s major retailers have been discounted heavily during the recent market volatility.
So is it time to buy them?
Despite a rich history and control of a number of Australia’s leading retail brands such as Coles, Bunnings Warehouse, Kmart and Officeworks; Wesfarmers hasn’t been immune from the volatility. However, as shares continue to trend lower, savvy investors will undoubtedly start queuing up to buy bucket loads of shares in the 100-year-old conglomerate. At today’s prices, Wesfarmers’ shares offer a 5.2% fully franked dividend yield.
JB Hi-Fi has been a direct beneficiary of rising house prices (thanks to the roll-out of its HOME format stores) and robust – albeit choppy – consumer confidence. Indeed, solid comparable sales growth saw the group raise net profit a healthy 6.4% in the 2015 financial year and up the full-year dividend to 90 cents per share. At today’s prices, that’s equivalent to a yield of 4.9% fully franked.
Harvey Norman is another Australian retailer with a healthy exposure to the resilient residential property market as it offers everything from TV’s and white goods to mirrors and couches. However, despite the company recently announcing a solid profit rise for its full financial year, a foray into dairy farming has spooked investors – perhaps rightly so. Nevertheless, the $4.4 billion company continues to hold some appealing features, such as its 5.2% fully franked dividend.
Buy, Hold or Sell
At today’s prices, I think each of these three businesses deserve a spot on your watchlist. However, given where we are in market cycle (property prices coming off the boil, potential for lower GDP growth, etc.) I probably wouldn’t buy either JB Hi-Fi or Harvey Norman shares at these levels. Wesfarmers would also have to drop a few more dollars before I’d consider it a sound long-term buying opportunity.
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Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned.
Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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