With the passage of the Federal Government's tax cuts through parliament last Thursday, ASX retail companies are set for some Christmas-in-July cheer. The tax cut package, worth over $158 billion over the next decade, passed in its entirety after some initial political wrangling over which cuts should proceed. In the end, all of the proposed changes entered law – which will see most Aussie tax-payers receiving a $1,080 tax offset when they lodge this year's tax return.
Many are predicting a similar economic effect to the famous $950 cheques that were sent out during the GFC by the Rudd government back in 2009. This will no doubt be a boon to struggling Aussie retailers in particular, who have been dealing with sluggish growth and flat wage rises as well as online competition for many years now. Here are 2 ASX companies set to benefit the most from the tax cuts.
JB Hi-Fi Limited (ASX: JBH)
JB Hi-Fi is already renowned as one of our more resilient retail companies, with JB continuing to defy the 'retail apocalypse' that the ascent of Amazon Inc. has long foreshadowed. JB shares are already up 25% YTD and up another 5.4% week-to-date on the 'tax cut' news. In 2009, the biggest beneficiaries of our $950 cheques were the sale of new TVs and investors clearly expect a repeat of this trend this time around. JB is one of the biggest sellers of televisions in the country so the company looks set to heavily benefit from the passage of the tax cuts. JB also sell large household appliances like refrigerators and washing machines, which may also 'feel the burn' from the cash that will soon be scorching a hole in customers' wallets.
Harvey Norman Holdings Limited (ASX: HVN)
Harvey Norman also do big business in TVs as well as appliances, so this is another Aussie retailer in pole position for some 'hardly normal' big spending during the next few months. The Harvey Norman share price has also responded positively to the passage of the tax cuts, jumping 4.75% on Friday morning. Harvey Norman is now up almost 33% for the year so far and, interestingly, is offering a 7.18% dividend yield at current prices.
Foolish takeaway
There's no doubt these new tax cuts will benefit many ASX companies, but these two in particular are set to see some cash heading their way if the 2009 trends hold true. As we Australians don't seem to have given up our love of a big screen, I expect they will, and I wouldn't mind being a shareholder in either of these two companies, at least for the next few months!
