Retailers are expected to buck the negative sentiment surrounding December sales, with the National Retail Association forecasting that a record breaking $2.6 billion was going to be spent on Boxing Day yesterday.
The Christmas trading period is usually the strongest trading cycle for retailers. However, many analysts were pessimistic of this year’s cycle given waning consumer confidence and stagnant wage growth. In addition, events such as Black Friday and Cyber Monday were expected to eat into the Christmas cycle.
While the firm numbers are still to come out, here are 2 ASX retailers that I think could have benefitted from strong Boxing Day takings yesterday.
Myer Holdings Ltd (ASX: MYR)
Earlier this month, industry sources rumoured that retailers were looking to cut shifts for regular staff and Christmas casuals, whilst also bringing forward Boxing Day discounts. Myers has bucked this rumour by actually hiring more than 2,000 Christmas casuals in addition to regular full-time and part-time employees.
Some Myer stores also opened their doors earlier yesterday, with 5am opening for some stores. The retailer was expecting that 2 million customers around Australia would visit their stores on Boxing Day, with some consumers lining up outside major stores since 3am.
Myers also sought to enhance the consumer experience during its Boxing Day sales by hosting live performances from acrobats, jugglers and other entertainers.
JB-Hi Fi Limited (ASX: JBH)
JB Hi-Fi’s Boxing Day catalogue saw the company slashing prices of popular products from Apple, Samsung, Sony and Dyson. The electronics giant saw a 34% year-on-year increase in online visits this Black Friday, a trend that could also have translated into a stronger Boxing Day performance.
Despite a challenging retail environment, JB Hi-Fi beat market expectations for FY19 thanks to better margins and an improvement in sales growth. The company saw net profit increase 7.1% to $249.8 million and a 3.5% increase in sales of $7.09 billion for the financial year.
The strong performance was boosted by JB Hi Fi’s $860 million acquisition of The Good Guys in 2016, which has helped the company combat online disruption. The optimism has been reflected in JB Hi-Fi’s share price, which has surged more than 85% in 2019 and is currently trading at all-time highs.
In my opinion the retail sector will remain challenging for the medium-term given the fluctuating macroeconomic factors. Reporting season earlier this year showed promising signs of revival in the sector, however only a few retailers are poised to benefit.
Companies most likely to perform during this period are opening new brick and mortar stores, whilst also having double digit online sales. I think a prudent strategy for investors is to keep these retailers on a watchlists and wait for positive price action before making an investment decision.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. 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 Scott Phillips.