Melbourne is now in the midst of its second coronavirus lockdown, this one expected to last six weeks. The first set of restrictions had mixed impacts on ASX shares with some seeing a rush of buyers and others being sold off. Whether the second lockdown results in similar impacts remains to be seen.
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Initial lockdown impacts
During the first round of COVID-19 lockdowns, ASX shares such as Coles Group Ltd (ASX:COL) and Woolworths Group Ltd (ASX: WOW) reported elevated sales as customers stockpiled goods. Third quarter FY20 supermarket sales were up 13.8% for Coles and 11.3% for Woolworths. Customers moving to work-from-home models also caused a surge in demand for office technology such as keyboards and monitors. As such, JB Hi Fi Limited (ASX: JBH) saw sales grow 20% in 2HFY20, up from 5.1% in 1H FY20. Wesfarmers Ltd (ASX: WES) also reported its Officeworks division grew sales by 27.8% in the half year to the start of June.
With many physical stores closing, demand for online shopping increased. Some retailers saw accelerated demand through their digital channels, with Accent Group Group Ltd (ASX: AX1) seeing online sales quadruple during store closures. The elevated demand for digital commerce resulting from COVID-19 is expected to endure and grow beyond the pandemic.
As people began spending more time at home, demand for products to enhance the home setting also began to increase. Homewares retailer Adairs Ltd (ASX: ADH) saw online sales increase 92.6% in 2HFY20, while sales of online furniture subsidiary, Mocka, were up 52.1%. Online furniture and homewares retailer Temple & Webster Group Ltd (ASX: TPW) reported strong gross sales to 28 June, up 130% compared to the prior corresponding period. People also took advantage of lockdown to complete DIY projects with Bunnings seeing sales growth of 19.2% in 2H FY20.
Which ASX shares will benefit from the second lockdown?
The second lockdown may not prompt the same surge in sales of certain products that the first one did. After all, how many computer monitors and throw rugs does anyone need? On the other hand, those who chose not to set up a home office the first time may relent this time around. But there are fears that businesses already fragile from the first round of lockdowns may fail to recover from a second.
According to the Australian Financial Review, there has been a firm rotation into ASX shares most likely to outperform in the event of a second lockdown. Investors remain wary of travel shares but are favouring technology and defensive shares. Consumer staples shares such as Coles and Woolworths have been popular as have healthcare shares such as Resmed Inc (ASX: RMD), CSL Limited (ASX: CSL), and Fisher & Paykel Healthcare Corp Ltd (ASX: FPH).
It is likely technology companies that facilitate remote working solutions such as Whispir Ltd (ASX: WSP) will continue to see elevated demand. Buy now, pay later (BNPL) providers are also seeing strong user growth in the current economic environment. Afterpay Ltd (ASX: APT) now has nearly 10 million customers globally and other BNPL providers such as Sezzle Inc (ASX: SZL), Splitit Ltd (ASX: SPT) and Zip Co Ltd (ASX: Z1P) have also been reporting strong growth.
Foolish takeaway
COVID-19 is fundamentally shifting how we live, work and play and the effects are likely to be lasting. I believe ASX shares leveraged to take advantage of these shifting trends will survive and continue to thrive throughout subsequent lockdowns.
