The Harvey Norman Holdings Limited (ASX: HVN) share price jumped 2.1% on Monday after a strong sales update. The good times are rolling for the Aussie retailer right now but will they continue in 2021?
Why the Harvey Norman share price jumped higher
A strong trading update was the main catalyst for the solid capital gains in yesterday’s trade.
Harvey Norman reported sales from 1 July 2020 to 17 September up 30.3% from the previous year. That’s an incredibly positive start to the new financial year buoyed by strong government stimulus and online sales channels.
The Harvey Norman share price surged higher as unaudited preliminary accounts showed a 185.8% increase in profit before tax to $178.1 million.
Can the momentum continue in 2021?
Clearly, this strong sales growth won’t continue forever. That doesn’t mean that the Harvey Norman share price can’t climb higher on the back of short to medium-term growth outperformance.
Retailers have surprised many commentators in the market this year. The coronavirus pandemic has weighed on economic growth and sparked a recession.
That would normally see discretionary spending on retail, such as products sold by Harvey Norman, subside as consumers look to save more cash.
2020 is no normal year and we’ve seen an uptick in retail spending. There could be a number of factors driving the move including the early access to superannuation scheme and strong government stimulus like JobKeeper.
Whatever the cause, the Harvey Norman share price is riding the spending wave higher. Impressively, the ASX retail share could still be a cheap buy.
The group’s shares are currently yielding 4.1% despite trading just below a 52-week high. That’s good news for investors looking for a reliable dividend share in the S&P/ASX 200 Index (ASX: XJO).
On top of that, the Harvey Norman share price is trading at a price to earnings (P/E) ratio of 11.3x. That could mean its a good value buy compared to other ASX retail shares like Super Retail Group Ltd (ASX: SUL).
Super Retail shares trade at a P/E of 19.2x with JB Hi-Fi Limited (ASX: JBH) shares at 18.0x.
The Harvey Norman share price has rocketed 9.1% higher in 2020 but could have further to run given its current valuation.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. 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.