The coronavirus pandemic has had a mixed impact on ASX retail shares. Those with a strong online presence have benefitted from an influx of online shoppers. Those reliant on high street trade have been more vulnerable to lockdowns and social distancing requirements.
But retail sales have come back strongly as the economy has opened up. According to the Australian Bureau of Statistics, Australian retail turnover rose 10.7% in January 2021 compared to January 2020.
ASX shares such as JB Hi-Fi Limited (ASX: JBH) have benefitted from the increase in consumer spending. The electronics retailer reported a 23.7% increase in sales for the half-year ended 31 December 2021.
But it’s not just JB Hi-Fi that’s been seeing a significant increase in sales. Adairs Ltd (ASX: ADH) reported a 34.8% increase in sales over the same period. Online only retailer Temple & Webster Group Ltd (ASX: TPW) did even better, reporting a 118% increase in revenue for the most recent half year. Kogan.com Ltd (ASX: KGN) is due to report its half-year results on Friday, and investor expectations are high.
Let’s take a closer look at how these ASX retail shares are performing this reporting season.
Australia’s favourite electronics retailer made record sales in 1H FY21. Selling some $4.9 billion worth of TVs, computers, gaming devices, and mobiles, JB Hi-Fi saw continued elevated demand for consumer electronics and home appliances.
“We are pleased to report record sales and earnings for HY21, in what has been an extraordinary period,” said CEO Richard Murray. “Investments in our online business and supply chain have enabled us to seamlessly meet our customers’ increased demand,” he added. The increased demand pushed JB Hi-Fi’s profits up 86.2% to $317.7 million. This allowed for an 81.8% increase in dividends, which reached 180 cents per share.
Online sales increased 161.7% over the half year to $678.8 million. JB Hi-Fi has been continuing to invest in this channel, upgrading websites and providing expanded delivery and warehouse options.
Australian sales were up 23.3%, thanks to the key growth categories of communications, computers, games hardware, and small appliances. In New Zealand, total sales were up 9.1%, and online sales were up 69.2%. The Good Guys grew total sales by 26.4% thanks to continued elevated demand for home appliances and consumer electronics. Strong sales momentum continued into January across all brands. Murray says the company recognises that the operating environment is uncertain but remains excited by the outlook for the business.
Homewares retailer Adairs has benefitted from customers spending more time at home during lockdowns. Many have taken the opportunity to upgrade their home furnishings and decor. Despite the impact of store closures on the company’s 43 Greater Melbourne locations, Adairs managed to deliver an increase in gross sales to $243 million in 1H FY21. Online sales accounted for $90.2 million, or 37.1%, of sales. Earnings per share (EPS) were 25.9 cents (compared to 7.8 cents in 1H FY20) and profits leapt 233.4% to $43.9 million.
With profits on the rise, Adairs has announced it will repay its $6.1 million JobKeeper wage subsidy to the government. Shareholders, in turn, will receive an interim dividend of 13 cents per share.
Investment in its omni-channel strategy is showing benefits for Adairs, with membership of its Linen Lovers club now exceeding 900,000. “Our first-half FY21 results are outstanding and a clear testament to the strategic health, operational excellence, and resilience of our business,” said CEO Mark Ronan. “These results highlight the benefits of investing early in our omni-channel strategy.”
Temple & Webster Group
Temple & Webster reported first-half revenue of $161.6 million as active customer numbers grew 102% to 687,000. “It is great to see our revenue growth translating into operating leverage and significant profit growth,” said CEO Mark Coulter. “This allows us to accelerate our investment into areas such as data, technology, private label, and brand awareness.”
The company is a pure-play online retailer in the furniture and homewares market with a strategy of being a category specialist. The customer offering is built around the biggest range of furniture and homewares in the country. Coulter says the advantages of being an online leader are apparent as the company continues to grow its market share.
Temple & Webster reported earnings before interest, taxes, depreciation and amortisation (EBITDA) of $14.8 million in 1H FY21, up 556% from $2.3 million in the prior corresponding period. Cash flow was positive, and the business ended the half with a cash balance of $85.7 million (including $40 million in placement proceeds).
Temple & Webster says the second half has started strongly, with January revenue growth tracking in excess of 100%. Strong tailwinds are expected to aid performance. Tailwinds include ongoing adoption of online shopping due to structural and demographic shifts and increases in discretionary income due to travel restrictions.
Kogan’s half-year financials are due out on Friday. In its January business update, the company reported a strong Christmas trading period with record-breaking sales during Black Friday week. Gross sales for 1H FY21 grew by more than 96%, with gross profit up 120%.
Founder Ruslan Kogan said, “We are proud to have delivered another record half while undertaking significant investments into the future of the business.” Investors will be expecting big things when Kogan unveils its results later in the week.
Can it continue?
These ASX retail shares have seen major surges in sales thanks to the COVID-19 pandemic. Lockdowns have meant people are spending more time at home, and travel bans are leaving them with extra discretionary income.
Whether this will continue as the vaccine rolls out and we return to a new normal remains to be seen. But a continued economic recovery should support sales as the world moves out of pandemic mode.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia has recommended ADAIRS FPO, Kogan.com ltd, and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.