The 2 S&P/ASX 200 Index (ASX:XJO) shares in this article are generating growth and could be worth looking at, including Wesfarmers (ASX:WES).
The post 2 ASX 200 shares to buy for growth appeared first on The Motley Fool Australia. –
Here are two of the ASX 200 shares generating growth and could be worth looking at:
Wesfarmers Ltd (ASX: WES)
Wesfarmers is largely a retail conglomerate that runs various major retailers such as Bunnings, Officeworks, Catch, Kmart and Target.
During this difficult COVID-19 pandemic period, the department store businesses have been struggling with lower foot traffic going into the stores. However, online sales across the business has been booming to help the overall picture.
The ASX 200 share gave a trading update in November to outline how it had done in the first four months of FY21 to October 2020.
It said that Bunnings total sales were up 25.2%, Kmart total sales had risen by 3.7%, Target sales had fallen by 2.2%, Catch’s gross transaction value had gone up 114.4% and Officeworks sales had climbed 23.4% higher.
In the year to date, Wesfarmers’ retail businesses had achieved total online sales growth of 166%, excluding Catch. Excluding online sales in metro Melbourne, which were significantly elevated due to government trading restrictions, online sales growth was 98%. Including Catch, total online sales across the group increased to $1.3 billion in the year to date.
Bunnings is by far the largest profit generator for Wesfarmers. Management said that the DIY hardware business had seen continued strong growth in both consumer and commercial segments. Consumer sales were particularly strong as customers spent more time undertaking projects around the home. Excluding metro Melbourne stores, total sales growth of 29.3% was recorded for the year to date.
Management are pleased with Bunnings’ digital strategy, with online sales penetration excluding metro Melbourne of 1.5% during the year to date, and digital engagement with both consumer and trade customers continuing to increase.
According to Commsec, the Wesfarmers share price is valued at 29x FY21’s estimated earnings.
Premier Investments Limited (ASX: PMV)
Premier Investments is another ASX 200 retail share. It owns various brands like Just Jeans, Jay Jays, Peter Alexander and Smiggle.
FY20 was a year of disruption and transition as Premier Investments adapted to the COVID-19 impacts on retail.
In a trading update for the first 24 weeks of FY21, it generated $146.2 million of online sales, which was up 60% compared to the prior corresponding period. This contribution was 20.4% of total sales, up from 13.4% in the prior corresponding period.
Premier Retail said that its online sales delivered a significantly higher earnings before interest and tax (EBIT) margin than the retail store network.
The ASX 200 share now expects Premier retail EBIT for the 27-week period to 30 January 2021 to be in the range of $221 million to $233 million, up between 75% and 85%.
Total global like for like sales for the 24 weeks to 9 January 2021 were up 18%, with Australian like for like sales growth of 26.2%. Premier said that there has been “outstanding” sales and gross margin growth in Peter Alexander, Just Jeans and Jay Jays in both Australia and New Zealand.
The company has also been focused on reducing its rental costs. In the trading update, Premier Investments said that it had achieved strong cost controls, including reaching agreements with key landlords on COVID-19 rent abatements.
According to Commsec, the Premier Investments share price is valued at 15x FY21’s estimated earnings.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.