Electronics and homewares retailers Harvey Norman Holdings Limited (ASX:HVN) and JB Hi-Fi Limited (ASX:JBH) have both seen their shares surge higher recently. But what are the drivers behind the massive price gains for these two ASX retail shares?
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Two retailers that have done well during pandemic lockdowns have been electronics and homewares companies Harvey Norman Holdings Limited (ASX:HVN) and JB Hi-Fi Limited (ASX:JBH). With more people spending time indoors sprucing up their home entertainment systems, electronics sales went through the roof last year. This shift in consumer trends translated into major profits for both companies.
The JB share price exploded over the last 12 months, almost doubling from a 52-week low price of just $28.90 to be now trading at $51.01 (still only just shy of the all-time high price of $55.25 it reached in January).
It’s easy to see what has driven the massive gains in its share price. In its most recent financial results – for the first-half FY21 – JB reported a 23.7% jump in sales versus first-half FY20 to a staggering $4.9 billion. But an even better sign for shareholders was that JB grew its bottom-line at a faster rate than top-line revenues, with net profit after tax (NPAT) surging 86.2% to $317.7 million.
While JB did not commit to an earnings outlook for the remainder of FY21, the company did report continued high sales growth in January across its key brands and geographies. Total sales growth in Australia for January was 17.3% (versus 6.5% for January 2020), while in New Zealand total sales grew by 21.7% (versus -1.6% in January 2020), and for the Good Guys whitegoods brand sales increased by 14.1% (versus 1.4% in January 2020).
Harvey Norman stocks a broader range of household products than JB, including bedding and furniture in addition to electronics. However, it still taps into the same shift in consumer trends that have benefited JB Hi-Fi. Its share price has also gone bananas over the last twelve months, surging just over 100% since this time last year – from a low of just $2.80 to its current price of $5.64.
The company also reported stellar results for the first half FY21. Total aggregated company sales revenues were $5.12 billion, an increase of 25.8% over first-half FY20. The company’s profit after tax also soared by 115.8% to $438.17 million. Harvey Norman also reported strong sales for the early stages of the second half FY21 as well, with aggregated sales revenue for the period from 1 January 2021 to 23 February 2021 up 21% versus the same period in the prior year.
Both of these companies have enjoyed an exceptional trading period throughout the pandemic. Both are expanding their margins and growing bottom-line profit at breakneck speed – particularly for two already established brands. And while it might be too early to tell just yet whether the lockdown sales tailwinds will continue to extend far into 2021 for either JB or Harvey Norman, results for the early stages of FY21 have been promising.
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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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