Despite dire predictions at the start of the COVID-19 pandemic, ASX retail shares have performed strongly with rising sales and profits.
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Australia’s retail industry has demonstrated its resilience over the past six months. Despite dire predictions at the start of the COVID-19 pandemic, ASX retail shares have performed strongly with rising sales and profits.
According to the Australian Bureau of Statistics, retail sales rose 2.5% in the December quarter on a seasonally adjusted basis. This follows a 6.5% rise in the September quarter. Consumers unable to travel are instead choosing to spend discretionary income on homewares, furniture, and electronics.
ASX retail shares are taking advantage of these shifting spending patterns and outperforming the dire predictions that proliferated last year.
Online shopping surges
Online shopping has surged in the wake of the pandemic, with the global e-commerce market expected to reach $4.5 trillion in 2021.
Many ASX retail shares have seen this trend reflected in their own sales statistics. JB Hi-Fi Limited (ASX: JBH) reported 161.7% growth in online sales in the first half of FY21, while Adairs Ltd (ASX: ADH) reported a 99.7% increase in online sales in the first 23 weeks of FY21. Premier Investments Limited (ASX: PMV), the company behind Smiggle, Peter Alexander, Just Jeans, and Dotti, saw a 60% increase in online sales in the first 24 weeks of FY21.
Online-only retailers are sharing in the e-commerce spoils. Temple & Webster Group Ltd (ASX: TPW) reported a 118% increase in revenue in the first half of FY21, with active customer numbers growing 102% to 687,000. “The advantages of being the online market leader are apparent as we continue to grow our market share,” said CEO Mark Coulter in the company’s most recent update.
Online beauty retailer Adore Beauty Group Ltd (ASX: ABY) has updated its revenue forecast for the first half of FY21 to $95.2 million, a 7% increase on the prospectus forecast. “We are pleased to report strong sales ahead of our Prospectus forecasts. The business has continued to scale, deliver content, and meet the needs of our customers at a time when they need it most,” said CEO Tennealle O’Shannessy.
Travel spend diverted to retail
As consumers find themselves stuck on Australian shores, many are reallocating their offshore travel spend to domestic adventures. This has resulted in a sales surge for Super Retail Group Ltd (ASX: SUL), the company behind popular stores BCF, Rebel Sports, and Super Cheap Auto.
Super Retail Group reported unprecedented consumer demand in the first 26 weeks of FY21, with like-for-like sales up 24%. The BCF brand reported a 51% uplift in sales as customers sought accessories to allow them to take advantage of adventures in their own backyard. BCF grew online sales by 113% while Super Retail Group reported an 87% overall increase in online sales. As a result, Super Retail Group upgraded its forecast profits and vowed it would repay $1.7 million in JobKeeper support.
Consumers spending more time at home have also looked to upgrade their surroundings, spending big on furnishings and homewares. Nick Scali Limited (ASX: NCK) reported an exceptional six months of trading in the first half of FY21, with sales revenue up 24.4% to $171.1 million. This flowed through to a 99.5% increase in net profit after tax, which reached $40.5 million.
“The first half of financial year 2021 had many challenges to navigate including government-mandated store closures, supply chain issues and significant delays experienced with global shipping providers,” said CEO Anthony Scali. “Despite these events, the team was able to capitalise on shifting consumer spending patterns and deliver a record result for the company.”
Adairs and Temple & Webster also reported strong results thanks to increased spending on the home. Adairs reported an increase in total sales of 23.4% in the first 23 weeks of FY21, upgrading group sales guidance for the first half of FY21 to $235–$245 million (compared to $179 million in the prior corresponding period). CEO Mark Ronan noted: “It is now clear our first half FY21 result will be outstanding ….whilst we have clearly been a COVID-19 beneficiary, the result has been delivered through the team’s strong execution against our articulated business strategies.”
Temple & Webster reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $14.8 million in the first half of FY21, up from $2.3 million in the prior corresponding period.
Electronics and whitegoods in favour
Consumers spending more time at home are not just looking to upgrade their furnishings — new appliances and entertainment options are also favoured.
Whitegoods retailer Harvey Norman Holdings Limited (ASX: HVN) reported a 28.2% increase in sales revenue for the period between 1 July 2020 and 21 November 2020, while profit before tax was up 160.1% between 1 July 2020 and 31 October 2020. These results were achieved despite lockdowns shuttering many stores during the period.
JB Hi-Fi also reported strong sales momentum in the first half, with continued elevated customer demand for consumer electronics and home appliance products. Sales surged 23.7% to $4,941 million, providing an 86.2% boost to profits, which reached $317.7 million.
Kogan.com Ltd (ASX: KGN) reported that business growth continued at a strong pace over the Christmas period, with 7 of its biggest 10 trading days ever occurring in the period surrounding Black Friday. Gross sales grew by 96% in the first half of FY21, while gross profit was up more than 120%. The company now boasts more than 3 million active customers, with over a million customers served during the Christmas period.
“The Black Friday week saw some of the most extraordinary trading we have ever seen. We are proud to have delivered another record half while undertaking significant investments into the future of the business,” said founder and CEO Ruslan Kogan.
Despite early concerns about the impact of COVID on Australian retail, ASX retail shares have shown great resilience in the face of the pandemic. Customers unable to utilise their travel budgets are turning instead to retail therapy, boosting returns for ASX retailers. Whether this trend will continue as the vaccine begins to roll out and borders open remains to be seen. But for now, many ASX retail shares are rewarding investors with strong results.
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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 Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited and Super Retail Group Limited. The Motley Fool Australia has recommended ADAIRS FPO 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.