Sometimes we need to look back to appreciate where we have come from. Shareholders of select brick-and-mortar retailers still must be pinching themselves. Despite the turmoil of lockdowns and store closures experienced in 2020, they have come out ahead.
The question is, will the performance continue in 2021? Especially given the re-emergence of COVID-19 cases in NSW, potentially jeopardising the economic recovery.
Brick-and-mortar retailers will need to prudently manage capital in order to not only survive but thrive, in the event of future disruptions.
Let’s take a look at a couple of retailers that made it through the 2020 debacle and might be worth watching as we enter the new year.
JB Hi-Fi Limited (ASX: JBH)
The well-known price competitive retailer felt the closure bite in March 2020. Shares in JB Hi-Fi fell more than 47% to a low of $23.50 in March, as viral cases were rising and foot traffic fell. However, the market was quick to realise that JB Hi-Fi was well adapted for online sales, through its long running click-and-collect and delivery options. The shares have since more than doubled to $49.69 at the time of writing.
As mentioned in its 2020 annual report, the company benefitted from high demand and supply constraints – leading to a high turnover rate. This was reflected in the staggering double-digit growth in net profit after tax of 33.2%.
A key contributor to the group’s performance was also the 56.6% increase in online sales compared to the previous year.
CEO Richard Murray also acknowledged back in October during an interview with The Australian Financial Review, that he did not expect a continuation of the double-digit sales growth in Q1 FY2020, for the rest of the financial year.
JB Hi-Fi also indicated in its annual report that the company will likely return to a net debt position as inventory becomes available. Term debt and/or trade finance facilities will then be drawn upon in order to replenish stock.
JB Hi-Fi has returned an impressive 21.2% compound annual growth in earnings per share (EPS) since listing in 2003.
Dusk Group Ltd (ASX: DSK)
The fresh and spry fragrance retailer, Dusk, has been heating up since its IPO listing back in November. Shares in the specialty retailer were initially dumped by 15.5% on their first day of trade, falling to $1.69. However, since then, they have been on fire, rallying to $2.18 at the time of writing.
Although new to public listing, Dusk has been around for 20 years. That means that 2020 was not its first economic rodeo.
Given the company’s recent listing, it is difficult to judge its performance during interruptions last year.
However, the most recent trading update appears to be positive for the company’s outlook. Sales for the first half of FY 2021 is anticipated to come in between $90 million to $90.5 million. This compares to first-half sales in 2020 of $58.7 million. The company also expects earnings before interest and tax (EBIT) of $26 million to $27 million – 168% higher than H1 FY2020 on the low end.
Today, shares have been trading up significantly. This may relate to the notice of change in substantial holding in Wilson Asset Management Group (WAM). The notice indicates that WAM has increased its holding from 5.41% to 6.72%.
Dusk Group’s market capitalisation is now $135.78 million, making it a small-cap.
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Motley Fool contributor Mitchell Lawler 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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