Data is the key for ASX retail shares in 2020. That’s what I think is the big message after the value of Australia’s retailers surged on Tuesday.
Positive news about coronavirus vaccine candidates pushed the S&P/ASX 200 Index (ASX: XJO) as a whole 2.6% higher on Tuesday.
However, ASX retail shares received a particularly strong boost from the Federal Government’s JobKeeper and JobSeeker extensions.
What’s happening with JobKeeper and JobSeeker?
Prime Minister Scott Morrison announced a range of changes to the existing stimulus programs.
JobKeeper payments will be reduced to $1,200 for full-time workers, down from $1,500 at the moment. That will run until the end of 2020 and then drop to $1,000 per fortnight from January 3.
The part-time worker payment will be reduced from $1,500 to $750 per fortnight after September before dropping to $650 per fortnight in 2021.
The new end date for ‘JobKeeper 2.0’ will be 28 March 2021.
The $550 JobSeeker supplement will be reduced to $250 per fortnight after September. That means total payments will be reduced from $1,115 to $815.
Why is that good news for ASX retail shares?
Yesterday I wrote about the potential impacts of this week’s action-packed spate of economic updates.
I wrote that an extension of JobKeeper and JobSeeker could help boost ASX 200 retail shares like JB Hi-Fi Limited (ASX: JBH) and Super Retail Group Ltd (ASX: SUL) higher.
That proved to be the case on Tuesday, with JB Hi-Fi shares surging 2.0% and Super Retail jumping 3.7%. Shares in retail REIT Scentre Group (ASX: SCG) also rocketed higher on the news, closing up 3.3% at $2.17 per share.
Retail billionaire Solomon Lew shared a similar view according to an article in the Australian Financial Review (AFR).
Mr Lew described ‘JobKeeper 2.0’ as a ‘big shot in the arm for the Australian workforce and broader economy’. Low unemployment is good for sales while the extra cash is helping retail stores continue operations.
Is now a good time to buy?
I think the answer to this really depends on the August earnings season. The JB Hi-Fi share price has climbed 14.2% this year on the back of strong sales. This says to me that investors are already pricing in a strong sales result in 2020.
However, the JobKeeper extension is good for business. That means more cash in the economy and less of a drain on expenditure.
If we see an Aussie retailer like Super Retail outperform with respect to earnings, I think ASX retail shares will finish the year strongly.
Any signs of persistent sales growth or operational streamlining could push ASX retail shares higher in August and September.
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More reading
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- 5 things to watch on the ASX 200 on Wednesday
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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