The Harvey Norman Holdings Limited (ASX: HVN) share price is trading flat on Wednesday after releasing a sales update.

At the time of writing the retail giant’s shares are changing hands for $3.55.

What did Harvey Norman announce?

Today’s update reveals that Harvey Norman’s Australian business has been on form during the pandemic.

During the crisis, only two franchised stores in Tasmania were closed for two weeks due to a mandated closure of the region by the Tasmanian State Government.

All other Australian franchised stores remained open. This was because, like supermarkets, Harvey Norman was seen as an essential service by the Australian Government during the crisis.

In light of this and increasing demand for many of its products, as of 31 May 2020, the Harvey Norman franchise network has delivered a 17.5% increase in sales in the second half.

This compares to just a 0.1% increase in sales during the first half and means that its year to date sales are up 7.4% on the prior corresponding period.

What about the rest of the business?

Things weren’t quite as positive for its overseas operations, where the vast majority of its stores were forced to close for certain periods during the pandemic.

In Australian dollar terms, New Zealand company operated sales are down 7.3% during the second half. It was a similar story in Slovenia and Croatia, with sales down 5.5% half to date.

Things were much worse in Northern Ireland and Singapore. Second half sales were down 38.2% and 21.7%, respectively, as of 31 May.

Positively, its Ireland and Malaysia stores were still growing their sales. Ireland sales are up 25.4% during the second half and Malaysia sales are up 1.3%.

Special dividend.

In April, Harvey Norman revoked its decision to pay shareholders a 12 cents per share interim dividend due to the pandemic.

It appears as though things haven’t turned out as bad as it first feared. As a result, it has decided to pay a special dividend to shareholders later this month.

Harvey Norman will pay a 6 cents per share fully franked dividend on 29 June 2020. To be eligible, you will need to be a registered shareholder at the close of business on 23 June 2020.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Commonwealth Bank of Australia (ASX: CBA) share price has lagged behind the other major banks since the market turned on 22 May. Since then, CommBank’s share price has risen by 22%. While impressive, all of the remaining major banks saw increases of over 30% across the same period. This includes Australia and New Zealand Banking Group Limited (ASX: ANZ) which saw a 36% rise in its share price. Even the out of favour Westpac Banking Corp (ASX: WBC) has seen greater share price rises than the largest Aussie bank.

The Commonwealth Bank has, however, been moving forward in preparing itself for the future. This includes by selling off distracting assets not focused on its core business of banking, as well as entering the buy now, pay later market via a deal and 5% stake in Swedish company Klarna. 

So, what is holding back the CBA share price?

CommBank was the first Aussie bank to signal its intention to cut back on Covid-19 support by 30 June. Principally via assessing all claims for loan deferrals on a case by case basis, rather than automatic acceptance. This means customers with ongoing hardship as a result of the coronavirus crisis will have to contact the bank for alternative support. I believe this move is weighing heavily on the CBA share price. 

While this approach seems fiscally prudent at face value, it creates two problems. First, there are issues related to auditing.

Most loans deferred from 20 March, the date the conditions were commenced, would be 90 days overdue. After 90 days default, notices are required to be sent by auditors. A default notice demands payment of the overdue amount plus the current repayment. Debtors can apply for a hardship variation at this stage. With the other banks, when the period finishes on (say) 30 September, customers will just start paying again at that time.

Second, CommBank will likely be the first of the majors to start to see loan defaults for those customers unable to pay who do not qualify for whatever the ‘alternative’ support may be.

Commonwealth Bank is by far the largest of any Aussie bank in the mortgage market with 14.75% market share, according to a report by Australian Finance Group Ltd (ASX: AFG). Therefore, it is exposed to the greatest economic impact of both loan deferrals and potentially loan defaults. 

Alan Kohler opined in The Australian this week that the total amount of the deferred loans is equal to 90% of the market capitalisation of the big four banks. In fact, it is $224 billion across mortgages and business loans. This is a frighteningly large amount of money. Even a small percentage is a frighteningly large amount of money.

Foolish takeaway

CommBank is the country’s largest mortgage lender, a major player in business loans and the country’s largest digital payments institution. As such, Coronavirus is likely to impact the CBA share price more than the other major banks. In response, CommBank has taken the decision to stem the bleeding by cutting short its 6-month coronavirus support measures to finish on 30 June.

At the close of trading on Tuesday, Commonwealth Bank had the lowest price to earnings ratio of the big four banks. It also had the second lowest trailing 12-month dividend yield, even though dividends are presently on hold. The CBA share price remains 9.6% down year to date. 

I would recommend Commonwealth Banks shares to anyone willing to buy and hold over the medium to long term who is prepared to deal with the inevitable bad news to come as the economy normalises.

More reading

• 3 top ASX shares for growth, income, and value investors to buy today
• Is the CBA share price a buy right now?
• 5 things to watch on the ASX 200 on Wednesday
• The ASX bank dividend recovery may be better than what the market thinks
• Not keen on Westpac? Then buy these top ASX dividend shares instead

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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As we turn to a new chapter where lockdown measures are being eased and the community slowly returns back to life pre-COVID-19, what are the smartest S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) shares to buy?

Here are 3 industries that are positioned to benefit from the easing restrictions. 

1. Telecommunications 

Smaller ASX telecommunications shares such as 5G Networks Ltd (ASX: 5GN) and Uniti Group Ltd (ASX: UWL) are positioned to benefit from increased levels of working from home, online learning and domestic internet consumption that look set to stick around as a lasting result of the pandemic. While they may represent high risk/high reward investments, I believe both companies may be positioned at the right place at the right time. 

In Uniti’s March 2020 quarter business update it highlighted that increased levels of working and learning from home has “strengthened underlying demand for the company’s superfast fibre-to-the-premises services provided by its wholesale and infrastructure business unit.”

For investors interested in high growth companies, I would certainly place 5G Networks and Uniti shares on the watchlist. 

2. Fintech payments 

ASX fintech shares such as Tyro Payments Ltd (ASX: TYR) and EML Payments Ltd (ASX: EML) both depend in large part on physical retail and hospitality consumption, so they will be looking forward to the return to normal trading. 

Tyro provides more than 32,000 customers with EFTPOS terminals, a vast majority of which are SMEs in the retail, hospitality and health sectors. The company has been providing the market with weekly updates regarding its transaction values. On Tuesday, it highlighted that its transaction values for the week ended 5 June (date-on-date for FY20 vs. FY19) increased by 11%. This has been the first positive increase since April. 

Likewise, EML’s gross debt volume dropped 29% in March on the prior corresponding period, reflecting mall closures across the globe. It expects that the gradual reopening of malls in various countries should see an improvement to its trading conditions. 

3. Airlines and travel 

ASX airline and travel shares have seen eye watering rallies despite domestic and international borders still being closed. On Tuesday, Air New Zealand Limited (ASX: AIZ) saw its share price soar 20% after announcing its plan to return to revenue and profitability.

Qantas Airways Limited (ASX: QAN) has announced that it plans on doubling its existing domestic schedule to more than 300 return flights per week by the end of June. Flights would continue to increase in July, with capacity to reach approximately 40% by month end.

Increasing domestic flights will be positive for the likes of travel agencies including Webjet Limited (ASX: WEB), Corporate Travel Management Ltd (ASX: CTD) and Flight Centre Travel Group Ltd (ASX: FLT).

Foolish takeaway

I believe investors should pivot their investment decisions to ASX shares in sectors that are expecting to benefit from pent-up consumer demand, post-COVID-19. 

More reading

• ASX 200 jumps 2.4%, unloved shares keep rising
• Fund managers have been buying these ASX shares
• Why the Air New Zealand share price is up 17% today
• Flight Centre share price and other ASX 200 travel shares look set to continue rising
• Is the Webjet share price a cheap buy today?

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited and Tyro Payments. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Emerchants Limited and Flight Centre Travel Group Limited. 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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