Category: Stock Market

It has been a disappointing day of trade for the Nitro Software Ltd (ASX: NTO) share price on Wednesday.

In early trade the global document productivity software company’s shares are down 2.5% to $2.62.

Why is the Nitro Software share price trading lower?

Investors have been selling Nitro Software shares today despite the release of a strong full year result this morning.

While much of this result was pre-released with its fourth quarter update last month, there was still plenty for investors to take note of.

According to the release, at the end of December Nitro Software’s annual recurring revenue (ARR) reached $27.7 million. This was up 64% year on year and ahead of its upgraded guidance range of $26 million to $27 million.

This underpinned a 13% increase in total revenue to $40.2 million for FY 2020, which was in line with its prospectus forecast.

At the end of the financial year, subscription revenue had increased to $21.2 million. This was up 61% year on year and means it now accounts for 53% of total revenue. This was driven by a sizeable increase in licensed users to 2.6 million. It now has approximately 11,700 business customers and deployments in 68% of the Fortune 500.

In respect to its earnings, Nitro Software reported an operating loss of $2.4 million for the year. Once again, this outperformed its prospectus forecast. The company was forecasting an operating loss of $4 million.

Management notes that operating expenditure savings during the year were largely attributable to delays in hiring and COVID-related savings. These were partially offset by other incremental investments.

At the end of the period, the company had a cash balance of $43.7 million. Management feels this provides it with the flexibility to pursue organic and inorganic growth opportunities.

Outlook

The company is positive on the year ahead and is expecting to deliver further strong growth in ARR.

It expects FY 2021 ARR to be between $39 million and $42 million. This represents a 41% to 51.6% year on year increase.

It is, however, also forecasting a sizeable operating loss. It expects this to be in the range of $11 million to $13 million, which compares to its operating loss of $2.4 million in FY 2020. This forecast could be weighing on the Nitro Software share price today.

Looking further ahead, management notes that it has a significant market opportunity to grow into.

It commented: “Nitro will continue to focus on delivering its platform product strategy, driving increased adoption of the Company’s PDF productivity, eSigning and analytics solutions across new and existing customers in its enterprise, mid-market and SMB segments.”

“Nitro’s total addressable market in document productivity and eSigning is large and growing, supported by strong structural tailwinds and changing work practices accelerated by COVID-19, and estimated at $28 billion.”

Despite today’s weakness, the Nitro Software share price is up over 50% since this time last year.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nitro Software Limited. 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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Woolworths Group Ltd (ASX: WOW) shares are on the rise today after the supermarket giant released its half-year results for the period ended 3 January 2021 (HY21) this morning. At the time of writing, the Woolworths share price has jumped 1.15% to $39.54.

Let’s take a look at how Woolworths has been performing.

What’s driving the Woolworths share price?

The Woolworths share price is on the move after the company reported total revenue from continuing operations of $35.8 billion for the period. This compares to $32.4 billion for the half-year ended 5 January 2020.

Woolworths also posted a gain in gross profit which jumped from $9.6 billion in HY20 to $10.5 billion in HY21.

Earnings before interest and tax were $2.1 billion, which is up from HY20’s $1.8 billion.

Basic earnings per share (EPS) came in at 90.5 cents, a 28.1% leap from the 70.6 cents posted for HY20.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was up 8.7% at $3.4 billion for HY21.

At the end of the period, the business held $2.1 billion in cash and cash equivalents. The prior corresponding period (pcp) posted $1 billion.

Woolworths advised that coronavirus has had a material impact on results. 

While the company reported strong group sales growth of 10.6% for HY21, this was offset by $277 million spent on incremental COVID-19 costs.

The board declared an interim dividend for the period of 53 cents per share, fully franked.

CEO commentary

Woolworths Group CEO Brad Banducci commented on the HY21 results and said:

H1 sales growth was strong across all Group businesses, with the exception of Hotels, with record Christmas trading. Group sales increased by 10.6% in H1 (Q2: +9.0%) with Australian Food, BIG W and Endeavour Drinks all reporting sales growth well above trend. Sales growth in New Zealand Food slowed in Q2 with lower market growth rates impacted by a reduction in international tourism. In Hotels, sales trends improved over the half but growth was below the prior year due to continued COVID-related operating restrictions.

Despite incremental COVID costs of $277 million and the Hotels EBIT being well below the prior year, H1 Group EBIT1 grew by 10.5% to $2,092 million, with NPAT1 up 15.9%. BIG W’s profit improvement was a particular highlight with EBIT of $133 million, up 166% on the prior year.

Woolworths share price snapshot

Over the past year, the Woolworths share price has fallen by 7.3%. Whilst having mostly recovered from their May 2020 lows of around $32, Woolworths shares are yet to reach their pre-COVID highs of around $43.

Based on the current Woolworths share price, the company has a market capitalisation of around $50 billion with 1.3 billion shares outstanding.

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Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. 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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Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest follows the company releasing its half-year financial results for FY21.

Let’s take a closer look at the report and what this might mean for the Michael Hill share price. 

Michael Hill reports strong sales and growth

Earlier today Michael Hill released its financial results for the half-year ending 27 December 2020.

The company’s results were highlighted by an 82.1% surge in first-half net profit after tax (NPAT). For the first-half, Michael Hill recorded an NPAT of $38.9 million, compared to $21.4 million in the prior corresponding period (pcp).

In addition, the jewellery chain reported a 66.9% increase in earnings before interest and tax (EBIT) of $58.9 million. For the first-half, Michael Hill also saw a 6.3% increase in group same-store sales of $312.1 million.

Despite the strong performance, the company was not immune to the COVID-19 pandemic.  In its report, Michael Hill sighted that the company had lost 3,709 store trading days due to the pandemic.

As a result, the jewellery chain estimated lost sales of approximately $23 million. Michael Hill cited these store closures for the 2.9% decline in revenue for the first half of $319.9 million.

The company also boasted a strong balance sheet for the first half, with a cash position of $90.3 million. As a result, Michael Hill declared an interim dividend of 1.5 cents per share.

What is the outlook for Michael Hill and its share price?

Michael Hill is a global jewellery chain with 289 stores operating in Australia, New Zealand, and Canada.

For the remainder of FY21, the company remains focussed on maximising growth opportunities.

Michael Hill identified its digital business as a key focus. For the first half of FY21, the company reported a 102% increase in digital sales of $18.5 million. Overall, digital sales contributed nearly 6% to total sales compared to 2.8% in the prior corresponding period.

As a result, Michael Hill noted digital priorities for FY21 include traffic driving initiatives, new payment platforms, and conversion rate optimisation.

The company’s highlighted that the business had entered the second-half with clear strategic initiatives. Michael Hill’s management noted a strong start to the second-half, with same store sales up 11% for the first 8 weeks.

At the time of writing, the Michael Hill share price is poised to open slightly higher after closing yesterday’s trading session at 70 cents.

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Motley Fool contributor Nikhil Gangaram 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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The InvoCare Limited (ASX: IVC) share price is trading lower following the release of its full year results.

At the time of writing, the funerals company’s shares are down slightly to $11.17.

How did InvoCare perform in FY 2020?

It was a very difficult 12 months for InvoCare because of COVID-19 and this was reflected in its financial results.

For the 12 months ended 31 December, the company reported a 4.7% decline in operating revenue to $476.2 million. Management believes this reflects the resilience of its core business and the benefits of diversification in challenging trading conditions.

Unfortunately, the company’s earnings didn’t hold up as well. InvoCare reported a 29% decline in operating earnings before interest, tax, depreciation and amortisation (EBITDA) to $102.6 million.

The company explained that employee costs (with no JobKeeper support), the fixed cost nature of its facilities, and the previously announced $7 million impact of significant operating items weighed on its operating profit result.

On the bottom line, the company reported a loss after tax of $9.2 million. This partly reflects the impact of non-cash movements in the Prepaid Funeral business’ funds under management (FUM).

Despite this loss, the company declared a fully franked final dividend of 7 cents per share. This brought its full year dividend to 12.5 cents per share, which is down 70% from 41 cents per share in FY 2019.

Management commentary

InvoCare’s new CEO, Mr Olivier Chretien, said: “While the Group’s financial results have been put under pressure in 2020, it is pleasing to see how resilient the business and our people have been.”

“I want to thank our dedicated employees who have continued to provide exemplary service despite multiple disruptions. They have provided safe environments and leveraged technology to ensure our client families were able to continue to celebrate and farewell their loved ones in whatever form that took.”

Outlook

InvoCare advised that it remains cautious in its outlook. It notes that short term market conditions are still being impacted by COVID restrictions and the timing and extent of the unwind of related impacts remains hard to predict.

Nevertheless, it feels confident about the long-term potential of the business,. It expects its future growth to be supported by population and ageing trends in its markets. Management has also initiated an operating model and cost efficiency review to further strengthen the business’ foundations.

Mr Chretien commented: “I am energised by the potential of our businesses. We have an experienced team, strong national and local brands, a modernised asset base and leading market positions. I see many opportunities to leverage and optimise our foundations to meet the evolving needs of our client families and communities with an expanding, omni-channel, value proposition.”

“We can also extend our industry leadership through increased focus on talent, safety, sustainability, digital, innovation and proactive stakeholder management. I look forward to setting out our strategic plan for the next 5 years at our inaugural Investor Day to be held in May,” he concluded.

Following today’s decline, the InvoCare share price is down 23% over the last 12 months.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare Limited. 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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In morning trade the WiseTech Global Ltd (ASX: WTC) share price is pushing higher after the release of a solid half year result.

At the time of writing, the logistics solutions company’s shares are up 9% to $32.40.

How did WiseTech perform in the first half?

For the six months ended 31 December, WiseTech reported a 16% increase in revenue to $238.7 million.

This was driven by a 12% increase in acquisition revenue to $88.7 million and a 19% lift in CargoWise revenue to $150 million. Management notes that the latter reflects increasing customer usage of the CargoWise platform.

Another positive is that organisation-wide efficiency initiatives, including synergies from acquisitions, delivered $6.1 million in cost reductions during the half.

This and operating leverage supported a 43% increase in half year earnings before interest, tax, depreciation and amortisation (EBITDA) to $89.2 million. And on the bottom line, this ultimately led to WiseTech reporting a 61% jump in underlying net profit after tax to $43.6 million.

Also potential giving the WiseTech share price a lift today was its strong free cash flow. It came in 74% higher than the prior corresponding period at $48.7 million.

In light of this and its strong balance sheet (cash of $251.4 million), the WiseTech Board declared a fully franked interim dividend of 2.7 cents per share.

What is driving WiseTech’s growth?

Management advised that its strategic investment (via in-house research and development and acquisitions) is driving CargoWise’s revenue growth and market penetration.

It notes that this is delivering geographic expansion, the addition of new functionalities and products, and increasing momentum in the number of global customer roll-outs of CargoWise.

Since 1 January 2020, there have been eight new sign ups. These include Aramex, Hellmann, Deugro, CEVA Logistics, A. Hartrodt, Cargo-partner, Seafrigo Group, and Hankyu Hanshin Express.

WiseTech’s Founder and CEO, Richard White, commented: “Notwithstanding the subsequent waves of COVID-19 in major markets, our business has continued to deliver solid revenue and EBITDA growth in 1H21.”

“Our strategic focus on ‘Product, Penetration and Profitability’ has enabled us to continue to expand the CargoWise ecosystem, increase our market penetration, with eight new global customer roll-outs signed since 1 January 2020 and deliver 61% growth in Underlying NPAT, demonstrating the step change in operating leverage that we are achieving by extracting acquisition synergies and implementing organisation-wide efficiencies.”

Outlook

Also giving the WiseTech share price a lift today was news that management is upgrading its earnings guidance for the full year.

It advised that this upgrade reflects the benefits expected to be generated from operational leverage as the company continues to implement its organisation-wide efficiency initiatives and extracts acquisition synergies.

It has reaffirmed its revenue guidance of $470 million to $510 million, which represents annual growth of 9% to 19%.

Whereas its EBITDA is now expected to be in the range of $165 million to $190 million. This represents year on year growth of 30% to 50%. Previous guidance was for growth of 22% to 42%.

Mr White commented: “The pandemic has provided the impetus for an acceleration in the longer-term structural shift towards consolidation, integration and digitisation of global logistics and supply chains. The recently announced proposed takeover of Kerry Logistics by SF Holdings and DSV’s public comments about its increased appetite for M&A following its successful UTi and Panalpina acquisitions are evidence of this trend.”

“We are seeing increasing demand amongst large global logistics service providers for our CargoWise offering with the momentum in sign-ups for CargoWise global roll-outs accelerating.”

“Looking ahead, we will continue to innovate through our ongoing product development program with the aim of delivering a seamless, global logistics technology solution that improves productivity, functional depth, data integration and cross-border regulatory compliance for customers, with a specific focus on targeting the Top 25 Global Freight Forwarders and the Top 200 Global Logistics Providers,” he concluded.

The WiseTech share price is now up a massive 72% over the last 12 months.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of WiseTech Global. 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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The Blackmores Limited (ASX: BKL) share price is charging higher following the release of its half year results.

At the time of writing, the health supplements company’s shares are up 4% to $77.17.

How did Blackmores fare in the first half?

For the six months ended 31 December, Blackmores reported revenue of $302.6 million. This represents a 3% increase on the prior corresponding period or 4% in constant currency.

This was driven by a 13% increase in International revenue and a 25% lift in China revenue, which offset a 10% decline in ANZ revenue to $148 million.

During the half, Blackmores received $10.4 million in government assistance through the JobKeeper program. However, since the end of the period, it has decided that it received more than necessary. As such, it will return $2.4 million of pre-tax Australian JobKeeper funds during the second half.

In respect to its earnings, Blackmores reported an 8% increase in underlying net profit after tax to $19.4 million.

This improved profitability has allowed the Blackmores Board to reinstate its dividend after a one-year hiatus. It has declared a fully franked interim dividend of 29 cents per share.

Management commentary

Blackmores’ Chief Executive Officer, Alastair Symington, appeared to be pleased with the half.

He said: “This time last year we outlined our three-year strategy to set us on the path for sustainable, profitable growth. Since then, we have taken the necessary steps to hit important turnaround milestones and made positive strides toward simplifying our operating model in line with our new strategic direction.”

“The strengthening of our balance sheet, ability to pay down debt and move to a positive net cash position enabled us to step up investments in Asia. This has resulted in accelerated growth in our key markets in Asia in the first half of FY21.”

Mr Symington was particularly pleased given the tough trading conditions it was facing due to COVID-19. He remains confident there will be more of the same in the second half.

He explained: “Our transformation program and first half result have been achieved despite the disruptions and uncertainty brought on by COVID-19 which affected traditional retail channels and shopper behaviour in Australia.”

“We remain focused in the second half on continuing to deliver against our strategic priorities. I am confident we will delight our consumers by giving a more distinctive brand experience with Blackmores, BioCeuticals and PAW by Blackmores while maintaining cost discipline and operational excellence to support future growth and shareholder value creation,” he added.

Outlook

While no real guidance has been provided for the second half, management has warned investors that it could be a tough period.

Although it expects growth in the Asia market, the core ANZ market remains challenging. It explained:

“As we look to the second half, revenue growth in Asia will continue with positive signs of health and economic recovery underway. The Australian vitamin and supplement market will continue to face structural challenges as international borders remain closed and the focus on vaccine rollout will disrupt consumer behaviour for at least the rest of the 2021 calendar year.”

“Despite a full half of realisation from our 1 October price increases, revenue for the second half will be slightly lower than the first half which was impacted by seasonal and key customer events.”

“In the second half, we will maintain our focus on cost management. For the remainder of the year we will respond to changing retail demands and restore much needed brand investments to levels before the onset of the pandemic. Blackmores remains mindful of the ongoing uncertainty around COVID-19.”

Following today’s gain, the Blackmores share price is up 10.5% over the last 12 months.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. 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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Nine Entertainment Co Holdings Ltd (ASX: NEC) has more than doubled its profit for the half-year ending 30 December.

The media company reported on Wednesday morning it raked in $181.9 million of consolidated net profit after tax, compared to $87.3 million the year before.

The positive result in a half-year affected by COVID-19 meant Nine has decided to give out an interim dividend of 5 cents per share fully franked.

This restores the dividend payout back to pre-pandemic levels.

Dividend ex-date	Type	Amount	Franking
4.3.2021	Interim	5 cents	100%
9.9.2020	Final	2 cents	100%
5.3.2020	Interim	5 cents	100%
26.9.2019	Final	5 cents	100%
5.3.2019	Interim	5 cents	100%
Table created by the author

The share price for the publishing giant will be keenly watched as the ASX opens trade on Wednesday morning. The stock closed Tuesday down 0.37% to trade at $2.67.

Just last week Macquarie Group Ltd (ASX: MQG) analysts upgraded their share price target for Nine to $3.80. That’s a healthy 42% return from the current level.

Nine was one of the best-performing media stocks on the ASX last year, gaining 29% for the calendar year.

Despite the profit upgrade, Nine’s revenue from continuing operations actually fell 3% from the previous year.

However, earnings before interest, tax, depreciation and amortisation (EBITDA) for continuing operations rose 42% and its cash flow also improved more than 91%.

The company performed well during a volatile time and has “come out the other side in a very strong position”, according to Chief Executive Hugh Marks. 

“The advertising market clearly turned in late September — earlier and more sharply than we had anticipated,” he said.

“Nine’s consistently strong audience performance, across all of our platforms, means we are well-positioned to benefit from this improvement in the ad cycle.”

A busy half-year for Nine 

Big events during the half-year included the relocation of its headquarters from the historic Willoughby site in northern Sydney to a brand new skyscraper in North Sydney.

The company also signed a revenue-sharing agreement with Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)’s Google for new content provided to the digital platform.

Nine’s own newspapers also reported Wednesday that negotiations had been re-opened with Facebook Inc (NASDAQ: FB) following the social media giant’s reversal of its Australia news ban.

There is also a Chief Executive transition in place. Current boss, Marks resigned from the position in November after revealing a relationship with the former Managing Director of Commercial, Alexi Baker. He is staying on until a replacement is found.

“I’ve had a great 5 years at Nine, and am confident that I am handing over the reins at the perfect time,” Marks said Wednesday. 

The company’s streaming service, Stan, also secured the rights to broadcast rugby union, with new brand Stan Sport launching last month.

With a big profit boost to show off, Nine will return JobKeeper payments received for all wholly-owned subsidiaries. This amounts to about $2 million.

In total, it has received about $8.4 million of the government subsidy, with the vast majority ($6.5 million) going to its real estate classified business Domain Holdings Australia Ltd (ASX: DHG).

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (C shares) and Facebook. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Alphabet (C shares) and Facebook. 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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The new bull market has thrust many shares to record highs. However, it is still possible to buy cheap shares due to an uncertain outlook for the economy in the short run.

Buying stocks that trade at cheap prices has historically been a sound means of capitalising on stock market cycles.

Therefore, building a portfolio right now of high-quality businesses while they trade at low prices could be a means of generating high returns. It may even double an initial investment at a relatively fast pace over the coming years.

Buying cheap shares with capital growth potential

One of the major reasons to buy cheap shares is their capacity to deliver high returns. Buying any asset at a low price is likely to be a better idea than purchasing it at a higher price. There is more scope for capital growth, which equates to greater returns for an investor.

Even though the new bull market has pushed many stocks to new highs, some sectors and companies trade at cheap prices. In many cases, they are businesses that face challenging short-term prospects that could mean their financial performances disappoint. However, since the world economy has always recovered from periods of low growth to deliver an improving performance, the long-term prospects for many industries may be more positive than market sentiment suggests.

Focusing on quality companies at low prices

Of course, some cheap shares may be priced at low levels for good reason. For example, they may have weak balance sheets or lack an economic moat that means they fail to deliver strong profit growth in the long run.

As such, it is imperative to focus on the quality of any company before buying it. This means analysing its industry position, strategy and financial position through assessing its latest investor updates and annual reports. Otherwise, it is possible to end up with a portfolio filled with unattractive companies that may not be able to recover even in a long-term bull market. This could mean high risks, as well as low returns.

Doubling an investment in undervalued shares

Investing in cheap shares could be a means of generating higher returns than the wider stock market over the long run. It allows an investor to capitalise on the new bull market via companies for whom investors may currently have a negative standpoint that may not be merited in the coming years.

Even matching the returns of the stock market could lead to 100%+ returns in the coming years. For example, indices such as the FTSE 100 Index (FTSE: UKX) and S&P 500 Index (SP: .INX) have delivered annualised total returns of 8-10% in recent decades. This means that an investment that matches their performance could double within 7-9 years.

However, an investor may be able to reduce this timeframe by purchasing undervalued companies now. They could be among the top performers in the new bull market.

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Motley Fool contributor Peter Stephens 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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ASX media share will be in the spotlight after Facebook, Inc. Common Stock (NASDAQ: FB) and stuck a deal with Seven West Media Ltd (ASX: SWM).

The Aussie media group is believed to be the first to sign a letter of intent with the social media titan, according to the Australian Financial Review.

It isn’t only Seven West that likes the deal. The Facebook share price broke its four-day losing streak last night.

Seven West first but not last to strike deal with Facebook

Nine Entertainment Co Holdings Ltd (ASX: NEC) and News Corporation Class B Voting CDI (ASX: NWS) are believed to be close to penning their own agreement with Facebook.

The news should keep the Seven West share price close to its two-year high even as the S&P/ASX 200 Index (Index:^AXJO) is set to open lower this morning. The company, which owns the West Australian newspaper and Channel Seven free-to-air stations, closed at 54 cents yesterday.

The Nine Entertainment share price and News Corporation share price are also hovering close to multi-year or record highs on the belief that Silicon Valley tech giants will inject more than $200 million a year into local journalism.

Facebook throws a tanty

The proposed media bargaining law has dragged Facebook and Google’s owner Alphabet Inc Class C (NASDAQ: GOOG) kicking and screaming to the negotiation table.

Google was the first to capitulate but Facebook played hardball and blocked Australian news organisations (and then some) from posting on its platform. That wasn’t to be a well calculated move as Facebook underestimated the public backlash.

It has since promised to restore access to its service to all Australian organisations.

Facebook share price jumps on media bargaining code compromise

Facebook’s three-finger salute to Australia also didn’t help the Facebook share price. It tumbled for four straight days before news that it struck a compromise with the federal government sent the shares jumping over 2% to US$265.86 last night.

The stumbling block that stopped ASX media groups from striking a deal with Facebook was the “poison pill” clause that gave Facebook the right to immediately terminate deals.

But Facebook has dropped that after the federal government agreed to amend its media bargaining code.

The changes mean that the government will need to consider existing commercial deals between the platforms and media companies before applying the media bargaining code.

The government also has to give the US giants at least a one-month warning before enforcing the code.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors.

Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (C shares) and Facebook. The Motley Fool Australia has recommended Alphabet (C shares) and Facebook. 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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The coronavirus pandemic has had a mixed impact on ASX retail shares. Those with a strong online presence have benefitted from an influx of online shoppers. Those reliant on high street trade have been more vulnerable to lockdowns and social distancing requirements.

But retail sales have come back strongly as the economy has opened up. According to the Australian Bureau of Statistics, Australian retail turnover rose 10.7% in January 2021 compared to January 2020.

ASX shares such as JB Hi-Fi Limited (ASX: JBH) have benefitted from the increase in consumer spending. The electronics retailer reported a 23.7% increase in sales for the half-year ended 31 December 2021.

But it’s not just JB Hi-Fi that’s been seeing a significant increase in sales. Adairs Ltd (ASX: ADH) reported a 34.8% increase in sales over the same period. Online only retailer Temple & Webster Group Ltd (ASX: TPW) did even better, reporting a 118% increase in revenue for the most recent half year. Kogan.com Ltd (ASX: KGN) is due to report its half-year results on Friday, and investor expectations are high.

Let’s take a closer look at how these ASX retail shares are performing this reporting season. 

JB Hi-Fi 

Australia’s favourite electronics retailer made record sales in 1H FY21. Selling some $4.9 billion worth of TVs, computers, gaming devices, and mobiles, JB Hi-Fi saw continued elevated demand for consumer electronics and home appliances.

“We are pleased to report record sales and earnings for HY21, in what has been an extraordinary period,” said CEO Richard Murray. “Investments in our online business and supply chain have enabled us to seamlessly meet our customers’ increased demand,” he added. The increased demand pushed JB Hi-Fi’s profits up 86.2% to $317.7 million. This allowed for an 81.8% increase in dividends, which reached 180 cents per share. 

Online sales increased 161.7% over the half year to $678.8 million. JB Hi-Fi has been continuing to invest in this channel, upgrading websites and providing expanded delivery and warehouse options.

Australian sales were up 23.3%, thanks to the key growth categories of communications, computers, games hardware, and small appliances. In New Zealand, total sales were up 9.1%, and online sales were up 69.2%. The Good Guys grew total sales by 26.4% thanks to continued elevated demand for home appliances and consumer electronics. Strong sales momentum continued into January across all brands. Murray says the company recognises that the operating environment is uncertain but remains excited by the outlook for the business. 

Adairs

Homewares retailer Adairs has benefitted from customers spending more time at home during lockdowns. Many have taken the opportunity to upgrade their home furnishings and decor. Despite the impact of store closures on the company’s 43 Greater Melbourne locations, Adairs managed to deliver an increase in gross sales to $243 million in 1H FY21. Online sales accounted for $90.2 million, or 37.1%, of sales. Earnings per share (EPS) were 25.9 cents (compared to 7.8 cents in 1H FY20) and profits leapt 233.4% to $43.9 million. 

With profits on the rise, Adairs has announced it will repay its $6.1 million JobKeeper wage subsidy to the government. Shareholders, in turn, will receive an interim dividend of 13 cents per share.

Investment in its omni-channel strategy is showing benefits for Adairs, with membership of its Linen Lovers club now exceeding 900,000. “Our first-half FY21 results are outstanding and a clear testament to the strategic health, operational excellence, and resilience of our business,” said CEO Mark Ronan. “These results highlight the benefits of investing early in our omni-channel strategy.”

Temple & Webster Group 

Temple & Webster reported first-half revenue of $161.6 million as active customer numbers grew 102% to 687,000. “It is great to see our revenue growth translating into operating leverage and significant profit growth,” said CEO Mark Coulter. “This allows us to accelerate our investment into areas such as data, technology, private label, and brand awareness.”

The company is a pure-play online retailer in the furniture and homewares market with a strategy of being a category specialist. The customer offering is built around the biggest range of furniture and homewares in the country. Coulter says the advantages of being an online leader are apparent as the company continues to grow its market share. 

Temple & Webster reported earnings before interest, taxes, depreciation and amortisation (EBITDA) of $14.8 million in 1H FY21, up 556% from $2.3 million in the prior corresponding period. Cash flow was positive, and the business ended the half with a cash balance of $85.7 million (including $40 million in placement proceeds).

Temple & Webster says the second half has started strongly, with January revenue growth tracking in excess of 100%. Strong tailwinds are expected to aid performance. Tailwinds include ongoing adoption of online shopping due to structural and demographic shifts and increases in discretionary income due to travel restrictions. 

Kogan

Kogan’s half-year financials are due out on Friday. In its January business update, the company reported a strong Christmas trading period with record-breaking sales during Black Friday week. Gross sales for 1H FY21 grew by more than 96%, with gross profit up 120%.

Founder Ruslan Kogan said, “We are proud to have delivered another record half while undertaking significant investments into the future of the business.” Investors will be expecting big things when Kogan unveils its results later in the week. 

Can it continue?

These ASX retail shares have seen major surges in sales thanks to the COVID-19 pandemic. Lockdowns have meant people are spending more time at home, and travel bans are leaving them with extra discretionary income.

Whether this will continue as the vaccine rolls out and we return to a new normal remains to be seen. But a continued economic recovery should support sales as the world moves out of pandemic mode. 

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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 Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia has recommended ADAIRS FPO, Kogan.com ltd, 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.

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