On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on them:

Air New Zealand Limited (ASX: AIZ)

According to a note out of UBS, its analysts have retained their sell rating but lifted the price target on this airline operator’s shares to 60 New Zealand cents (55.5 Australian cents). The broker now expects Air New Zealand’s cash burn to be less severe than previously expected. However, the full extent of its cash burn will depend on how quickly travel markets return to normal. In light of this, it sees no reason to change its rating at this stage. The Air New Zealand share price is trading at $1.16.

Commonwealth Bank of Australia (ASX: CBA)

A note out of Goldman Sachs reveals that its analysts have reiterated their sell rating and $56.40 price target on this banking giant’s shares. Goldman remains bearish on Commonwealth Bank due to its strong deposit franchise. It believes this leaves it more vulnerable to the medium term impact of lower rates. In addition to this, it notes that the bank has the highest exposure to more competitive mortgages and its CET1 ratio is softening. Combined, it doesn’t believe the bank deserves to trade at such a premium to its peers. Commonwealth Bank’s shares are changing hands at $60.30 today.

National Storage REIT (ASX: NSR)

Another note out of Goldman Sachs reveals that its analysts have put a sell rating and $1.56 price target on this storage provider’s shares. The broker believes that trading conditions will remain challenging due to economic uncertainty. Especially given the prospect of higher unemployment. Goldman expects National Storage to post a 15% decline in underlying earnings in FY 2020 and then a 2% decline in FY 2021, before rebounding 9% in FY 2022. National Storage’s shares are trading at $1.71.

More reading

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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 Baby Bunting Group Ltd (ASX: BBN) share price is surging higher today after the retailer provided a business update. At the time of writing, Baby Bunting shares are trading 14.98% higher for the day at $3.07 on the back of continued sales growth throughout the COVID-19 pandemic.

Online sales boom

This morning, Baby Bunting provided an update on its business performance during the second half of FY20. From the period between 30 December 2019 and 17 May 2020, the company posted total sales growth of 13.2% and comparable-store sales growth of 8.1%. Meanwhile, online sales in this period represented 17.3% of total sales – an impressive 66% jump compared to the prior corresponding period.

On a year-to-date basis, total sales growth is 10.3% while comparable-store sales growth comes in at 3.4%. Baby Bunting noted this sales performance reflects the less discretionary nature of the baby category.

Breaking down online sales further, the company saw online sales increasing from 12.4% of all sales before 23 March 2020 to 22.4% of sales through the following 2-month period to 17 May 2020. This represents an increase in online sales of 121% during this period, year over year.

Baby Bunting’s click and collect service is also proving to be a popular option, with around 42% of all online orders ending up as click and collect transactions at its stores.

However, the company noted that online sales have lower gross margins due to higher freight fulfilment costs compared to in-store sales.

All stores remain open

Throughout the coronavirus pandemic, all Baby Bunting stores have remained open but the company has adapted to the various social distancing and hygiene measures.

According to today’s release, individual store performance has been mixed, while stores located in shopping centres and selected stores in Victoria and New South Wales have been affected by lower foot traffic.

In terms of buying trends, CEO Matt Spencer said there was strong initial demand for lower margin consumable products, such as baby wipes and nappies. As the lockdown period progressed, the company experienced a ramp-up in purchases of products for the nursery, including cots, furniture, toys, and bedding. Now that restrictions are beginning to be eased, demand for travel-related products, such as prams and car seats, has started to recover.

Capital expenditure program

In anticipation of future cash flow pressures, Baby Bunting introduced a prudent cost management program in March and April. However, now that the impact of COVID-19 on financial performance has become clearer, the company has decided to recommence capital expenditure that had previously been paused.

These costs are largely associated with the roll-out of the new brand across the full store network. The new brand features a more contemporary and gender-neutral logo and the roll-out is expected to be completed by the end of Q1 FY2021.

What’s next for Baby Bunting?

On 23 March, Baby Bunting withdrew its FY20 earnings guidance due to the uncertain nature of the COVID-19 pandemic. Despite the stellar sales result, the company notes that it remains difficult to anticipate consumer behaviour and the associated effect on sales, gross margin, and expenses. Therefore, no guidance will be provided for FY20.

The back end of the financial year (ending 30 June 2020) is traditionally Baby Bunting’s largest and most important promotional period.

Importantly, the company highlighted that its balance sheet remains strong with approximately $35 million in undrawn debt facilities.

More reading

• 3 top ASX growth shares you should never sell
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Motley Fool contributor Cathryn Goh 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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While budget measures have been effective in keeping the economy on life support, the real economic numbers have yet to be announced. Last week in parliament, Treasurer Josh Frydenberg revealed that the economic contraction for the current quarter is expected to be 10%. This will be the biggest 3 month decline on record. It’s a sobering number, but a recovery can be anticipated when lockdowns ease and economic activity around the globe returns to normal.

Here are 5 ASX 200 dividend shares that can be expected to bounce when an economic recovery takes hold.

Premier Investments Limited (ASX: PMV)

Premier Investments is the investment company of retail mogul Solomon Lew. It owns several famous retail brands including Just Jeans, Portmans, Peter Alexander and Smiggle. The company has been in temporary lockdown as a result of the coronavirus pandemic and all its stores have been closed. While the company’s online retailing was up a massive 99%, its sales overall were down 74% for the 6 weeks to 6 May 2020 on the prior corresponding period.  

In response, the Premier Investments share price has fallen from a high of $21.31 in February to $15.58 at present, previously falling as low as $8.95 at the height of the crisis. However, all of the company’s Australian stores reopened on Friday 15 May. This should assist the company in returning to previous earnings and maintaining its dividends. Premier Investments has a trailing dividend yield of 4.56% fully franked.

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi is a retailer of consumer goods in Australia and New Zealand. It also owns The Good Guys network of stores. Despite the recent crisis, JB Hi-Fi stores in Australia have remained open and the company has continued taking online orders. JB Hi-Fi have actually announced sales growth throughout the last 2 months. The company attributes this growth to people stocking up in preparation for the COVID-19 crisis. Whatever the cause, it is good news for JB Hi-Fi shareholders.

JB Hi-Fi is a considered a consumer discretionary stock. This means that as a recession kicks in people can be expected to spend less on its products than they would otherwise. However, when the economy recovers and consumer confidence picks up, JB Hi-Fi can be expected to see increased buying by consumers. JB Hi-Fi trades on a trailing dividend yield of 4.32% fully franked.

BHP Group Ltd (ASX: BHP)

BHP is one of the oldest companies listed on the ASX. While it is often seen as an engine of stability in an often unpredictable share market, it is actually highly cyclical. During the GFC, the BHP share price dropped from a high of $95 in May 2008 down to a low of just $24.62 in November 2009. Just 2 years later in 2011, it recovered to a high $102.68. Currently it sits back at $34.52.

In a question and answer session with the BHP CEO on 30 April, the company’s leader promised a continued dividend and strong balance sheet through the economic cycle. These are reassuring words considering that this could be the worst recession since the Great Depression. BHP is deferring investments in projects to keep cash on hand and maintain a dividend of at least 50% of earnings.

Additionally, the company is looking out for strategic acquisitions that may be brought about by the economic downturn. BHP is leveraged to a recovery in the world economy and a subsequent recovery in oil, coal and iron ore prices. This is something that has historically eventuated throughout the economic cycles of previous decades. BHP has a trailing dividend yield of 6.17%, fully franked.

National Australia Bank Ltd. (ASX: NAB)

NAB is the third largest bank on the ASX by market capitalisation. With dividends from rival banks becoming uncertain, NAB’s recently announced capital raising will allow it to continue paying a dividend. This will also help them to keep a strong balance sheet during a severe economic downturn. NAB’s ratio of tier one equity capital, an important ratio for liquidity and balance sheet strength, is high by international standards at around 11.20%. This means that the bank should remain financially secure in difficult times.

When an economic rebound eventuates, NAB will see a significant boost to new loans issued by the bank. This will mean more interest and higher profits. Additionally, NAB has recently been required to make provisions of $4.4 billion to allow for bad debts. During an economic recovery, this number will be significantly reduced freeing up cash for dividend increases. NAB has a trailing dividend yield of 7.32% fully franked.

Boral Limited (ASX: BLD)

Boral is a manufacturer of bricks and other construction materials. Its share price has recently fallen a massive 50.38% from a high of $5.20 in February to just $2.58. Last week, Boral released an update to the market. The company recently worked to ensure the liquidity of its balance sheet by issuing US$200 million of unsecured notes and extending its banking facilities. In addition to keeping Boral in good shape financially, these measures are a smart move while the US dollar is fetching $1.56 Australian (at the time of writing).

During the COVID-19 crisis, Boral’s products have been considered essential and the company has been allowed to keep operating throughout the crisis. Additionally, despite a >50% drop in share price, Boral’s revenue has only been affected by around 6% compared to 2019, despite the bushfires and the coronavirus crisis. Going forward, Boral is leveraged to continued strength in the property market as Australia absorbs significant population growth. While short-term weakness in property prices is expected, history has shown that Australia’s housing market has recovered over time. Boral trades on a trailing dividend yield of 9.35% with 50% franking.

More reading

• This is the latest ASX 200 stock to unveil double digit profit growth
• 4 ASX 200 shares exposed to a fall in house prices
• NAB is going to question borrowers with loan holidays
• 3 industries that may never recover from COVID-19
• Why ASX iron ore miners like BHP aren’t afraid of the China trade war

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments 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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