The ASX retail sector has been in the firing lining during the coronavirus pandemic, but not all retailers have been treated equally. Government restrictions and resulting social shifts have advantaged some retailers but been a detriment to others. 

Consumers are spending more time working, eating, learning, and relaxing at home. This has led to a shift in consumer demand towards home office equipment, technology, and education supplies. Baking challenges have replaced restaurant visits, leading to a shift in food spending. 

Whether these changes represent headwinds or tailwinds depends on individual retailers’ offerings. Some have been better positioned than others to benefit from shifting consumer behaviours.

We take a look at 3 ASX retail shares that are thriving in the current environment. 

Wesfarmers Ltd (ASX: WES)

Bunnings and Officeworks have seen strong sales growth as people spend more time at home. There has been increased demand for home improvement products, remote working and learning equipment, and office supplies. 

Wesfarmers reports that it is well-positioned to respond to the consumer shift to online. It is leveraging the digital expertise of the Catch business, which was acquired in 2019. Drive and collect has been introduced at Bunnings and Officeworks, and supply is being fast-tracked for high demand items.

Kmart third-quarter sales growth has been broadly in line with 1H20, supported by strong growth in online sales. In-store sales momentum has moderated over the past month due to a decline in customer footfall. 

Catch has made pleasing progress since the acquisition with active customers increasing 38% over the last 12 months. Strong growth in gross transaction value has also been noted. 

Wesfarmers has taken action to ensure it has the balance sheet capacity to respond to a range of economic scenarios. It has partially sold its 15% interest in Coles Group Ltd (ASX: COL) via 2 separate transactions in February and March, crystallising strong returns. Wesfarmers now holds a 4.9% stake in Coles. 

Wesfarmers is continuing to invest for the future by expanding its digital offerings and reinforcing the customer value proposition. Investment in Bunnings’ digital offer is being accelerated and focus on commercial customers increased. Kmart is also investing in its digital offer and reinforcing customer value in a competitive market. The digital offer is also being extended at Officeworks alongside an expansion of its range. 

Disruption in customer shopping patterns means it is unclear whether current high levels of sales will continue. Given a high degree of fixed occupancy costs, a sustained decline in sales momentum could have a material impact on profitability for Wesfarmers’ businesses. Target continues to underperform, with plans to improve its performance accelerated. Further details will be provided once the strategic review is completed. 

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi’s third-quarter sales jumped thanks to the boom in working and learning from home. JB Hi-Fi Australia sales leapt 11.6% due to an acceleration in sales in late March as customers prepared for an increase in government restrictions. 

The Good Guys sales surged 13.9% in the March quarter. Strong sales growth in Australia continued into April and early May at JB Hi-Fi Australia and The Good Guys. Customers are increasingly seeking new and additional appliances and technology to allow for working, learning, and entertainment at home. 

New Zealand JB Hi-Fi stores and online operations were closed on 26 March.  Its online and commercial businesses have resumed trading with fulfilment via delivery or click and collect. Sales in New Zealand declined 3.3% in the March quarter. The JB Hi-Fi New Zealand business does not make a material financial contribution to the Group, representing around 3% of FY19 sales. 

JB Hi-Fi withdrew its FY20 sales and earnings guidance as a result of COVID-19 uncertainty. It has so far refrained from providing updated guidance given the current disruption to customer shopping patterns. 

JB Hi-Fi says it is in a strong financial position and is taking a conservative approach to balance sheet management. It has received credit approval for an additional $260 million of committed short term debt facilities. JB Hi-Fi does not anticipate drawing on these facilities but considers it prudent to secure them in the current uncertain environment. 

Coles Group Ltd (ASX: COL) 

First it was panic buying, then it was baking challenges. The major supermarkets have been the major beneficiaries of coronavirus buying trends. Along with competitors Woolworths Group Ltd (ASX: WOW) and Metcash Limited (ASX: MTS), Coles has benefited from a surge in sales. 

In the March quarter, Coles reported a 12.4% increase in total sales which reached $9,226 million. Supermarket sales were up 13.1% while liquor sales were up 7.2%. This marks the 50th consecutive quarter of comparable sales growth for supermarkets. 

Social distancing measures led more Australian to spend more time at home which resulted in greater at-home consumption of meals and other household items. Significant demand was seen across all categories, particularly grocery, home & health, and meat. Supermarkets experienced strong transaction and basket size growth. 

Online sales were temporarily suspended due to unprecedented demand, then made available only to the vulnerable and in need during isolation. Despite this temporary disruption, Coles Online sales revenue for the quarter grew by 14%. To meet the challenges of recent demand, Coles has hired an additional 12,000 team members. 

Liquor was negatively impacted by bushfire smog over capital cities and floods in January and February, before seeing the impact of COVID-19 later in the quarter. Sales in liquor began to materially elevate in the latter part of March, however, when the Federal Government closed hotels, pubs, clubs, and licensed venue operators. 

In the first 4 weeks of the fourth quarter, comparable sales growth for supermarkets has trended back toward the levels seen pre-COVID-19. During this period, Coles has seen an increase in basket size partially offset by a decline in transactions due to social distancing measures. Customers are purchasing fewer convenience products and moving towards cooking and baking from scratch. 

More reading

• 3 high quality ASX shares for a retirement portfolio
• 3 ASX 200 pandemic winners and 3 losers
• Buy these 4 ASX shares to survive the pandemic
• Are ASX retail shares undervalued today?
• ASX 200 Weekly Wrap: New ASX bull run continues

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers 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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Generally speaking, an individual’s risk appetite will reduce as they get older.

This makes a lot of sense when you consider that someone in their 20s has a lot more time to recoup their losses compared to someone in their 60s who is nearing retirement and will soon be reliant on their savings to fund their future lifestyle.

In light of the increasing importance of capital preservation as we grow older, I believe investors need to ensure they select shares that are consistent with their risk appetite.

With that in mind, here are three shares that I think could be great additions to a well-balanced retirement portfolio:

BWP Trust (ASX: BWP)

BWP is a real estate investment trust that primarily owns industrial property such as warehouses. Most of the company’s warehouses are leased to hardware giant Bunnings, which is owned by Wesfarmers Ltd (ASX: WES). I believe Bunnings is a high quality tenant and very likely to remain in these warehouses for the long term. As a result, I believe BWP’s earnings are very defensive and it is well-placed to grow its distribution at a solid and consistent rate over the next decade.

Telstra Corporation Ltd (ASX: TLS)

Another top option for a retirement portfolio could be Telstra. I like the telco giant due to its improving outlook and attractive valuation. In respect to the former, thanks to a combination of cost cutting, rational competition, and a positive growth outlook in the mobile business, I believe Telstra is well-placed to return to growth from perhaps as soon as FY 2022. Which, after years of dividend cuts, should mean Telstra will soon be in a position to start increasing its payouts once again.

Woolworths Limited (ASX: WOW)

This retail conglomerate could be a good option for a retirement portfolio. The company has a track record of growing its dividend payments and look well-positioned to continue this trend for the foreseeable future. In addition to this, the company’s strong brands, entrenched customer base, and non-discretionary nature makes for a very defensive business model.

More reading

• These 3 ASX 200 retail shares are absolutely thriving right now
• Is the Woolworths share price a buy?
• Buy these 4 ASX shares to survive the pandemic
• ASX 200 Weekly Wrap: New ASX bull run continues
• 3 top ASX dividend shares to buy right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Wesfarmers Limited and Woolworths 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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The S&P/ASX 200 Index (ASX: XJO) is hurtling even higher today, after a bumper week of returns last week. At the time of writing, the ASX 200 is 1.62% higher at 5,478.4 points.

For some context, we are now over 20% above the lows we saw in March, 23% from the highs we saw in February and back to the level we saw at the bottom of the late 2018 correction.

Over in the US, the situation is remarkably similar, if not better, than the ASX. The S&P 500 Index (a US equivalent to our ASX 200) has risen more than 30% since its March lows and is now only down around 13% from its pre-crash highs.

The NASDAQ Composite is even more striking – it’s only down 7% from its pre-crash highs and is actually in the green year-to-date. Think about that!

So why all this posturing about the past? Well, I think all of these markets – the ASX included – are behaving something like a troop of ostriches. There’s a lot of sand in their ears as they bury their heads and pretend they don’t see what’s going on around them.

The ravages of unemployment

Why do I say this? Well, because we’ve recently found out how many people are facing unemployment queues in the United States – and the numbers are terrifying.

According to the Australian Financial Review (AFR), employment fell by 20.5 million jobs in the month of April, which translates into an unemployment rate of 14.7% for America. That’s the highest level since the Great Depression.

Here in Australia, the AFR is also reporting that our own unemployment rate is tipped to balloon by 540,000 jobs to more than 8% for April – notwithstanding the government’s JobKeeper program.

These are dire numbers. And they also herald a period of intense economic pain in my view.

Putting aside the enormous social costs that unemployment can inflict on society, fewer people in jobs is terrible for economic growth. It’s fewer people going to JB Hi-Fi Limited (ASX: JBH), fewer people driving on the toll roads owned by Transurban Group (ASX: TCL) and more people unable to service their Commonwealth Bank of Australia (ASX: CBA) mortgage.

Do I think this awful reality is being reflected in the stock market right now?

No.

Do I think it will be reflected at some point?

It’s a distinct possibility. There are a lot of factors influencing the ASX right now, including ultra-low interest rates and Reserve Bank of Australia bond-buying programs. But I do think it’s something that the ASX may have to come to terms with in the near future. And it might well be the last straw of this ASX bull run we are seeing play out today.

More reading

• Is this ASX 200 share market recovery “fool’s gold”? This ASX fundie thinks so
• Webjet share price jumps 25%: Is it good value?
• Is the Woolworths share price a buy?
• 3 ASX 200 pandemic winners and 3 losers
• ASX 200 storms 1.2% higher: Cochlear reports 60% sales decline, Webjet jumps 22%

Motley Fool contributor Sebastian Bowen 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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Analysts at Goldman Sachs have adjusted their economic forecasts following the improved trajectory for COVID-19 in Australia.

While the investment bank still expects a sharp -10% quarter on quarter contraction in GDP in the second quarter of 2020, it now expects a consumer-led recovery to commence one quarter earlier in the third quarter.

In response to this, Goldman Sachs has been looking through the mid cap sector and has adjusted its recommendations accordingly.

Here’s what the broker thinks about these four mid cap ASX share:

Breville Group Ltd (ASX: BRG) 

Goldman has retained its neutral rating and $16.70 price target on this appliance manufacturer’s shares. It notes that Breville is a high quality business (strong balance sheet, solid returns and long-term growth potential in the US and UK/EU markets remains very attractive), however, it feels the current valuation reflects these strengths.

City Chic Collective Ltd (ASX: CCX)

The broker has retained its buy rating and $3.25 price target on this fashion retailer’s shares. It likes City Chic and believes it is a strong retailer in its clearly defined category (plus sized clothing). It also notes that it has a strong online presence, with 60% of sales from online channels. Other positives include its capital light business model and growth potential across multiple geographies (US/UK/EU).

GUD Holdings Limited (ASX: GUD)

Goldman Sachs has upgraded this products company’s shares from a neutral rating to a buy rating with a $10.50 price target. It made the move on valuation grounds, noting that its shares are changing hands at a lowly 13x estimated FY 2022 earnings.

Reject Shop Ltd (ASX: TRS)

Finally, the broker has upgraded this discount retailer’s shares from a sell rating to buy with a $4.75 price target. The broker likes Reject Shop due to its turnaround story with a new executive team, its robust balance sheet, and the potential for material improvements in efficiencies in labour, rent and stock turn. It also notes that the company has a strong cash balance, with its net cash representing approximately 28% of its market capitalisation.

More reading

• Leading brokers name 3 ASX shares to buy today
• Who said ASX retail shares were dead?
• 4 ASX retail shares up more than 100% in the past month
• Revealed: Which ASX shares will grow during coronavirus?
• 2 ASX retail shares that could thrive after COVID-19

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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Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy? It’s down 42% since the Australian share market started declining.

The Australian banking sector has been turned upside down by the coronavirus pandemic.

Between all of the big ASX banks like ANZ, National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Macquarie Group Ltd (ASX: MQG), they have already provisioned billions of dollars for the economic impacts of the coronavirus. Commonwealth Bank of Australia (ASX: CBA) is yet to announce its own estimated pain.

In the recent half-year ANZ result announced that statutory profit after tax was down 51% to $1.55 billion. Cash profit was down 60% to $1.41 billion. The decline was driven by credit impairment charges of $1.67 billion which included increased credit reserves for coronavirus impacts of $1.031 billion.

Clearly bank investors had mostly been expecting something like this because the ANZ share price is currently down 41% to $16 today and on 23 March 2020 it had plunged to around $14.

Was it the right call to defer the ANZ dividend?

I think it was. In my mind it’s a much wiser move to defer the dividend and not do a capital raising at a dilutive share price. We’re still early into this whole situation. The economic fallout could last a lot longer than just the length of government restrictions.

On the economic side of things it’s good the Australia is in a position where lockdowns can start to be lifted. But a lot of industries are still being heavily disrupted. ANZ can’t truly say yet how much bad debts it will face because the situation is changing every week.

If it turns out better than expected than ANZ may still be able to pay a dividend later in the year. ANZ could also decide not to pay a dividend at all, depending on what happens.

Is the ANZ share price a buy?

If you believe the worst of the economic pain is already known then perhaps the ANZ share price is a buy. It’s already fallen a lot – how much further could it fall?

I’m not sure it’s good to buy yet though. I’d want to wait a few months to see what happens next. It could stay at this lower level for some time. There’s a chance that the market is feeling a bit too confident about the rest of 2020. I wouldn’t buy it thinking profit and dividends will resume quickly. Low interest rates are here to stay for at least a few years.

More reading

• Reality bites: Broker warns CBA shares to underperform this week
• Why Advance Nanotek, Macquarie, Tyro, & Zip Co shares are charging higher
• How Macquarie Group is vying to unseat CBA
• ASX 200 Weekly Wrap: New ASX bull run continues
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie 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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The Scentre Group (ASX: SCG) share price has popped today after the Westfield owner gave a market update to investors before the bell this morning.

Scentre shares closed at $2.22 on Friday afternoon, but opened at $2.26 this morning and are sitting at $2.28 at the time of writing – a 3.18% bump.

Scentre cancels interim dividend

Well, let’s get the bad news out of the way first: Scentre has officially cancelled its 2020 interim dividend distribution. Here’s how the company justified its move in the ASX release this morning:

“Given the uncertainty regarding the pandemic, its duration, the economic impact and the timing of operating cash flows for the Group, the Group has determined to not pay an interim distribution for the Half Year period ending 30 June 2020. The Group believes that retaining this capital will further strengthen its financial position and ability to continue to deliver long term returns to its securityholders.”

Although this was a move most investors had braced themselves for, it will no doubt still be a painful pill to swallow. Many investors buy into REITs (real estate investment trusts) like Scentre for dividend/distribution income, so the absence of this income from Scentre shares isn’t negligible.

What else did Scentre tell us?

You may have noticed that the Scentre share price has risen substantially today, so the news out of this REIT can’t be all bad. Scentre did also inform the markets that its capital position was healthy with increased liquidity to $3.1 billion, and it has managed to retain its ‘A’ grade credit rating.

The company also told markets that 57% of its retail tenants, representing 70% of the gross lettable area, remain open, with “more retailers scheduled to reopen over the coming weeks”.

Scentre also noted that “as more retailers have reopened, we have seen an increase in customer visitation in recent weeks and most significantly over this last weekend there was double the level of visitations from 5 weekends ago”.

All of these developments point to Scentre recovering once restrictions are lifted across the coming months, and it might not look like the retail apocalypse for the company that many feared a few months ago.

This is reflected in the current Scentre share price, which although is still a long way away from the ~$4 levels we were seeing early in the year, is still far above the $1.35 low we saw in March.

The next few months will still be crucial for this ASX REIT, however, and we shall have to see how this company pulls itself out of the woods when the coronavirus is, at last, behind us.

More reading

• Are ASX retail shares undervalued today?
• 3 ASX shares to buy as a beginner
• Is there long-term value in ASX REITs?
• Increase your income with $5,000 in ASX shares
• Some ASX shares will never be the same again

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. 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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The Ophir High Conviction Fund (ASX: OPH) released its April report this morning and provided investors with an update on its portfolio and its market view.

Have share markets gone too far?

Ophir notes that share markets have rebounded very strongly from their March lows.

This is despite the impending release of “the worst economic data the world has seen since the Great Depression” over the next few months. This data will include the “sharpest falls in GDP, the highest unemployment and the largest contraction in corporate earnings in many countries.”

However, the fund manager believes things are very different to the 1930s.

It explained: “Unlike the Great Depression though, it is our opinion that this crisis is likely to be much shorter, though there will likely be some lasting impacts on consumer behaviour.”

The fund manager warned that it is difficult to predict how the market will react to the upcoming economic data. However, as it is a long-term focused investor, it isn’t being put off and remains heavily invested.

Furthermore, it notes that this crisis is “as much about ascertaining what long term changes we might see in consumer buying behaviour as it is about avoiding the immediate losers.”

Which leads us on to Ophir’s portfolio update. The Ophir High Conviction Fund’s investment portfolio returned +12.1% during April.

Key drivers of its return were payments company Afterpay Ltd (ASX: APT), artificial intelligence company Appen Ltd (ASX: APX), and gold miner Evolution Mining Ltd (ASX: EVN).

This was offset slightly by the underperformance of shares such as private health insurer NIB Holdings Limited (ASX: NHF) and medical device company ResMed Inc. (ASX: RMD).

Ophir notes: “Both Resmed and NIB Holdings suffered some payback in April for being two of the only 25 stocks in the ASX300 that went up in March. Both have been significant outperformers since the onset of COVID-19.”

Should you be investing in the share market?

I think Ophir is spot on with its assessment. Over the next few months we are likely to see some horrific economic data, but I remain confident the recovery will be far swifter than the Great Depression.

In light of this, I think investors ought to continue investing in the share market. And particularly companies which are continuing their growth unabated during the pandemic such as Afterpay and Appen.

More reading

• 3 ASX 200 pandemic winners and 3 losers
• Buy these 4 ASX shares to survive the pandemic
• These ASX shares booked the biggest gains last week
• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended NIB Holdings Limited and ResMed Inc. 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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