What is an essential retailer?

JB Hi Fi sales have been strong as Australian geared up to bunker down at home. Picture: AAP

What is an essential retailer? That is a question exercising the minds of a few people around town, because potentially, a negative definition could decimate the near term prospects of high flyers like JB Hi Fi and Wesfarmers.

The government has already said supermarkets, bottle shops and pharmacists are essential and it is assumed Bunnings is as well because it supplies the construction market.’

But how about Target and Kmart or Big W and Good Guys?

There are arguments in favour and against each of the above and you can be assured their representatives are pressing their case to government.

All this comes as the ACCC took the unprecedented step of letting the big supermarkets work together to manage supply.

No one is being too precise about exactly what they will be talking about because the supermarkets behemoths don’t want to limit their options.

But it could include logistics issues like agreeing, say, Woolworths to buy from one toilet paper supplier and Coles the other. It might be everyone is running out of packaging, so why not sell all the biscuits in plain wrapping, or sharing geographies so one supplier covers north of the Murray and the other the rest of the country.

Price is not on the table.

This comes as this week the ACCC will also approve Coles’ purchase of Jewell Fine Foods, which will mean, with Woolworths owning 23 per cent of B & J Kitchens the big two supermarkets will control the key prepared food manufacturers.

Nice timing for the duopoly, given the lockdown boosts prepared meal sales.

Richard Murray at JB followed Mark Fitzgibbon at NIB on Monday in effectively issuing a profit upgrade. Only neither put it in those terms because its not a good look right now.

Suffice it to say health funds are doing well because they are collecting your premiums but right now don’t have to pay up much in expenses because those costly knee reconstructions and other elective surgery are on hold.

JB Hi-Fi is also making out like a bandit because everyone is installing electrical equipment in their homes as they are locked down.

But there comes a point when this gold rush stops and having bought the new freezer there is no need to buy another.

Bank America by way of example, has its earnings per share up 18 per cent from $2.15 a share to $2.54 this year but the rate of growth slowing in 2022 to $2.61 a share.

The same reasoning goes for Coles and Woolies with sales booming now. But if every household has 55 cans of tuna they won’t have to buy any more for a while.

That of course assumes the lockdown is short lived and no-one knows the answer to that.

The fear is the coronavirus likes cold weather so the northern hemisphere will gradually improve but Australia will be hit hard.