Surprising retail stock winners defy virus

A robust retail sector is throwing up winners not just in the Buy Now Pay Later space.

You would think that fancy chandeliers and occasional chairs would be a low priority in these straitened times.

Shoppers are engaging in retail therapy despite the spectre of even more serious job losses and mounting evidence the virus is far from vanquished.

According to this week’s numbers from the Australian Bureau of Statistics, retail sales rose 2.4 per cent for the month of June, to $29.7bn. This was an 8 per cent rise on the previous June and backed up a 17 per cent surge in May.

Separately, the recent knockout numbers from the buy now, pay later providers add to the impression that consumers remain willing to shop till they drop — either from COVID-19 or foot blisters.

Grinding in reverse are the dinosaur department stores and certain other specialty retailers in empty shopping malls.

Online-only providers such as Kogan (KGN) and food deliverer Marley Spoon (MMM) are certified winners, along with Harvey Norman (HVN) and JB Hi-Fi (JBH).

In the sprawling ASX small cap retail sector, less prominent examples are enjoying the crisis for less than obvious reasons.

Take Beacon Lighting (BLX), which last year pre-announced a glowing 38 per cent increase in reported profit for the year to June 30, of $22m. The group’s like-for-like (comparative) sales grew 7 per cent to $251m and notably were 17 per cent higher in the suspect June half.

Despite temporarily closing its showrooms, furniture purveyor Nick Scali (NCK) in June reported June quarter sales to date increased 20 per cent, with June half net earnings expected to be 15-20 per cent higher.

A case of sofa, so good.

You would think that fancy chandeliers and occasional chairs would be a low priority in these straitened times.

But as Citi points out, their customers in the main are homeowners, who are less likely to lose their jobs than younger consumers in the leisure, retail and travel sectors.

Elsewhere, Shaver Shop (SSG) shares have run nicely since a bullish update in May, despite stay-at-home workers often opting for the rugged hirsute look. Affirming the trend in mid June, management reported a life-for-like sales increase of 23 per cent for the half to date.

The best explanation is that those Ned Kelly beards are better manicured than they look. Online turnover soared 164 per cent and now accounts for 32 per cent of sales.

Plus-size clothing specialist City Chic Collective (CCX) is booming and expanding globally — perhaps all those extra ‘‘iso’’ kilos.

Baby Bunting (BBN) shows that alongside jigsaws, procreation has remained a popular indoor activity with 6000 new arrivals nationally every week. The company said it was looking at a 29-35 per jump in net profit. 

 Tim Boreham edits The New Criterion

tim@independentresearch.
com.au