This reporting season has been all about the retail shares. Despite the economic downturn, some ASX retail shares have outperformed with significant increases in sales and profit. The banks, on the other hand, have seen profits and dividends shrink as COVID-19 impairments take a chunk from bottom lines. It's been a mixed bag for healthcare shares which have proven they are not immune to the impacts of the virus, while the miners have seen results boosted by strong iron ore and gold prices.
We take a look at the highlights of this reporting season so far.
Retailers smash expectations
ASX retailers have seen strong sales as consumers spending more time at home upgrade their surroundings. Home offices have been equipped, entertainment options upgraded, and furnishings updated.
JB Hi Fi Limited (ASX: JBH) reported an 11.6% increase in total sales which reached $7.9 billion. The electronics retailer reported increased sales momentum in the fourth quarter as customers spent more time working, learning, and seeking entertainment at home. Gross profit increased 11.7% to $1.17 billion, despite a drop in sales in New Zealand where stores were temporarily closed.
Wesfarmers Ltd (ASX: WES) saw accelerated sales from its Bunnings and Officeworks brands. Bunnings' sales were up 13.9% in FY20 as consumers turned to DIY during lockdowns. Officeworks sales increased 20.4% as consumers equipped themselves to work and learn from home. Surprisingly, Kmart sales only increased 5.4% despite increased demand for homewares during lockdown, with significant availability issues emerging in June.
The Reject Shop Ltd (ASX: TRS) saw sales growth of 3.4% in FY20 with total sales of $820.6 million. During the second half, the Reject Shop experienced a material increase in sales driven by strong customer demand for 'essential' products. Strong performance was seen in categories such as cleaning, groceries, toiletries, and pet care. However, some categories that traditionally perform strongly during the period saw a decline in sales thanks to COVID-19 restrictions. These include Easter-related products, luggage, and party supplies.
Banks slash dividends as earnings dive
The big banks have been big disappointments this reporting season, with results infected by COVID-19. Commonwealth Bank of Australia (ASX: CBA) reported an 11.3% decline in cash profits due to high loan impairment expenses. Net profit after tax (NPAT) fell to $7,296 million and dividends were slashed – CBA paid full year dividends of $2.98 a share, a 32% decrease on FY19.
Westpac Banking Corp (ASX: WBC) scrapped its previously deferred first half dividend entirely as it delivered its third quarter trading update. The bank said approximately $30 billion in mortgages were currently being deferred and booked an $826 million impairment charge for the quarter.
Australia and New Zealand Banking GrpLtd (ASX: ANZ) reported a mixed third quarter result last week. The bank generated $1.3 billion in statutory profits for the quarter but took another $500 million provision charge, following a $1.674 billion charge in the first half. ANZ announced an interim dividend of 25 cents a share after previously deferring the dividend. This was down from 80 cents a share in 2019.
National Australia Bank Ltd (ASX: NAB) surprised on the upside with a $1.5 billion quarterly profit as revenue increased by 10%. NAB raised billions in capital earlier this year and slashed its interim dividend by 64% to 30 cents per share.
Mixed results for medical shares
In the medical sector, Cochlear Limited (ASX: COH) showed that healthcare shares are not immune to the impacts of coronavirus – the medical device company saw sales revenue decline 22% in the second half. Efforts to control the spread of coronavirus meant many cochlear implant surgeries were delayed with implant units falling 26% in the second half. Cochlear reported a net loss of $283.3 million for FY20. Nonetheless, it says it remains committed to market growth activities and R&D programs to enable the business to emerge from the pandemic in a stronger competitive position.
CSL Limited (ASX: CSL) saw its shares surge back above the $300 mark with the release of its FY20 results. CSL reported a 9% increase in revenues as management noted they had not yet seen a material impact from coronavirus. NPAT grew by 17% to US$2,247 million with earnings per share also up 17% to US$4.951. CSL did, however, guide modestly lower growth in FY21 with a forecast NPAT of between US$2,100 million and $2,265 million.
Sonic Healthcare Limited (ASX: SHL) shares hit a fresh high after posting full-year results. The medical diagnostics company reported revenue of $6.8 billion, up 11.5% on FY19. Underlying net profit grew 6.5% to $552 million as the company performed millions of COVID-19 tests globally. Sonic reported dramatic falls in business patient volumes from mid-March to May, however this was offset by COVID-19 testing volumes enabling the company to report modest earnings growth for the year. Sonic reported that revenue growth rates have been substantially higher than usual since financial year end, boding well for FY21.
Miners benefit from commodity prices
BHP Group Ltd (ASX: BHP) shares have slid lower since the release of the miner's full-year results last week. BHP missed analysts expectations, reporting a 5% drop in earnings which fell to US$22.1 billion. Iron ore was the stand out performer, accounting for nearly two thirds of earnings before interest, taxes, depreciation and amortisation (EBITDA). The iron ore price has been on the rise since May thanks to increased demand from China. This is expected to continue with the Chinese Government recently pledging to increase spending on infrastructure construction.
Gold prices have also been on the rise in 2020, which benefitted gold and copper miner Oz Minerals Limited (ASX: OZL). The miner recorded an 82% increase in NPAT, which reached $80 million driven by higher gold volumes and the strong gold price.
Foolish takeaway
This has been the first coronavirus reporting season, but may not be the last. Changes to spending patterns driven by the pandemic have lifted results for some ASX shares but seen earnings fall for others. Retailers have dominated this season, but economic recovery should see benefits spread more broadly.
