Home Finance ASX flat, retail in spotlight as lockdowns curb spending

ASX flat, retail in spotlight as lockdowns curb spending

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The ASX closed flat to finish the week, with Bunnings owner Wesfarmers losing ground despite a blockbuster full-year result. The Australian sharemarket has barely budged to end the week, with Bunnings owner Wesfarmers losing ground despite a knockout full-year result.

The S&P/ASX200 finished just 2.9 points lower at 7488.3, while the All Ordinaries Index dipped 10.3 points or 0.13 percent to 7760.1. CommSec analyst James Tao said the local bourse largely recovered from a weak start, with healthcare stocks among the winners.

After posting record full-year results, including a more than doubling net profit, Clinuvel soared 17.96 percent to $34.49. The company is developing a range of drugs but has made the most progress with a rare light intolerance disorder product. “Today’s momentum seems to have come from the release of a financial summary and a nice upgrade from the analysts,” OMG chief executive Ivan Tchourilov said.

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“Clinuvel has been able to roll out in the US without any significant increase to cost margins, meaning they can pay out leftover cash to shareholders to further sweeten the deal.” Biotech giant and market heavyweight CSL put on 0.96 percent to $311.06.

Consumer discretionary stocks were lower, with Harvey Norman retreating 0.72 percent to $5.54 and JB Hi-Fi backtracking 1.06 percent to $45.57. In contrast, consumer staples were mixed, with Woolworths easing three cents to $40.96 and rival Coles putting on 1.42 percent to $17.89.

Wesfarmers booked a 40.2 percent surge in full-year statutory net profit to $2.38bn and declared a $2 per share return of capital to investors – amounting to $2.3bn. That’s on top of a final dividend of 90 cents per share, bringing the total rewards for the year to $1.78 per share.

The Kmart and Officeworks owner said those two businesses and Bunnings delivered solid sales and earnings growth for the year. More time spent working, learning, and relaxing at home boosted demand for some products, while government stimulus measures also helped.

Disruptions and capacity constraints in global supply chains led to some inventory delays and higher ocean freight charges. CommSec senior economist Ryan Felsman noted Wesfarmers and Australia’s other biggest retailer Woolworths had delivered bumper full-year earnings and rewarded shareholders but cautioned that sales were down so far in fiscal 2022 due to lockdowns, with no guidance provided amid global supply chain issues.

“In fact, Wesfarmers reported that Bunnings’ sales have declined 4.7 percent so far in the financial year 2022 on the corresponding period last year, with combined Kmart and Target sales 14.3 percent lower over the period,” Mr. Felsman said. Citi said Bunnings missed consensus by 2 percent, Kmart was in line with expectations, and Officeworks performed slightly better than expected.

Wesfarmers shares declined 2.75 percent to $62.20. The Australian Bureau of Statistics unsurprisingly reported a 2.7 percent seasonally adjusted fall in retail turnover in July – the biggest monthly fall this year – due to lockdowns and stay-at-home orders in many parts of the nation.

The retail sector was particularly hit hard in NSW, where the first whole month of lockdown resulted in a near 9 percent slump in turnover. It was the most significant fall of any state and territory since August last year and the third-biggest monthly decline on record.

“Retail spending is likely to continue to fall in August and September as lockdowns drag on in NSW and potentially Victoria,” Mr. Felsman said. “Additionally, global supply chain disruptions, rising unemployment and potentially reduced housing goods-related demand could also weigh on consumer spending.”

Candles retailer Dusk posted a 130 percent spike in full-year net profit to $21.8m, saying its record numbers came despite forced store closures and stand-downs, while it opened 10 new stores during the period. About 35 percent of potential trading days were lost during the first seven weeks of this financial year, however, shaving 28 percent off top-line sales.

Dusk shares gave up 2.74 percent to $3.19. Vegemite owner Bega Cheese booked a 24 percent rise in normalized net profit to $39.6m, saying its acquisition in November of Lion Dairy and Drinks from Japanese alcohol giant Kirin had been “transformational”.

The deal added Masters milk, Big M, Yoplait yogurt, Pura Milk, Farmers Union, Dairy Farmers, Juice Brothers, Daily Juice, and Dare brands to its product stable. Shares in Bega Cheese closed steady at $5.51. Lynas Rare Earths booked a record full-year profit, up eight-fold from the prior year at $157m, but did not declare a final dividend.

Its shares dropped 3.6 percent to $6.42. In the tech sector, Appen sank 6.08 percent to $10.20, and Zip slipped 2.27 percent to $6.90. Rio Tinto added 0.3 percent to $109.70, and BHP fell 0.56 percent to $44.70. ANZ slid 0.46 percent to $28.32, Commonwealth Bank appreciated 0.55 percent to $101.54, National Australia Bank lifted 0.4 percent to $27.64, and Westpac inched two cents lower to $25.99. The Aussie dollar fetched 72.55 US cents, 52.91 British pence, and 61.63 Euro cents in afternoon trade. Published initially as Australian sharemarket closes flat, with retail in the spotlight as lockdowns curb spending.

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