Retailers report bumper earnings

A big week of reporting on the ASX saw strong results from retailers while e-commerce businesses that benefited from lockdowns continue to struggle.

1. Retail Therapy is real

Several Australian retailers have reported positive financial results for the first half of the financial year. Wesfarmers reported a 14.1% increase in net profit to $1.384 billion, led by Kmart more than doubling its earnings.

JB Hi-Fi saw an 8.6% increase in sales to $5.3 billion, while Kathmandu and Rip Curl also experienced growth due to increased demand for outdoor and travel gear, with sales jumping 34% to a record $546 million in the first half of the financial year to January 31.

On the other hand, online businesses that benefited from pandemic lockdowns are coming to grips with reopening. Redbubble Group reported marginal revenue growth of 1% for the first half of FY23. Meanwhile, Temple & Webster reported a 12% decline in revenue to $207.1 million, mainly due to a decline in active customers. Management highlighted that this was expected to be the toughest period for year-over-year comparisons due to the timings of lockdowns in FY2022.

2. The house always wins

NAB and CBA have both reported record profits driven by surging interest rates. NAB’s reported that cash earnings hit a record $2.15 billion in the first quarter, up 18% compared to the average of the two previous quarters and ahead of analyst expectations. Meanwhile, Commonwealth Bank reported a half-year profit of $5.15 billion, a nine percent increase from the previous year.

In an interview with the AFR, NAB CEO Ross McEwan was quick to point out that even though a higher interest rate environment had benefited the bank’s revenue, they had had a negative impact on economic growth and house prices as loan repayments continued to increase.

3. Warren takes another bite of the Apple

Berkshire Hathaway Inc. has increased its stake in Apple, according to a Tuesday filing with the American Securities and Exchange Commission. Berkshire’s position in Apple was already comfortably their largest holding, with the Warren Buffett-led company now owning 915.6 million shares as of Dec. 31, representing a 5.8% stake in the company, 

Apple’s shares have risen by 10.6% since the end of the third quarter.

4. Airbnb’s in the green

Airbnb has reported its first ever annual profit on the back of strong earnings in Q4 2022, with a 24% YoY increase in revenue, coming in at $319 million compared to $55 million the previous year. In its shareholder letter, the company expressed confidence in its business, noting continued strong demand at the start of 2023. 

The company said that it has made difficult spending cuts during the pandemic but has since modestly increased its headcount, with plans to continue hiring at a judicious pace in 2023. Despite the hiring, its headcount is still 5% lower than it was in 2019, even as revenue increased by 75%.

5. It’s a no from me

Aussie gold miner Newcrest has rejected a $24 billion takeover bid from the world’s biggest gold miner Newmont, saying that the current offer doesn’t represent sufficient value for shareholders.

However, the company has not entirely closed the door on the takeover, indicating that it is willing to open its books to Newmont in the hope of eliciting a higher offer. 

Newcrest gets about a quarter of its revenue from copper, and its CEO Sherry Duhe said the metal’s role in the transition to net-zero emissions could see its contribution rise to over 50% by the end of the decade.