CE & Audio Retailers Reap Benefits Of JobKeeper As Sales Surge
Retailers, many who have stayed open during the COVID-19 downturn are set to report record profits after receiving millions of dollars in federal government wage subsidies.
An early indicator of this in the CE and appliance markets could come next week when JB Hi Fi rolls out their last quarter financials with shareholders set to benefit from their dividend payout.
Retail sales rose 8.2 per cent in June in seasonally adjusted terms compared with the year-earlier month.
In March employers were required to record or forecast at least 30 per cent turnover decline for a single month to qualify for up to six months of wage subsidies through to September 27.
The requisite revenue decline for large companies turning over more than $1 billion was 50 per cent
Several private retailers including Camera House, Bing Lee, Teds Cameras, Video Pro, Betta Electrical are set to reap the benefit of rising profits due to the stimulus payments for staff who have worked through the downturn.
The $102 billion JobKeeper program has allowed several Hi Fi, CE and appliance retailers to stay open with staff salaries paid by the Federal Government and top ups from State Governments.
At the same time these retailers have seen a surge in demand for sound gear, TV’s PC’s and accessories and are benefiting from the $30 billion in superannuation withdrawals which are propping up consumer spending – boosting retailer profits and shareholder returns.
More than 60 per cent of people who received stimulus payments said they had mainly spent the windfall, on household equipment, food, recreation, clothing and footwear, an Australian Bureau of Statistics survey published yesterday.
Furniture retailer Nick Scali who is a public Company that has already reported said it received $3.9 million under JobKeeper and the New Zealand scheme. In addition, it received rent relief from more than 85 per cent of its landlords, worth another $2.3 million.
Nick Scali increased its dividend 12.5 per cent to 22.5¢ and its share price hit a record high last week.
Independent senator Rex Patrick said the government could ask Adairs and Nick Scali to pay back some of the taxpayer support to help “support others that are actually suffering”.
“Alternatively, the directors might like to reconsider their position and act appropriately,” he said.
“Can someone tell why companies like Adairs and Nick Scali are getting government wage subsidies and then paying dividends when they are clearly not really suffering in the current environment – if anything they are benefiting,” said veteran fund manager Peter Morgan.
Forager Funds Management founder Steve Johnson responded via social media that the benefits were being paid to the two retailers for “four months too long”.
“As a general scheme it has been highly successful in maintaining consumer spending and enabling companies like these two to get back in business immediately,” he noted.
The Australian Financial Review reported that despite large job losses, Reserve Bank of Australia assistant governor Luci Ellis had claimed that JobKeeper and JobSeeker payments had “provided substantive support” and meant total household income had not fallen in aggregate so far.
JobKeeper eligibility is being tightened from later September onwards.
Treasurer Josh Frydenberg said that JobKeeper had helped more than 3.6 million Australians stay connected to their employers and remain in a job.
“The eligibility criteria for JobKeeper is clear,” the Treasurer’s statement said.
“Businesses with an aggregated turnover of less than $1 billion must have had a decline in turnover by 30 per cent, or in the case of businesses with an aggregated turnover of more than $1 billion a 50 per cent decline in turnover.
“As part of the initial JobKeeper scheme eligibility only had to be proven once.
“From 28 September 2020 as part of the JobKeeper extension, businesses will be retested against their September quarter turnover and their December quarter turnover to ensure they still qualify.
“This will see businesses who have recovered through this challenging period transitioned off the payment as it steps down and the economy opens back up.”
A source said the government could not directly comment on the tax affairs of any individual or entity due to taxpayer confidentiality laws. JobKeeper is administered by the Australian Taxation Office.
The big issue for industry retailers is how much the close down of Victorian retailers will impact this quarters profits.
Gerry Harvey, executive chairman of electrical appliances and furniture retailer Harvey Norman, said the most important thing now was for the government to make adjustments quickly in areas where the restrictions had caused any serious unintended problems.
“As long as they get the adjustments right, that’s the main thing,” Mr Harvey said.
He said it was extremely difficult to bring in such sweeping changes across an entire economy. “I don’t think anyone can get absolutely everything right first go,” he said.
Harvey Norman has two retail stores still operating in Geelong but its Melbourne stores are shut. Mr Harvey said there had been a strong uptake of ”click and collect” by Melbourne customers, which he suspected was because those customers wanted products immediately and were keen to drive to a store to get them. “If I was locked up, that’s what I’d do,” he said.