Data is the key for ASX retail shares in 2020. That's what I think is the big message after the value of Australia's retailers surged on Tuesday.
Positive news about coronavirus vaccine candidates pushed the S&P/ASX 200 Index (ASX: XJO) as a whole 2.6% higher on Tuesday.
However, ASX retail shares received a particularly strong boost from the Federal Government's JobKeeper and JobSeeker extensions.
Image source: Getty Images
What's happening with JobKeeper and JobSeeker?
Prime Minister Scott Morrison announced a range of changes to the existing stimulus programs.
JobKeeper payments will be reduced to $1,200 for full-time workers, down from $1,500 at the moment. That will run until the end of 2020 and then drop to $1,000 per fortnight from January 3.
The part-time worker payment will be reduced from $1,500 to $750 per fortnight after September before dropping to $650 per fortnight in 2021.
The new end date for 'JobKeeper 2.0' will be 28 March 2021.
The $550 JobSeeker supplement will be reduced to $250 per fortnight after September. That means total payments will be reduced from $1,115 to $815.
Why is that good news for ASX retail shares?
Yesterday I wrote about the potential impacts of this week's action-packed spate of economic updates.
I wrote that an extension of JobKeeper and JobSeeker could help boost ASX 200 retail shares like JB Hi-Fi Limited (ASX: JBH) and Super Retail Group Ltd (ASX: SUL) higher.
That proved to be the case on Tuesday, with JB Hi-Fi shares surging 2.0% and Super Retail jumping 3.7%. Shares in retail REIT Scentre Group (ASX: SCG) also rocketed higher on the news, closing up 3.3% at $2.17 per share.
Retail billionaire Solomon Lew shared a similar view according to an article in the Australian Financial Review (AFR).
Mr Lew described 'JobKeeper 2.0' as a 'big shot in the arm for the Australian workforce and broader economy'. Low unemployment is good for sales while the extra cash is helping retail stores continue operations.
Is now a good time to buy?
I think the answer to this really depends on the August earnings season. The JB Hi-Fi share price has climbed 14.2% this year on the back of strong sales. This says to me that investors are already pricing in a strong sales result in 2020.
However, the JobKeeper extension is good for business. That means more cash in the economy and less of a drain on expenditure.
If we see an Aussie retailer like Super Retail outperform with respect to earnings, I think ASX retail shares will finish the year strongly.
Any signs of persistent sales growth or operational streamlining could push ASX retail shares higher in August and September.
