The S&P/ASX 200 Index (ASX: XJO) is suffering a hefty bit of volatility amid a building tariff war between the US and multiple countries. Since 2 April 2025, the ASX 200 has fallen 7.5%. Could this be the right time to look at ASX retail shares like Harvey Norman Holdings Ltd (ASX: HVN) or JB Hi-Fi Ltd (ASX: JBH)?
They are two of Australia's largest retailers, selling discretionary items that Aussie households may want in their homes. The share prices of both businesses are lower, which is understandable considering a global downturn could hurt household spending.
I'm going to look at some of the factors that would help me choose between the two.
There are certain advantages one business has over the other, in my opinion.
I think JB Hi-Fi's earnings are more defensive than they used to be and likely more defensive than Harvey Norman because it sells a large amount of electronics that are needed by households, such as appliances, phones and computers.
Harvey Norman, on the other hand, has an impressive $4.4 billion freehold property portfolio, which is an important asset backing for Harvey Norman shares. It also has a growing presence in a number of countries outside of Australia and New Zealand, including Singapore, Slovenia, Ireland, the UK, Malaysia and Croatia. It has a total of 122 stores overseas, which generated $67.9 million of profit before tax in the first half of FY25.
Dividends play an important role in the returns from both businesses.
Let's look at what's currently projected for both businesses, though forecasts could change if the tariff situation worsens.
According to the projection on Commsec, the Harvey Norman grossed-up dividend yield for FY25 is forecast to be 8.7%, including franking credits.
For JB Hi-Fi, the grossed-up dividend yield is forecast to be 4.4%, including franking credits, in FY25.
The final, and perhaps most important, aspect to consider is the valuation of both businesses.
If one has a much more appealing price/earnings (P/E) ratio, then that could tip the scales.
According to the forecast on Commsec, the JB Hi-Fi share price is valued at 21x FY25's estimated earnings. The Harvey Norman share price is valued at 13x FY25's estimated earnings.
From these numbers, I think Harvey Norman is the clear winner. It has a much lower valuation, a much higher dividend yield, international growth and a large property portfolio.
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