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Will ecommerce save these 2 ASX retailers?

Social isolation and other distancing measures have forced many retailers to close their doors and lay-off staff as foot traffic plummets. With many retailers facing uncharted territory, the future of the industry remains uncertain.

Despite the reduced traffic to brick-and-mortar stores, retailers could sustain themselves through increased ecommerce. Here are 2 traditional ASX retailers that are getting a boost from online buying amid this bear market.

Super Retail Group Ltd (ASX: SUL)

Super Retail, which owns Supercheap Auto, Rebel Sport, Macpac and BCF, recently reported that group gross margin has remained steady up to 21 March 2020. In a recent update to the market, Super Retail reported that the company has maintained positive sales momentum.

In the market update, Super Retail reported that is online business has been seen strong growth in home delivery and click and collect services. The company reported a 21% growth in online sales, which represents approximately 9% of group sales.

Super Retail has cited the essential nature of its products as an important role in sales growth. Supercheap Auto recently reported sales growth of 7.5% in the past 5 weeks, fuelled by an increase in demand for self-sufficiency products such as portable gas, camping stoves, generators and refrigerators. The group’s Rebel Sport stores have also seen a surge in demand as the shut down of gyms drives consumers to stock up on home fitness gear.

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting Group has a network of 56 stores across Australia, specialising in baby and toddler products. In an update to the market last week, Baby Bunting pointed to its essential role in supporting Australia’s parents, newborns and children. It also informed investors that total sales growth for the second half ending on 22 March was 12.4% and comparable store growth surged 6.2% for the period. In addition, the company also saw a 28.6% growth in online sales for the same period.

Baby Bunting also announced that the company has delayed the re-launch of its new online platform and is pleased with the performance of its current e-commerce platform. Despite the positive market update, Baby Bunting pulled its guidance for the full-year due to the uncertain nature of the COVID-19 pandemic.

Should you buy?

In my opinion, uncertainty is the only certainty in the outlook for the retail sector in 2020 and beyond. In the short-term, reduced foot traffic is not the only challenge facing retailers, as some companies may also have supply chains in China impacted. In addition, a struggling Australian dollar will put further pressure on retailers that source their goods from overseas.  

Although the outlook for the discretionary retail sector may look dreary, investors can still find value if they look for certain characteristics. Such opportunities will include companies that cater to consumer staples and those with a strong and established online presence

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.