Accent Group Ltd (ASX: AX1) shares have risen 16% today after the retailer announced a surge in digital sales. Digital sales have quadrupled since Accent Group shut stores.
Accent Group shuttered stores from 27 March in response to social distancing requirements. The Group is a leading regional retailer of performance and lifestyle footwear across Australia and New Zealand. Accent Group has more than 420 stores across 10 different retail banners. Brands include The Athlete’s Foot, Hype DC, Sketchers, Merrell, CAT, Vans, Dr Martens, Timberland, and Saucony.
Digital sales accelerate
With stores closed, digital sales have accelerated, increasing from an average of $250,000 per day prior to store closures to between $800,000 and $1.1 million a day in the last fortnight. As digital sales escalated, stores closed to the public became “dark stores”, used to enable click and dispatch of products to customers.
Accent Group has seen increased demand for footwear for essential workers, as well as strong demand for active footwear and apparel as more people take part in these activities. The digital business has responded to shifts in consumer behaviour with targeted content and offers to drive traffic and conversion.
Accent Group has 18 websites allowing customers to shop online, and says driving digital growth is its number one priority. Digital sales grew 33% in 1H20, on top of 94% growth in 1H19. The Group is growing its customer database and focused on evolving customer communications to reduce reliance on paid search channels.
CEO Daniel Agostinelli said, “I am delighted with the growth in our digital sales. It is clear there has been a seismic and most likely enduring shift in consumer behaviour away from traditional shopping centres to shopping online.”
Stores to reopen
Accent Group has announced plans to progressively reopen its physical stores with all stores set to be open by 11 May. The company says its store network, along with increasing online sales, provide a fundamental competitive advantage.
Nonetheless, Accent Group believes the increase in online business likely marks a permanent shift in consumer habits. Online sales are expected to represent a much larger share of total sales in future.
For physical stores, a significant ongoing impact on store revenue and profitability is expected. Reduced foot traffic and tourism, and increased levels of unemployment and related economic impacts will continue for some time. The company is negotiating with landlords for appropriate arrangements to reflect changed trading conditions.
Accent Group says it will not operate stores on uneconomic or unsustainable rental deals. In the coming months, the company will be re-evaluating the location, size, and format of its store network to ensure an appropriate balance between digital and store sales.
Accent Group’s digital business has been boosted by social distancing requirements, softening the blow from the closure of physical stores. As more of its business moves online, the Group will look to optimise its storefront presence to maximise profitability.
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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. 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.