A recent report from broker UBS has predicted that online sales will double post-pandemic, with a slew of traditional retailers expected to close shop permanently.
The report follows data from the Australian Bureau of Statistics released yesterday, which revealed that retail spending fell a record 17.9% in April. Social distancing and travel restrictions have sapped demand from traditional retail outlets, with consumers moving to online platforms.
Here are 3 retail shares on the ASX that have outperformed during the pandemic and are well poised to adapt to the new age of retail.
Adairs Ltd (ASX: ADH)
Adairs is a home furnishings retailer that boasts more than 160 speciality stores in Australia and New Zealand. In addition to physical stores, the company also has a robust and growing online presence. Adairs recently released a trading update, informing the market that online sales surged 221% for the 5 weeks that stores have been closed.
Despite only contributing 20% to Adairs’ total sales, strong growth in online transactions has resulted in Australian sales over the period only being down approximately 37% compared to last year. Since 23 March, the Adairs share price has surged more than 285%, reflecting substantial interest from investors.
Kogan.com Ltd (ASX: KGN)
Kogan.com is probably one of the most prominent online retailers on the ASX. The company has been on the receiving end of huge demand as consumers flock to stock up on essential and discretionary items. Kogan released a trading update recently which reported a 100% growth in gross sales and 150% increase in gross profit for April.
The company also saw the largest monthly increase in active customers since its IPO. This surge in demand has been reflected in the Kogan share price which has bounced more than 155% from its March low. Kogan also made headlines recently, announcing that it had acquired furniture and homeware retailer, Matt Blatt.
Temple & Webster Group Ltd (ASX: TPW)
Believe it or not, the Temple & Webster share price has recovered more than 155% from its low in March and is currently trading near all-time highs. Temple & Webster is Australia’s largest online retailer of furniture and homewares and has thrived during the coronavirus pandemic.
The company recently provided an update, reporting record numbers in new and repeat customers, whilst also reporting that second-half revenue (to 24 April 2020) had increased by 74% year-on-year.
The move online is not only limited to traditional ASX retail shares. Even essential stalwarts like Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) have seen a surge in online participation and are preparing to meet future demand by investing heavily in the segment.
I think a prudent strategy for investors is to compile a watchlist of ASX retailers that will thrive in the next 20 years and wait for a good buying opportunity.
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Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of Woolworths 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.