The COVID-19 pandemic has been disastrous for the retail sector. ASX retail shares have taken a hit, the global economic outlook is gloomy, and consumer sentiment is down.
And although restrictions have eased across most of Australia, metropolitan Melbourne is still under a harsh lockdown of unknown duration. Consumers hate uncertainty, and in times of crisis are much more likely to save their money than spend it.
This is reflected in the price of many traditional ASX retail shares. Department store operator Myer Holdings Ltd‘s (ASX: MYR) share price effectively flatlined at around $0.20 after starting the year closer to $0.50. And the share price of outdoor clothing retailer Kathmandu Holdings Ltd (ASX: KMD) is down close to 50% for the year to $1.165.
But some companies have excelled in these conditions.
The retail shift towards e-commerce is a major trend to emerge from COVID-19. This will potentially bring about permanent structural shifts in the way consumers choose to shop.
Here are 3 ASX retail shares that have pivoted online and are seeing their profits – and share prices – surge as a result.
Temple & Webster Group Ltd (ASX: TPW)
Furniture and homewares retailer Temple & Webster operates an online drop-shipping business without any physical furniture showrooms. This business model means the company was able to transition to remote working arrangements more easily than many rivals. At the same time, Temple & Webster has seen demand for homewares, furniture and office equipment spike as people spend more time at home.
In its FY20 results, released to the market in late July, Temple & Webster reported full year revenues of $176.3 million, an increase of 74% over the previous year. These revenues were heavily weighted towards the second half of the financial year, with fourth quarter revenues rising 130% over the prior comparative period. The ASX retail share (and its shareholders) will hope this positive momentum carries over into FY21.
Kogan.com Ltd (ASX: KGN)
Australia’s answer to Amazon, Kogan has become a bona fide COVID-19 market darling. Since falling to a 52-week low of $3.45 back in March, Kogan shares have skyrocketed more than 500% to $21.08 at the time of writing.
This impressive ASX retail share delivered strong results across the board in FY20. Active customers grew by over 35% to 2.2 million, revenues surged 13.5% to $497.9 million and NPAT was up almost 56% to $26.8 million.
As with Temple & Webster, revenues were weighted heavily towards the second half of the year, a trend which has continued into July. Gross sales for the month were up 110% year-on-year and gross profit surged by 160%.
City Chic Collective Ltd (ASX: CCX)
A more surprising success story to emerge out of the pandemic has been plus-size women’s clothing retailer City Chic. The ASX retail share has seen its share price skyrocket more than 360% off its March lows and is trading at $3.32 in mid-morning trade.
City Chic released its FY20 annual report this morning, in which the company reported sales revenues for FY20 of $194.5 million, an increase of 31% year-on-year. Underlying earnings before interest, tax, depreciation and amortisation (EDITDA) expenses came in at a healthy $26.5 million.
The revenue increases came mostly via online channels. Sales in North America were bolstered after City Chic acquired the Avenue, a US-based brand with a strong online presence. This, combined with prudent cost-cutting, has put City Chic in a strong position as it emerges from the COVID-19 crisis.
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Rhys Brock owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group Ltd. 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.
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