Discretionary retailers have felt the full brunt of the coronavirus pandemic, with many companies forced to shut their stores and let go of staff. Despite the doom and gloom, there are certain ASX retail shares that could withstand the pandemic downturn and bounce back stronger.
These companies that could prosper in the challenging environment offer growth through the cycle, are leveraged with global expansion opportunities and have a strong online presence.
Here are 2 discretionary retailers on the ASX that could blossom after the pandemic.
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is Australia's largest online retailer of furniture and homewares, boasting more than 150,000 products for sale. The company is able to offer a broad product range thanks to its innovative drop-shipping model, which allows products to be sent directly to consumers from suppliers.
Despite the recent volatility, the Temple & Webster share price is trading more than 20% higher for the year. The company is well-positioned to take advantage of structural tailwinds in the sector. Temple & Webster estimates that currently only 4-5% of homeware and furniture sales are executed online. Online participation is forecast to surge and drive growth with faster internet and new technologies improving the online experience for consumers. In addition, tech-savvy millennials have joined the company's core demographic.
Temple & Webster plans to drive continued sales growth by adding greater depth to its core offering and the addition of new categories. The company is also in the process of launching a new mobile app to improve the online shopping experience. In addition, the coronavirus pandemic could see consumers shift more to online platforms for homeware and furniture products.
City Chic Collective Ltd (ASX: CCX)
City Chic is a multichannel retailer that specialises in catering for plus size women. The company is a collective of customer-led brands that offer a range of clothing, accessory and footwear options. City Chic also boasts a multichannel business model that allows the retailer to operate a network of over 100 physical stores in Australia and New Zealand.
Additionally, City Chic has a strong online presence with multiple websites in Australia and the US. Avenue and Hips & Curves are two online brands owned by City Chic that have a significant following in the US.
In response to the coronavirus pandemic, City Chic temporarily closed its physical stores in Australia and New Zealand which contribute approximately 30% to total sales. As a result, the City Chic share price is still trading nearly 50% below its all-time highs.
Foolish takeaway
Prior to the coronavirus pandemic, the traditional retail sector was already under pressure as consumers remained cautious on discretionary spending and more market share was lost to online avenues. In my opinion, the retail sector will continue to face serious headwinds during and after the coronavirus pandemic.
However, as consumers still require discretionary spending avenues, I think that the ASX retail shares poised to thrive will have excellent growth prospects domestically and internationally, whilst also having a strong online presence. I think a prudent strategy would be to keep a watchlist of ASX retail shares that could flourish and wait for positive price action before making an investment decision.
