ASX retail shares have been amongst the hardest hit from the coronavirus pandemic, with many choosing to shutter stores. As restrictions begin to lift, store reopenings are on the cards. But retailers hoping for a rebound in consumption may be disappointed – just 15% of consumers plan to return to their old spending habits according to a study cited by the Australian Financial Review (AFR).
This suggests the recovery will likely be L-shaped rather than V-shaped, with 75% of households expecting the impact of the coronavirus pandemic to last more than 12 months. A renewed focus on budgeting is expected as consumers enter a recessionary mindset.
According to the Australian Bureau of Statistics, retail sales rose 8.2% in March thanks to panic buying of toilet paper and pantry staples. But strong falls in turnover were reported for cafes, restaurants, clothing, and department stores. Sales are expected to fall in April when most discretionary retailers closed their doors.
With all this in mind, let's take a look at how ASX retail shares are faring.
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Accent Group Ltd (ASX: AX1)
Shares in Accent Group are up 35% this week with the footwear retailer announcing a surge in digital sales. The retailer closed physical stores from 5pm on 27 March for a period of 4 weeks.
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 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 18 websites allowing customers to shop online, and says driving digital growth is its number 1 priority. 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."
The company believes that the increase in online business likely marks a permanent shift in consumer habits. Accent Group plans to progressively reopen its physical stores to the public by 11 May. Online sales are, however, expected to represent a much larger share of total sales in the future. In the coming months, Accent Group 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 expects a significant ongoing impact to store revenue and profitability related to coronavirus. Reduced foot traffic and tourism, and increased levels of unemployment and related economic impacts are expected to continue for some time.
The company is negotiating with landlords for appropriate arrangements to reflect changed trading conditions. Negotiations have been concluded with more than 100 landlords. Agreement could not be reached with 1 major landlord, however, meaning 28 stores will be closed over the next 6 months as leases expire.
Premier Investments Limited (ASX: PMV)
Shares in Premier Investments are up nearly 20% this week. The company closed all Australian stores from 26 March, with stores currently slated to stay closed until at least 11 May. Premier Investments owns popular brands Peter Alexander, Smiggle, Dotti, Just Jeans, Jay Jays, Jacqui E, and Portmans.
Premier Investments recently reported that all 7 of its brands are trading strongly online in Australia. With the alert level in New Zealand reduced, the company will commence online trading in New Zealand from 28 April 2020.
Premier Investments has announced its intention not to pay any rent globally for the duration of store shutdowns. Across Australia and New Zealand, close to 70% of stores are already in holdover or have leases expiring in 2020.
Premier Investments store closures impacted over 9,000 employees with all employees in Australia stood down except for a small number of employees required to perform essential work. The CEO of Premier Investments is working from home without pay for the period of the shutdown.
Myer Holdings Ltd (ASX: MYR)
Shares in Myer have been relatively flat this week but are up more than 100% from March lows. The department store giant closed stores from Sunday 29 March with stores set to remain closed until at least 11 May. Reopening may occur on a staged basis, taking account of applicable government measures across different states.
Myer says that its online business has performed strongly since physical stores were closed. 20% of stood down employees have been asked to return to assist with the fulfillment of online orders. Efforts to minimise costs are continuing including ongoing discussions with suppliers and landlords.
Myer had been seeking to rationalise its floor space and stores even before the pandemic. Discussions with landlords have been ongoing for some time as the retailer looks to close or shrink stores. Myer has also been in discussions with its bankers regarding the refinancing of around $80 million of debt.
Short sellers have had Myer in their sights as the pandemic compounds its woes. Gambling on a fall in the share price, short sellers now hold about 13.5% of Myer shares.
The AFR reports that the number of Myer shares held by short-sellers rose from 60.8 million on 23 March to 113.6 million on 21 April. Myer is now the second most shorted stock on the ASX. Department stores have been sold off by investors on fears some may not survive the coronavirus pandemic.
Temple & Webster Group Ltd (ASX: TPW)
Shares in Temple & Webster are up over 100% from March lows as the online-only homewares and furniture retailer benefits from an increase in online shopping. The company reported a significant increase in demand in April, with second-half revenue (1 Jan to 24 April) up 74% year-over-year.
Temple & Webster says it has played a role in helping customers set up their homes as multi-purpose spaces at the beginning of the COVID-19 crisis. Now, demand has shifted into core categories across furniture and homewares. As an online-only business, it has the ability to scale quickly and has responded to increased demand by expanding its customer service team.
Q4 has shown an increased demand for shopping online but Temple & Webster remains watchful of significant uncertainty in the macroeconomic environment. As a result, short-term operational initiatives are being prioritised to support growth.
In the long term, the company remains committed to a high-growth strategy to take advantage of the structural shift towards online. This shift may have been accelerated by coronavirus-related lockdowns. Temple & Webster is in a strong financial position with a capital-light business model and debt-free balance sheet. The company has $20 million in cash and is cash flow positive.
