ASX retail shares are preparing to reopen stores after COVID-19 closures. Store closures have had a significant impact on sales, but for some, booming online shopping has cushioned the blow. According to 9News, online e-commerce spending is up 110% from 12 months ago.
Retail stores were not required to close their doors under government restrictions, but heavy messaging about shopping for basics and social distancing requirements meant it was not profitable for many retailers to stay open. As coronavirus numbers have fallen, however, foot traffic and consumer sentiment are lifting. A number of ASX retailers have announced plans to reopen doors in the near future.
While stores were closed, sales didn't stop; some ASX retail shares reported a surge in digital sales. We take a look at when ASX retailers are reopening their doors, and which ASX retailers have benefited from the move to online shopping.
Accent Group Ltd (ASX: AX1)
Accent Group has announced plans to progressively reopen all stores to the public by 11 May 2020. During the closure period, Accent Group has seen a surge in online sales. Digital sales have quadrupled while stores have been closed, rising from $250,000 a day to between $800,000 and $1.1 million per day for the last 2 weeks of April.
With stores closed to the public during April, some were progressively reopened as 'dark stores' to enable click-and-dispatch to customers. All Group stores and some New Zealand stores are now staffed and operating as dark stores, working together with distribution centres to fulfil digital sales.
CEO Daniel Agostinelli said, "after years of investment by Accent Group in our digital team and technology, I am delighted with the growth in our digital sales." Agostinelli believes there has been a seismic and likely enduring shift in consumer behaviour away from traditional shopping centres to online.
Even though it is reopening stores, Accent Group expects a significant ongoing impact on revenue and profitability of stores. This is a result of decreases in foot traffic, reduced tourism, and increased levels of unemployment. The Group is negotiating with landlords for lease agreements to reflect market conditions.
Accent Group believes rent should be calculated by reference to a percentage of sales. The company has announced that where 'sustainable and fair' rental deals cannot be agreed with landlords, it will close stores. Accent Group has given notice with 1 major landlord to exit 28 store leases at expiry over the next 6 months, and says it may be forced to take similar action for more stores in future.
Adairs Ltd (ASX: ADH)
Adairs announced the closure of its stores from 27 March 2020 for a period of 4 to 6 weeks. The company now plans to progressively re-open stores from 7 May. The initial focus will be on larger format stores, with other stores opening throughout May and June having regard to the circumstances of each store.
During the shutdown period, Adairs' online sales have surged 221%. Nonetheless, once the impact of the lack of store sales is taken into account, total sales are down 37% for this period versus last year.
Sales for the online-only Mocka brand are up 151% compared to last year. In New Zealand, Mocka was closed in line with Government restrictions, which concluded on 28 April. Sales for the period 28 April to 3 May for Mocka New Zealand were up 216% on the same period last year.
Adairs cancelled its earnings guidance and interim dividend in March ahead of store closures. It is negotiating with landlords with a focus on agreeing to an outcome that sees the impact of COVID-19 shared through both closure and recovery phases. Adairs says it does not currently see a need for additional capital given its liquidity, sales levels, and ability to manage costs.
Kathmandu Holdings Ltd (ASX: KMD)
Kathmandu announced the closure of all but two of its 327 international stores at the start of April. Over recent days, most Kathmandu and Rip Curl stores in New South Wales and Queensland have reopened on a trial basis. The majority of Australian Kathmandu and Rip Curl stores are expected to open by the end of the week.
Throughout the store closure period, Kathmandu and Rip Curl have continued to trade online in all international jurisdictions. Group online sales in April were 2.5 to 3 times higher than last year. The highest growth rates were recorded in Australia, the company's largest market.
CEO Xavier Simone said, "the digital infrastructure and supply chain investments we have made over the last three years have underpinned our ability to rapidly ramp up online trading capabilities and distribution capacity in the face of unprecedented online demand."
Kathmandu recently completed a NZ$307 million capital raising which strengthened its balance sheet and liquidity position. This will help in ensuring Kathmandu remains well capitalised to navigate through the current trading uncertainties caused by COVID-19. Kathmandu is also negotiating with its landlords for an outcome that sees rental costs aligned to sales performance.
Myer Holding Ltd (ASX: MYR)
Myer has extended the closure of its physical stores until at least 11 May 2020. Government measures will be closely monitored with a view to reopening stores as soon as possible. Reopening may occur on a staged basis, taking account of applicable conditions and government measures.
Myer has continued to operate its online business during the store closure business, which it says is performing strongly. Online fulfilment is occurring at 26 locations across the store and distribution network. This has resulted in approximately 20% of team members being asked to return to work to support online fulfilment.
Myer CEO John King said, "the strong growth in the online business during the past few weeks has been particularly encouraging."
Myer has been in negotiations with its landlords since well before the coronavirus crisis. The retailer has been seeking to rationalise its store network and floor space for some time. Myer wants to close or shrink stores to improve profitability. The company is taking all necessary measures to minimise its cost base, including continuing talks with landlords and suppliers.
