The COVID-19 pandemic has not been kind to retailers. Concerns over the potential economic impacts of the virus have caused consumer spending to drop, while social distancing restrictions have made it difficult for shops to generate the amount of foot traffic required to stay profitable.
Traditional brick-and-mortar retailers have suffered the most from government-imposed lockdowns. Department store operator Myer Holdings Ltd (ASX: MYR) has seen its share price plunge over 50% so far this year – and that's despite rallying more than 150% higher since late-March.
Kathmandu Holdings Ltd (ASX: KMD), which specialises in clothing and equipment designed for travel, hiking and outdoor adventure activities has also struggled during COVID-19. Its business has suffered due to both the social distancing and travel restrictions put in place by governments to fight the spread of coronavirus. The Kathmandu share price has also plummeted 50% lower so far this year.
However, there are at least 2 ASX retail shares that have so far managed to buck the trend.
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Kogan.com Ltd (ASX: KGN)
Australia's answer to Amazon, online retailer Kogan has emerged as one of the market darlings of the new coronavirus economy. The company has benefitted from surging rates of online shopping due to people spending more time confined to their homes. This has been reflected in its share price, which has skyrocketed more than 130% higher this year.
According to its most recent business update, released to the market on 5 June, gross sales for the fourth quarter to date (April and May) doubled that of the same period last year. Gross profit was up 100% and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) had tripled.
With online retailing gathering momentum and retailers like Myer in decline, Kogan decided it was the perfect time to strengthen its war chest through a $100 million institutional placement and $20 million share purchase plan, both of which recently closed oversubscribed.
Temple & Webster Group Ltd (ASX: TPW)
Another company to benefit from people spending more time at home is online furniture and homewares retailer Temple & Webster. In its June business update, covering the period up to the end of May, Temple & Webster reported year-to-date revenue of $151.7 million, an increase of 68% over the same period last year. And year-to-date EBITDA had surged an incredible 668% higher to $7.1 million.
Investors have flocked to Temple & Webster. Its share price has surged 172% higher already this year, which is pretty astounding given the gloomy economic outlook. However, the success of both Temple & Webster and Kogan sends the strong signal that the market believes that a post-coronavirus economy will still be heavily reliant on ecommerce.
Digital retailers aren't burdened by the significant staffing and rental costs from a brick-and-mortar retail network, meaning they can compete more effectively on price. Additionally, they have shown their ability to quickly pivot to meet changing customer demands.
Like Kogan, Temple & Webster has seized on this opportunity to strengthen its war chest. Earlier this month it announced the successful completion of a $40 million institutional private placement.
With growing customer numbers and plenty of cash in the bank, these 2 ASX retail shares look like formidable forces as the COVID-19 pandemic continues to reshape the retail landscape.
