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Reasonable trading update from $AX1 at the AGM today.
Revenue for 1st 19 weeks of FY24 up 2.1% over PCP, and LFL down 2.0%.
Of note, is that after first 7 weeks LFL was down 1.8%, indicating a reasonably stable retail environment in its categories.
Disc: Not held in RL and SM
27-Apr-2020: Business Update
DIGITAL SALES SURGE AND ALL STORES REOPENING WITH NEW SAFETY PROTOCOLS
On 25 March 2020, Accent Group Limited (AX1) announced the closure of Company owned stores in Australia (Group Stores) from 5pm on 27 March 2020 for a period of 4 weeks. Today, we are pleased to provide a further business update, including the significant acceleration we have seen in digital sales, and to announce our plans to progressively re-open our stores in compliance with Government directives and with the safety of our team and our customers our priority.
Digital sales surge
Continuing its 5 year investment and further energised focus on digital, Accent Group has seen a surge in the Company’s digital sales. Digital sales have grown from an average of approximately $250,000 per day prior to our stores closing in March, to between $800,000 and $1.1 million per day for the last 2 weeks of April.
Whilst our stores were closed to the public during April, some Group Stores were opened and staffed to operate as ‘dark stores’ [stores closed for trade to the public and used as fulfillment points for digital click-and-dispatch to customers] using our endless aisle technology to access our entire inventory base and to enable click-and-dispatch of product to our customers. Our digital business has also responded to this shift in consumer behaviour with targeted consumer content and offers to drive traffic and conversion. As our digital sales continued to escalate, the number of Group Stores opened as dark stores increased progressively through April. All of our Group Stores and a number of our NZ company owned stores are now staffed and operating as dark stores, working together with our distribution centres to fulfil our digital sales.
During this period, we have also developed and implemented new in-store protocols to help ensure a safe working environment for our team members working in our dark stores.
Accent Group 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. It is clear that there has been a seismic and most likely enduring shift in consumer behaviour away from traditional shopping centres to shopping online. With 18 websites and our leading digital capability, Accent Group is capitalising on this trend. We will continue to drive digital growth as the number one priority in our company.”
Re-opening stores and new safety protocols
In Australia, shopping centres have been required to implement the Government’s measures to manage the COVID-19 virus (such as social distancing and public gathering measures) but have remained open. Whilst many stores in shopping centres have temporarily shut during the COVID-19 pandemic period, a number of retailers have also continued trading in the centres where the Company’s stores are located.
During this time, we have seen an increased demand for footwear for essential workers, such as the Skechers range for health professionals. We are also seeing strong demand for active footwear and apparel as more people are taking part in physical activities, with strong trading in these categories, particularly on The Athlete’s Foot and Stylerunner websites.
Accordingly, we have made the decision to progressively re-open all Group Stores with our new safety protocols in place to comply with all Government directives and to prioritise the health and safety of our team members and our customers. We will review and adapt these in-store measures as the environment evolves.
The initial protocols will include:
These protocols have been trialled successfully in several stores over the last 2 weeks and we will now be progressively re-opening all Group Stores to the public by May 11.
We believe that the significant increase in our online business most likely marks a permanent shift in consumer habits in Australia and NZ and we expect our online sales to represent a much larger share of our total sales in the future. Our store network, along with our surging online business, is a fundamental competitive advantage to the Company, however we will not operate stores on unsustainable or uneconomic rental deals. Accordingly, in the coming months, we will be re-evaluating the location, size and format of our store network to ensure the appropriate balance between digital and store sales.
--- click on link above for full announcement - including:
--- AX1 closed at $1.045 today, up +16%, but were up +36% earlier (at $1.28).
Update on trade for the first 18 weeks of FY23:
From Morgan Stanley after the trading update: (Overweight; PT $1.85)
AX1 provided a positive trading update ahead of its AGM today. Key points:
Top line tracking ahead. Total sales +52% in first 18 weeks of 1H23 ... this is an acceleration from +49% in the first 7 weeks ... and ahead of cons 1H23 sales growth of 20%
Gross margins also beat. +570bps on FY22, which appears to be ahead of cons 1H23 margins of 56.4%
Upside to store targets. Expecting to open 50 new stores in 1H vs. previous full-year FY23 target of 50
Our view – Keep OW. Another strong trading update from AX1, with momentum building into the seasonally important Nov/Dec period. We see upside to consensus 1H23 EPS expectations from strong sales growth, gross margins and store roll-out. However, we expect the market to remain cautious on 2H23 EPS, given the challenging macro backdrop
We view this as a positive read-through for the rest of our apparel & footwear coverage – PMV, KMD and CCX
DISC: Small amount held on SM and IRL