Actions Taken by Consumer Discretionary players amid COVID-19 pandemic: MYR, MHJ, CCX, RCT

Actions Taken by Consumer Discretionary players amid COVID-19 pandemic: MYR, MHJ, CCX, RCT

The ever-increasing number of cases of SARS-CoV-2 has shaken the entire world. As per the situation report provided the World Health Organization on 27 March 2020 (at 06:00 PM CET), the number of positive coronavirus cases had reached 512,701 with 23,4955 reported deaths. In Australia, as on 28 March 2020 (at 3:00 PM AEDT), Australia had total confirmed cases had reached 3,635 with 469 new cases and 13 reported deaths.

Because of this pandemic, the Government has raised advisory to maintain social distancing and banned international as well as domestic travels. The grave situation has impacted most of the businesses. During this lockdown period, the companies have implemented a contingency plan for the business to continue in the long run.

In this article, we would be looking at four companies from the Consumer Discretionary sector and see their action plan during this period of uncertainty.

Myer Holdings Limited (ASX:MYR)

On 27 March 2020, Myer Holdings Limited provided a business update related to the coronavirus disease. Myer Holdings has a portfolio of 66 department stores across Australia.

Considering the health and wellbeing of the customers, team members, their families and the broader communities where the Company is functional, Myer Holdings remains supportive of the various measures taken by the Government and the respective agencies to prevent COVID-19 spread. On this note, Myer has decided to temporarily close its stores for four weeks effective 29 March 2020 till 27 April 2020.

However, the Company would remain operation via online mode to ensure a safe and hygienic environment for the team members. Further, for the ease of the customers, MYR has reduced the maximum limit for the free delivery to $49 and relaxed the returns policy.

Myer has also made the tough decision to stand down ~10,000 team members throughout the store network & Store Support Office, from Monday, 30 March 2020. Since the team members won’t be working during this period, they will not receive any payment. In this situation, the full time and the part-time members will have the option to access their annual leave & long service entitlements, including government assistance measures.

For its team members, and their families, the Company, would provide free counselling and support and look for ways to support their health & wellbeing during this time. A small group of business-critical roles would undertake essential work and support online business.

The Company highlighted that it is taking all measures deemed necessary to control its cost base. MYR will engage in discussions with landlords and suppliers to come up with strategies to minimise expenses.

Michael Hill International Limited (ASX:MHJ)

Jewellery retailer Michael Hill International Limited, as per the public health guidance in Canada, announced on 19 March 2020 that it will close its Canada store network for 14 days. The Company confirmed that the decision would be reassessed and would be lifted or extended, as required.

During this time frame, the Company has decided to stand down most of the Canadian staff & will let them take leave entitlements or leave without pay.

On 23 March 2020, the Company informed that at this juncture it is actively handling the trading & operational effect of public health measure related to COVID-19 management in every trading market of Australia, New Zealand and Canada where it operates. It also has passed a crisis plan to concentrate on emerging operational & trading issues expeditiously.

In the last couple of weeks, the Company reported a drop in foot traffic in each of its trading markets. As a result, there was an impact on sales. The Company would confirm their presence as a part of their regular Q3 FY2020 trading update in early April 2020.

In this present situation, MHJ has not provided guidance and believes it is not able to provide a dependable forecast.

The Company has taken crucial action to lessen forecast plus non?essential capital expenses, lowering non?essential spend & executing a hiring and travel freeze. Further, the labour cost across all aspects of its business is under scrutiny to optimise the cost of doing business. The Company has also acted to postpone payment obligations where feasible & is engaged with landlords in all the markets where it functions to take temporary rent relief while trading has been disrupted.

Michael Hill is also examining the working capital and cashflows, along with the inventory levels. The Company is confident that it has adequate levels to meet expected demand.

City Chic Collective Limited (ASX:CCX)

On 19 March 2020, City Chic Collective Limited announced that it is examining the rising cases of COVID-19 as well as the impact on trading, the team, as well as its customers. The Company confirmed that its initial priority is the wellbeing of its staffs and customers.

City Chic is a multi-channel retailer based in Alexandria, New South Wales. CCX is an active company and has a contingency plan in place to make sure that they can function effectively.

On 27 March 2020, the Company announced the temporary closure of its Australian stores by the end of this week after the closure of its stores in New Zealand on 25 March 2020. The decision to close the stores was taken as per the guidelines of the Australian Federal and State Government which related to social distancing and limited activities outside the home. New Zealand government has also advised closing all the non-essential businesses.

As an omni-channel retailer with 2/3rd of the sales online as well as three times the range of online vs stores, the Company would serve its loyal customers via digital mode. Although the Company has the advantage of a more variable cost structure than other traditional retailers, still it has decided to remain cautious during this phase of uncertainty surrounding the COVID-19.

The Company has applied various methods to slash the impact of the closure of its store network, which adds 30% of its sales revenue. It includes:

  • Reduction of inventory intake followed by deployment of store inventory across its online channel.
  • Holding expenses on non-essential capex as well as driving further working capital efficiencies.
  • Working on rents with the landlords while the stores remained closed.
  • Lowering costs pertaining to activity driven by stores along with the head office.

Reef Casino Trust

Reef Corporate Services Limited, as a responsible entity and operator of Reef Casino Trust (ASX:RCT), owners of the Reef Hotel Casino, on 23 March 2020 updated that Reef Hotel Casino operations will close effective the day of the announcement after the Australian Government announced the immediate closure of the all licensed clubs, pubs, cinemas, casinos, nightclubs and places of worship because of the rising cases of COVID-19.

The Company has shifted its focus on working on the consequences of the closure with the Reef Hotel Casino complex operator, Casinos Austria International (Cairns) Pty Ltd.  Reef Casino Trust owns as well as handles the Reef Hotel Casino situated in Cairns, North Queensland.

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