Fashion Retailers in Spotlight

Summary

• Due to people confined in their homes, and spending mostly on essential items, fashion retailers are facing tough times during the pandemic.
• Stores are re-opened following the safety guidelines, but the consumer is shifting more to online shopping.
• City Chic has finalised negotiations with landlords to reduce rents during the lockdown period, and also closed 14 stores due to failed negotiations.
• Myer has re-opened the stores in the phased manner as per the governments' guidelines for security and emphasised that customers' and staffs' safety is the top priority.
• PAS Group has entered the voluntary administration citing the effects of the pandemic. However, stores are functioning, as per the government guidelines.

The fashion retailers all across the globe have been walloped due to the coronavirus crisis. With travel restrictions, people are limiting themselves from being a part of big gatherings, doing work from home, everyone is busy practising social distancing, all of which is getting the casual attitude towards clothing as the desire to dress up is usually related to place and time to go. Due to the unique nature of the crisis, fashion retailers are busy figuring out new ways to excite customers.

Furthermore, with all the physical stores closed during the lockdown, the sales were massively hit. Now, after the re-opening of the stores, the retail industry is entirely transformed. There are strict hygiene and PPE guidelines with social distancing to follow.

Consumer behaviour has changed, and they prefer more of online shopping. Aussies are now focused on buying essential quality items leaving aside luxury buying and unnecessary spending, which seems to be out of fashion now- at least till the time the pandemic gets entirely over, and lives return to normalcy.

There are also reports that apparel brands in Australia are asking for huge discounts from the suppliers. These brands are also delaying and cancelling the supplier's payment due to unavailability of ultimate customers.

However, a silver lining here is that online stores are growing, and consumers are buying their favourite brands from popular retailers through their digital channels. Also, a hope to recover due to the re-opening of stores is there.

As per the latest ABS report, an initial estimation for Australian retail turnover for May 2020 are:

• The seasonally adjusted estimate increased by 16.3 per cent from April 2020 to May 2020. It is the most significant seasonally adjusted month-on-month rise in the last 38-year.
• In seasonally adjusted terms, Australian turnover increased by 5.3 per cent in May 2020 compared with May 2019.

The most significant turnover was witnessed in the clothing, personal accessory, footwear, and Cafes, restaurants and takeaway after the restrictions were lowered throughout the month. The monthly increase in footwear, apparel and personal accessory retailing was 100 per cent but is 20 per cent lower when compared with May 2019.

City Chic's agreement with landlords settled

City Chic Collective Limited (ASX:CCX) is a global retailer of plus-size women's apparel, accessories, and footwear. The company has three brands under its umbrella- Avenue, Hips & Curves, and City Chic. The corporation has a network of 92 stores across Australia and NZ.

City Chic has announced that it has finalised the negotiations with landlords and they have agreed on reduced rents for the period the store remained closed during the lockdown and going forward City Chic will pay the appropriate market rents. In the process, CCX is also closing 14 holdover stores where the company could not reach an agreement on proper leases post the lockdown.

However, City Chic has stated that the closure of these stores will have minimal impact on the company's future earnings as the shoppers will be redirected to other stores nearby and also to company's digital channel.

Phil Ryan, CEO and MD of City Chic said, the closing of the holdover stores only shows the company's focus on proper store economies. Despite the closures, CCX is committed to open new stores and convert them to large format to follow the current guidelines post lockdown.

Being an omnichannel retailer, CCX will provide the products through multiple channels. However, the sector is witnessing massive growth in the digital space, and CCX is well-positioned to execute the digital strategy.

Mr Phil Ryan also acknowledged the contribution of the store staff and said he is happy that most of the team members could be redeployed in the stores.

All 92 stores across Australia and NZ are now fully re-opened and are addressing to the government guidelines.

On 24 June 2020, CCX closed at AUD 3.070, up by 1.993 per cent with a market cap of AUD 603.32 million.

Myer Holdings Limited (ASX:MYR)

It has stated that the health and well- being of the customer and staff members remain its top priority during the ongoing crisis.

In sync with the phase-wise re-opening of the economy, Myer has re-opened 24 stores on phased and trial basis. The stores have re-opened as per the government strict guidelines to curb the spread of the virus. Like many other retailers, Myer's online business continued to perform well during the crisis.

All stores are going to practice social distancing, will offer contactless payments, and have preventive items like hand sanitiser stations. Also, there will be frequent cleaning of stores.

The company is observing the latest progress and advice from state and federal governments. It is also focussed on cost reduction, and for this, they are continually negotiating with the landlords and suppliers.

On 24 June 2020, MYR closed at AUD 0.230, down by 2.128 per cent with a market cap of AUD 193 million.

PAS Group Limited (ASX:PGR)

It capitalise on the fragmented nature of the apparel industry. The company has entered the voluntary administration due to the severe financial market condition during the ongoing Covid-19 crisis.

The appointed administrators are PwC partner Stephen Longley, Martin Ford, and David McEvoy. The company's board feels that it is the best way to protect the stakeholders.

The appointed administrators are required to conduct an initial review and assessment of the operations. PAS Group stores always function as per the government safety guidelines.

Amid difficult times of the pandemic, the re-opening of stores and the growth of online stores bring some relief to the sector.