Investors seem to be looking at these 5 Retail Stocks - CCX, LOV, NCK, TPW, ADH

Investors seem to be looking at these 5 Retail Stocks - CCX, LOV, NCK, TPW, ADH

Summary

  • Consumer Discretionary sector was amongst the sectors impacted adversely during the COVID-19 crisis.
  • Within the retail industry, a move towards online transactions helped companies mitigate the impact of falling sales from physical stores/outlets.
  • City Chic Collective recently responded to media speculation and updated that it is exploring possible acquisitions on a global scale.
  • Lovisa Holdings confirmed that its stores opened from mid-April in Australia and UK stores from June end. However, it had to exit Spain due to a lack of support from landlords.
  • NCK noted robust trading recently and a significant increase in the sales order. Seeing this, the Board decided to bring forward the payment of an interim dividend of 25 cents.

The S&P/ASX 200 Consumer Discretionary sector was amongst the ones that faced significant operational and financial hurdles due to the coronavirus pandemic. In the early phase of the COVID-19 pandemic, the sector dropped significantly from 2909.80 on 20 February 2020 to 1597.40 on 23 March. The index has bounced back since then but is still some way behind the pre-COVID-19 era.

Within Consumer Discretionary, the retail industry has had both ups and downs during the period. While the stores/outlets sales took a considerable hit due to worldwide lockdowns and social distancing measures, a significant increase in online retailing helped the retail players partially negate the damage caused. The retail players well all out to generate revenue via the electronic mode. On the one hand, the brick-and-mortar model took a substantial hit, and on the other hand, e-retail witnessed a boom during these past few months.

RELATED: Significant Shift Towards e-retailing, Is Brick-and-Mortar Model at Perpetual Risk?

Many companies from this sector have started coming up with the trading update, capital raise and their outlook. In this article, we would look at five players from this sector and their recent updates and performance.

City Chic Collective Limited (ASX:CCX)

City Chic Collective Limited is a global omni-channel retailer that focuses on plus-size women’s outfit, footwear, and accessories.

CCX shares have consistently delivered positive returns. The stock’s 1-year, YTD and 3-months returns are 74.16%, 19.23%, and 51.22% respectively. On 15 July, CCX shares ended the day’s trade at A$3.240, up 4.516%.

Response to Media Speculation:

On 6 July 2020, CCX responded to the media speculation related to the possible acquisition in the US and equity capital raise.

CCX explained that its strategy comprises of growing its international plus-size business along with the global customer base. Hence, the Company is exploring various possible acquisition on a worldwide scale. CCX confirmed that presently it has no agreement on terms of any potential acquisition. There is no certainty that any acquisition will be reached, or it will be made.

In case the Company reaches an agreement on terms of any acquisition, CCX board would consider the suitable funding option available to the Company. It could be cash, debt, and equity capital raising.

Quarterly Rebalance:

In the June 2020 quarterly balance, CCX was included in the S&P/ASX 300 Index.

Lovisa Holdings Limited (ASX:LOV)

Lovisa Holdings Limited is an international specialist fast-fashion jewellery retailer.

LOV shares, since its ASX debut has provided a return of 181% and 85.80% in last five years. However, the performance in the last one-year was unimpressive as the shares delivered a negative return of 50.21%. On 15 July, LOV shares ended the day’s trade at A$6.270, up 4.153%.

Business Update:

In the recent business update released on 02 July 2020, it was highlighted that the Company was forced to progressively close its store network globally because of COVID-19 as most stores were closed by the end of March 2020.

From the mid of April 2020, the business re-opened with the Australian stores, and progressively across all Company-owned markets. LOV’s UK business opened in late June 2020. By the FY2020 closure, the Company had 434 stores operational.

Spain Exit due to Lack of Support from Landlords:

The Store rollout in Spain was put on hold due to below-expectation performance before COVID-19 lockdown. However, some improvement was also seen during that period. But due to the lack of support from the landlords in Spain, LOV board decided not to re-open the stores and agreed to exit the Spanish market.

Cost Structure:

Various measures were taken to manage the cost structure because of the temporary closure of the store network. These include the stand-down of store teams in all markets and a blend of temporary stand-downs & permanent terminations in the support teams globally.

Balance Sheet Position:

The Company’s balance sheet position remains strong with inventory levels well controlled. The net cash by FY2020 closure was A$21 million.

Board Update:

John Armstrong resigned from the position of Director, effective 3 July 2020.

Nick Scali Limited (ASX:NCK)

Nick Scali Limited is into the business of furniture retailing.

NCK shares have delivered an impressive return of 381.81% since the ASX launch. The 5-year and 10-year returns of the stock were ~99% and ~351% respectively. However, its one-year return was -1.52%. The returns in the previous three months have improved significantly by ~51%. On 15 July, NCK shares ended the day’s trade at A$6.590, up 1.698%.

Operational and Financial Performance Update:

Since the temporary closure of showrooms on 30 March 2020, NCK reported written sales order growth of 20.4% in the time frame 1 April 2020 till 19 June 2020. The Company expects its 2H FY2020 to increase by 15% to 20% above 2H FY2019. The revenue is projected to lie in between A$39 million to A$40 million.

Response to COVID-19:

During COVID-19 pandemic, NCK implemented various measures across its showroom to make sure that the safety of its staff, customers, and community.

NCK experienced an impact on its business due to government restrictions. Its retail and distribution networks were temporarily closed. Trading & deliveries have now recommenced at all locations with a robust operating performance recorded since re-opening.

Dividend Update:

The interim dividend payment of 25 cents, which was deferred by the Board, has been brought forward considering strong recent trading and a significant increase in the sales order bank.

Temple & Webster Group Ltd (ASX:TPW)

Temple & Webster Group Ltd is an open e-commerce platform that focuses on creating a superior shopping experience by offering a large & constantly refreshed variety of furniture & homewares items.

TPW shares have consistently delivered impressive performance since it got listed on ASX. In the last one year, the shares have delivered ~354% return.  On 15 July, TPW shares ended the day’s trade at A$7.750, up 5.586%.

Completion of A$40 million Placement:

On 2 July 2020, Temple & Webster Group announced the completion of fully underwritten A$40 million institutional placement by issuing 7 million new fully paid ordinary shares at an offer price of A$5.70 per share.

The placement was significantly oversubscribed and had strong demand from existing shareholders as well as new investors. The placement would strengthen the balance sheet and position itself well to take advantage of the ongoing structural shift from offline to online for furniture and homewares. It would also support the Company’s growth strategy.

Adairs Limited (ASX:ADH)

Adairs Limited is the retailer of home furnishings in Australia.

ADH shares, in the last five years, delivered a negative return of 23.16%. However, the return in the last year was 43.16%. In the previous three months, the shares delivered an impressive ~80% return. On 15 July, ADH shares ended the day’s trade at A$2.330, up 6.393%.

Trading Update:

On 19 June 2020, Adairs Limited provides trading update and group sales guidance for FY2020. The Company announced that all its stores re?opened in May with improved safety measures to ensure the safety and well-being of its customer and team.

Mark Ronan, Managing Director and CEO of Adairs Limited, stated that the Company noted a strong sales across store network and online channel since the store re-opened. The sales growth of Mocka, a wholly-owned subsidiary of Adairs continued at high levels.

FY2020 Sales Guidance:

The Company expects Group sales for FY2020 in the range A$385 million - A$390 million.

 


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