Trading updates, ASX price queries, recoveries and tankings. It's been quite the week for ASX Listed E-Commerce companies.
Adore Beauty’s share price doesn’t appear to be responding well to its Q1 FY23 Business Update, down 6.8% in a seven day period to $1.58 at close of ASX on Tuesday. In its latest trading update, Adore reported that revenue has grown over the two most recent quarters to $54.4 million (down 28% on the prior corresponding period, which was a lockdown period). Returning customers are up 85% on a 2 year basis, and up 14% on PCP. Active customers of 791,000 are up 12% on a 2 year period, and down 9% on PCP. It said that its year-on-year comparisons were ‘volatile as expected’ as the company ‘cycles a period of significant growth when most of Australia was in lockdown’.
The issue for investors (apart from revenue) may be that returning customers remain the largest contributor to revenue, with acquisition and potential for future growth raising concerns.
Adore Beauty CEO Tennealle O’Shannessy said: ‘Adore Beauty has had a solid start to the new financial year, delivering quarterly revenue above the last two quarters, despite navigating more competitive trading conditions. Year-on-year comparisons in isolation simply reflect the cycling of two consecutive period of strong growth when part or most of the country was in lockdown….Adore Beauty’s valuable returning customers are a key differentiator for the business contributing 70% of all revenues and providing a high level of revenue sustainability.’
Much emphasis has been placed on Adore’s private label investment, Viviology (which is described as ‘scaling’) and AB Labs (launched last month). Whether this own brand investment will enhance or cannibalise its position remains to be seen. Adore said it is focused on ‘executing its strategic initiatives to deliver scale benefits and EBITDA margin expansion over time’. It’s just a question of whether investors will hang around to find out.
Source: ASX Listed E-Com Index based on ASX reporting for the period
Booktopia and BikeExchange shares are also down over the last seven days. Booktopia released its 2022 Annual Report to Shareholders which reported that, compared to FY21, Revenue was up 7.5% to $240.8m, Average Customer Spend was up 6.4% to $134.94, Average Order Value was up 6% to $75.59 and Underlying EBITDA was down 54% to $6.2m. ‘The year under review will go down as one of the most challenging in Booktopia’s 18 year history…’ said Chairman Chris Beare and Acting CEO Geoff Stalley.
‘Trading conditions remain volatile for retailers and the online retail market in particular, with various economic headwinds impacting consumer behaviour and a high level of uncertainty around inflation, interest rates and cost-of-living pressures,’ Beare and Stalley continued.
Booktopia continues to search for a new CEO, with Stalley acting in the CEO role until the appointment is complete. Such an appointment would surely help to instil a level of investor confidence in the direction of the company. Booktopia is the worst performer on the ASX Listed E-Com Index over the last seven days, down 16.7% to $0.20.
The best performer over the period is Temple & Webster, up 16.5% to $5.93. It recently advised that co-founder, Managing Director and CEO Mark Coulter has agreed to a new four-year remuneration package, ‘evidencing his commitment as CEO as the business enters its next phase of growth’. The multi-year remuneration package seemed to encourage investors.
‘Our first goal is to hit $1 billion in sales, however, our eye is firmly on the longer term goal of becoming one of the largest and most profitable retailers in the country,’ Coulter said at the time.
Kogan is up 2.7% over the last seven days to $3.38 in the aftermath of its trading update last Wednesday. The company announced its ‘strong cash position [and] accelerated sell-through of final excess inventory, which also delivered reducing warehousing costs…’ The quarter reflected a period of ‘subdued sales activity’, echoing Adore Beauty’s sentiments of ‘cycling a quarter in the prior year that was heavily impacted by COVID-19 lockdown orders.’
‘We know that during period of belt tightening like this, our responsibility to be the best place for Aussies and Kiwis to get a bargain on their key household items is more important than ever,’ Founder and CEO Ruslan Kogan said of the pressures on consumers.
Inventories for the period were reduced to $132.1 million from $159.9 million with the sell-through of inventory and tight controls on costs supporting the growth of the companies net balance (ending the wearer with $23.8 million). Gross Sales declined 38.8% year-on-year to $202.3 million and Group Active Customers decline 12.3% year-on-year to 3,596,000. Gross Profit declined 40.4% year-on-year to $31.3 million with Adjusted EBITDA of $(0.3)million. Given this decline, it’s perhaps surprising that the share price has held. It may be that with the economic pressures on shoppers, investors are banking on bargain purchase behaviour moving forward, and with Kogan in a more favourable position after its inventory woes, its positioned well for the year ahead.
After Redbubble hit its two-year low last week (to $0.46) in response to its trading update, there seems to be a slight shift in investor sentiment. The company is the second best performer on the Index, up 16.1% over seven days to $0.54. As recently as August 2022, its share price was well over a dollar at $1.50.
Redbubble CEO, Michael Ilczynski said at the time of its trading update: ‘The MPR this quarter was down $5.1 million versus the pcp. This largely reflects the impact of cycling $4 million of mask sales within the Accessories category, and the encouraging and continued growth in the T-Shirts category of 12% or $7 million. The growth in T-Shirts was not sufficient to offset the decline in the Artwork and Homeware categories. The MPR result was impacted by slightly lower sales in Australia, Europe and the UK than expected, particularly in September. Importantly, the Group’s largest market, North America, remained resilient in the first quarter of FY23.’
That the Redbubble share price has (somewhat) stabilised bodes well for other retailers in the post-trading update share price slump this week. Will we see the Adore share price lift in next week’s Stock Watch?
In last week’s Stock Watch we reported that the Cettire share price was up a massive 85.6% in the last 14 days alone to 24 October. We weren’t the only ones to notice, with Cettire having to respond to an ASX price query the next day. When asked whether Cettire had any information concerning it that has not been announced to the market which, if known by some in the market, could explain the recent trading in its securities, it answered ‘No’. The only explanation it could give was its trading update to the quarter ended 30 September which was released back on 11 October. The timing doesn’t quite seem to fit given the swift response to trading updates generally. It’s not the first time questions have been raised about its performance. In the last seven days Cettire is up 8.9% to $1.91 continuing its upwards trajectory. If there is more to its share price performance, we’re not privy to it (yet).
Overall, the ASX Listed E-Commerce Index is performing well, up 8% in the last seven days, compared to the ASX200 which is 2.6% over the same period.
Figures are current as at close of ASX on 1 November 2022. This is analysis only and not intended as investment advice.
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