Retailers on the ASX are being savaged despite consumer confidence being high. But are investors being harsh, or are shoppers deluded?
In the last 12 months, the ASX Listed E-Commerce Index has lost 67.7% compared to the ASX200 which which has lost just 10.7% in the same timeframe. The E-Commerce Index comprises pureplay online retailers including Adore Beauty, BikeExchange, Cettire, Kogan, MyDeal, Redbubble and Temple & Webster. In the last 12 months, three of these companies have announced a CEO departure and one announced an acquisition (meaning it will shortly be delisted). Six out of seven of these companies recorded double digit share price losses over the last year, with only one recording double digit growth (spoiler: MyDeal is both the company with a Woolworths acquisition to look forward to and the company which a big plus next to its share price performance). Essentially…it’s not a great report card. But is it warranted?
Post- the peak of covid spend and lockdown restrictions (*shudder*), online spend has clearly eased off. But the ‘new normal’ (also, *shudder*) is one in which Australians who were ‘forced’ online are now here to stay. When we look at consumer confidence, it hasn’t quite taken the dip many were expecting. As recently as mid-September, Power Retail datas showed that a massive 27% of Australian shoppers said they had plans to increase their level of online spend, outnumbering the 20% who said they planned to decrease online spend moving forward. The majority (61%) of those planning to decrease spend said they were doing so to save for essential items, and only 7% were decreasing due to concerns about their employment status. For those planning to increase spend, the reasons include taking advantage of bargains (50%), shopping for Christmas gifts (46%), convenience (44%) and that they’d just rather shop online than in-store, thank you very much (34%).
And yet…in the last seven days, Adore Beauty has dropped 22.3% to $1.27 (the worst performer on the E-Com Index), Cettire has lost 18.8%, Kogan is down 16.3%, Redbubble is -14.8%, Temple & Webster has shed 11% and Booktopia is down 4%. With BikeExchange the best performer at…..0%, the average of the Index over the last seven days is -13.4%. Consumers might be confident but investors certainly aren’t.
Source: ASX Listed E-Commerce Index based on ASX reporting for the period
Is it that consumers are just bracing themselves for what’s yet to come? Sure, there were some memes about the cost of lettuce and social media was abuzz with where to purchase petrol so you didn’t have to take out a(nother) loan, but has the reality of the true cost of living and continuous RBA rate rises not really hit (a declining in value) home yet?
It’s clear that investors have essentially abandoned retail and tech, especially those in the pureplay space and even more especially those selling discretionary products. Sure, in an inflationary context, it makes sense. But the reality is that it was happening before *gestures wildly* everything. The seeds of doubt were planted in peak-pandemic times. And while there were elements both within and outside of retailers’ control (the level of competition, inventory management woes, fulfilment delays) what really seemed to be at play was that the higher retailers climbed, the harder they had to fall.
So the question remains, did e-commerce eat itself?
Figures are current as at close of ASX on 26 September 2022. This is analysis only and not intended as investment advice.
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