ASX fashion and beauty shares made a strong showing during the most recent reporting season as consumers divert travelling spending to the retail sector.
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ASX fashion and beauty shares made a strong showing during the most recent reporting season. The retail apocalypse that many predicted at the start of the COVID-19 pandemic failed to eventuate. Instead, many retailers have benefitted as consumers divert travelling spending to the retail sector.
Sales at jewellery retailer Lovisa Holdings Ltd (ASX: LOV) are gaining ground as stores reopen globally, and Premier Investments Limited (ASX: PMV) has seen sales accelerate as online trade gathers pace.
So how did these ASX fashion and beauty shares perform in the first half of FY21?
Accent Group delivered a record profit in the first half of FY21 (1H FY21) as sales surged. The footwear retailer, which is behind The Athlete’s Foot stores, reported total sales of $541.3 million for the half, a 6.6% increase on the previous year.
Net profit after tax was $52.8 million, up 57.3%. “Our integrated digital and store operating model has delivered another record profit driven through strong sales and gross profit margin,” said CEO Daniel Agostinelli.
The company opened 50 new stores during the half, bringing total stores to 565. Digital sales were strong, up 110% on the prior year to $108.1 million. This represented 22.3% of retail sales, with Accent Group’s integrated digital model enabling the company to shift between channels fast when stores were required to close.
Earnings per share (EPS) was up 56.9% on the prior year to 9.76 cents. A record interim dividend of 8 cents per share was declared. This was up 52.4%, reflecting Accent Group’s strong trading result and cash position.
The company ended the half with cash on hand of $72.8 million, up from $44.1 million from 1H FY20. Sales momentum has continued into 2021, with like-for-like retail sales up 10.7% in the first eight weeks of the year. Digital sales were up 65.4% over the same period.
Nonetheless, given the ongoing uncertainty around the impact of COVID-19, Accent Group has declined to provide full-year sales or profit guidance.
Fast-fashion jewellery retailer Lovisa saw revenues and profits fall during 1H FY21 due to the impact of temporary store closures and weakness in most global markets. Revenue was down 9.8% to $146.9 million while net profit after tax fell 22.6% to $21.5 million.
Comparable store sales were down 4.5% for the period, with Q1 heavily impacted by store closures in Victoria. Nonetheless, Lovisa’s continued strong balance sheet position has enabled it to reinstate dividend payments. An interim dividend of 20 cents per share was declared, representing a 5% increase on the previous interim dividend.
“We are pleased with the performance of the business for the half year, in particular with the improving sales performance we saw through Q2 despite the continued global challenges we face with the impact of COVID,” said managing director Shane Fallscheer. “The strength of our balance sheet puts us in a great position to take advantage of future opportunities as they arise.”
Growth in the European and United States markets continued during the half, with four new stores opened in France and 14 in the US. Australian and New Zealand markets continued to be a standout with positive comparable sales for the half year, although the impact of Victorian stores being closed for an extended period resulted in total sales being down 0.4% on the prior year.
Trading has been positive in the second half, with comparable store sales up 12% for the first seven weeks of 2021.
Premier Investments has seen sales accelerate during its most recent half year, which ended on 30 January 2021. Outstanding sales were reported across the Peter Alexander, Just Jeans, and Jay Jays brands.
Although the company has yet to release final results for the half, it has advised that earnings before interest and tax (EBIT) are expected to be in the range of $221 million to $233 million. This would represent a 75% to 85% increase on 1H FY20. The result will be driven by an 18% increase in like-for-like sales for the 24 weeks to 9 January alongside strong cost controls.
Online sales continued to accelerate during the half, increasing 60% to $146.2 million in the first 24 weeks of 1H FY21. Online sales deliver a significantly higher EBIT margin than that of the retail store network.
Premier Investments has also benefitted from COVID-19 rent abatements having reached agreements with key landlords.
Online beauty and skin care retailer Adore Beauty reported revenue of $96.2 million for 1H FY21. This was 8% ahead of the prospectus forecast and 85% up on the prior corresponding period, driven by strong customer growth and continued high customer retention.
Active customers increased to 777,000, 7% ahead of the prospectus forecast and 82% up on the prior corresponding period. Earnings before interest, tax, depreciation and amortisation (EBITDA) of $5.2 million for 1H FY21 was 58% ahead of the prospectus forecast and up 188% on the prior corresponding period.
Adore Beauty ended the half with a cash balance of $25.8 million and no debt. “We have delivered record growth and financial performance, exceeding our prospectus forecast,” said CEO Tennealle O’Shannessy.
As COVID-19 restrictions ease, Adore Beauty is expecting to deliver full year FY21 revenue growth above pre-COVID levels. This is thanks to the continued structural shift to online and strong retention of new customers acquired over the peak COVID period.
The company says it is well-positioned to capture market share in a large and growing market and is benefitting from structural tailwinds. These include the shift to online accelerated by the pandemic and the entrance of digital-native Millenials and Gen Z into the market.
As the business grows, Adore Beauty expects scale benefits to increase operating leverage and deliver further EBITDA margin expansion.
ASX fashion and beauty shares shine
ASX fashion and beauty shares have reported impressive results for the most recent half year despite the impacts of COVID-19. Increases in online sales have buoyed revenues as customers shift spending to digital channels.
Can ASX fashion and beauty shares continue to grow sales as the pandemic recedes in the face of the vaccine rollout? Investors will be eagerly awaiting full-year results to find out.
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Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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