Ann: ADH Trading Update and Stores Re-opening, page-26

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hankreardon

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12/05/20

09:58

Post #: 44566573
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Originally posted by Klogg: ↑

A few trends I've noticed from retailers.

- Brand name (and design control) matters
Brands with strong names did well, regardless of store closure. Peter Alexander actually increased total sales during the time of store closure.
Similarly, Adairs and Mocka did quite well online.

Alternatively, Shaver shop, which sells 3rd party products, saw increased online sales, but not enough to offset store sales. If I were to speculate, this is because I can buy their products elsewhere. The benefit of seeing the product in store is gone, so I'll just buy from eBay at a discount.

Strong brand names and great customer experience are the only way to avoid the race to the bottom it seems (that being, whoever is cheapest wins). The Linen Lovers membership approach just makes the brand even stronger (Linen Lovers spend 4-5x that of other customers).

- Retail rents
PMV, AX1 and ADH have all stated they will negotiate rents to be a percentage of sales for the medium term. They will also close stores that don't perform (AX1 closing almost 100 stores from memory). Given the number of store closures, rents will surely drop to be competitive. The move to larger online sales has been fast-tracked, so the power has shifted away from landlords. (Good timing Mr Lowy)

- Managing inventory
Usually, retailers who didn't sell a season's worth of items would have concern for inventory obsolescence. The good retailers are focussing on this (ADH and PMV included). In a few months time, I expect we'll see some other retailers either drop margin (through cheap sales of old inventory) or just writing off old stock. It won't be huge, but is surely unavoidable for some.

Disciplined retailers will emerge from this with greater power to negotiate leases and increase margins through a greater online sales component. ADH is no exception.

Expand

they need to label linen lovers as Linen-as-a-service (LAAS) and then put a slide in their slide deck on the CAC, LTV, ARR and ARPU metrics for LAAS and distribute the CAC across the lease commitments of the store network!

maybe then it would get the multiple it deserves...

ADH Price at posting: $1.57 Sentiment: Buy Disclosure: Held
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