Retailers rocky from store closures

Retailers rocky from store closures

The impact of store closures and a lethargic supply chain are weighing down some of Australia's listed retailers. 

 

Lovisa (ASX: LOV) in particular has felt the brunt of disruption in Chinese production and the flow on effects to its global supply chain.

While production capacity at Lovisa's suppliers and distribution hub in China have begun to return normal levels, the jewellery retailer is experiencing delays in freight movements out of the country.

Additionally, the company has seen an escalation of the impact of Covid-19 worldwide, particularly how it is forcing its physical outlets to close.

All Lovisa stores in France and Spain have been closed since Sunday 14 March, with stores in Spain expected to be closed until at least the end of the month.

A government imposed shut-down of stores means its shopfronts in France will remain closed until the middle of April at least.

All Lovisa stores in Malaysia have been closed since 18 March and 25 stores across the USA are shut because of local government directives for shopping malls to close.

All other markets are still open and trading but Lovisa says it is witnessing a decline in sales.

Lovisa says it is not in a position to reliably estimate the financial impact of these events in the coming months.

A similar story is playing out for electronics and whitegoods retailer Harvey Norman (ASX: HVN) and fashion retailer City Chic Collective (ASX: CCX).

Sales in Northern Ireland, Malaysia, and Singapore are down for Harvey Norman.

The company's Slovenian, Malaysian and Croatian stores are all closed, while stores in Ireland, New Zealand, Northern Ireland, Singapore and Australia are all open for business as usual.

City Chic Collective says the effect of Covid-19 on its sales and earnings remains uncertain at this stage, but it has been impacted by the ongoing disruption to production from its Chinese supply partners.

With a sturdy online presence, buoyed by fashion brand Avenue, the company is in a position at this point in time to ride out the Covid-19 pandemic.

Approximately two thirds of CCX's global sales come through its online channel.

"This means we can deal with a protracted reduction in economic activity and disruption to our operations," says CCX CEO and managing director Phil Ryan.

"During this time, our focus will remain, as always, on delivering the right product at the right price through the right channel to our customers around the world."

The largest impact to CCX will be the downturn of consumer spending, but the company says its reactive and flexible supply chain position will ensure the company can manage its working capital through this period.

Updated at 11:53am AEDT on 19 March 2020.

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