The company that owns the Australia-New Zealand distribution rights to footwear brands like The Athlete's Foot, Stylerunner, Skechers, Vans and Dr. Martens believes the Covid-19 pandemic has sparked a "seismic" shift in consumer habits, following a massive spike in online spending.
In late March around 4,200 employees at Accent Group (ASX: AX1) were affected by the temporary closure of more than 470 stores in response to the pandemic, but positive digital sales have prompted the company to progressively re-open all physical outlets by 11 May.
Accent has struck successful rent renegotiations for more than 100 stores so far, but an inability to reach a deal with one major landlord will likely lead to the shutdown of almost 30 stores by October.
The company highlights a significant acceleration in digital sales from $250,000 per day prior to March closures up to between $800,000 and $1.1 million per day over the past fortnight.
This surge has been supported by the opening of some shops as 'dark stores', using Accent's endless aisle technology to access the entire inventory base and to enable click-and-dispatch of product to customers. All group stores and a number of Accent's NZ-owned stores now fit this model.
Major drivers have been increased demand for the Skechers range for health professionals, while there has been strong demand for active footwear and apparel as more people are taking part in physical activities with The Athlete's Foot and Stylerunner websites benefiting greatly.
"After years of investment by Accent Group in our digital team and technology, I am delighted with the growth in our digital sales," says Accent Group CEO Daniel Agostinelli.
"It is clear that there has been a seismic and most likely enduring shift in consumer behaviour away from traditional shopping centres to shopping online.
"With 18 websites and our leading digital capability, Accent Group is capitalising on this trend. We will continue to drive digital growth as the number one priority in our company."
Accent's management notes its store network and surging online business give the company a fundamental competitive advantage, but unsustainable or uneconomic rental deals just won't work. Therefore, the group will be re-evaluating locations, sizes and formats of its store network to strike the right balance between digital and bricks-and-mortar sales.
Despite the re-opening announced today, Accent Group still expects a significant ongoing impact on the revenue and profitability due to the ubstantial decrease in foot-traffic, reduced tourism, increased levels of unemployment and related economic impacts
Management expects these conditions to continue for some time.
"We are committed to maintaining our position as the largest multi-channel retailer in our market," says Agostinelli.
"The mix of Accent's superior digital capability and the magic of our stores gives us a key competitive advantage, but it is important that we reach agreement with our landlords for sustainable and fair rental deals.
"With landlords where this cannot be achieved, we will close stores. Unfortunately, that has already occurred with one of our major landlords and we have given notice to exit 28 store leases at expiry over the next six months. We may also be forced to take similar action for more stores in the future."
The group notes good support and understanding from major suppliers and global brand partners, including Skechers, Dr Martens, Vans, Nike, adidas, New Balance, ASICS, Toll and many others who have worked with Accent to help ensure the inventory pipeline is right-sized and payment terms are aligned to reflect the current sales environment.
The company has also secured additional banking facilities, bringing the total facilities to $207 million with current net debt standing at $112 million.
"Accent Group's greatest asset is its people and I am incredibly proud of the resilience, tenacity and performance of our team through this difficult period," concludes Agostinelli.
Updated at 9:52am AEST on 27 April 2020.
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