And here at Stockhead we’ve covered two stories this week on ASX small cap retail stocks struggling with challenging market conditions.
Melbourne packaging billionaires Fiona and Raphael Geminder have been so unimpressed with the performance of iconic Aussie discount retailer The Reject Shop (ASX:TRS) that they’ve lobbed a $70.3 million bid to take over the company.
They say Reject Shop shareholders should accept the offer because of the risk of further deterioration in retail trading conditions. Reject Shop chairman William Stevens said the offer was “somewhat opportunistic” but that he and the board would take time to consider it.
“The Reject Shop board continues to believe in the long term growth prospects of the business which has remained profitable amidst the backdrop of a challenging period in the Australian retail environment,” he said. “The board recommends shareholders take no action in respect of the takeover offer. Although the board considers the offer to be somewhat opportunistic, it will evaluate the offer and provide shareholders with a recommendation in due course.”
And over at furniture seller OneAll (ASX:1AL), profits are expected to fall between 4.6 and 9.1 per cent for the 2018 calendar year, with the China-US trade dispute starting to hurt the bottom line as a new major US customer cancels orders.
OneAll makes garden furniture in China and sells it around the world. The company says existing customers are maintaining ordinary order levels.
“OneAll, does, however expect more competition in Europe as Chinese manufacturers shift their focus away from the US while the dispute is ongoing,” the company said.
There are about 27 small cap ASX companies in the retail industry. You might be surprised to find that huge names like Myer, Kathmandu, Nick Scali and Michael Hill Jewellers are classified as small cap.
Myer, with a market cap of $328.5 million, isn’t even the biggest on our list; the two biggest are Accent Group, the $606.2m owners of brands like Athlete’s Foot, Dr Martens and Vans, and camping and outdoors company Kathmandu with $530.6m.
Eleven of them have seen increases in share price over the past year. Specialty Fashion (ASX:SFH) has been the best performer in 2018, with its share price up a whopping 789 per cent since New Year’s Day — rising from 13.5c to $1.20.
The company is now left with City Chic, the plus-size chain that has embraced multi-channel retailing, with online now representing more than a third of sales.
Its chairman Richard Facioni and managing director Scott Evans told investors they were “pleased with year-to-date progress despite what has been widely observed as a very difficult retail environment”.
Online furniture seller Temple & Webster (ASX:TPW) has also enjoyed a great 2018, with its shares rising 184 per cent to $1.25 to be the second-best performing retailer.
Others have struggled, however. Elanor Investments Group (ASX:ENN) earlier this year revealed that it would close down subsidiary John Cootes Furniture, the iconic furniture retail chain known for its TV ads in the 1980s and 90s. Its shares have fallen 19pc this year.
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