• Profit margin was a key theme during the earnings season
  • We take a look at the margins of online vs brick and mortar stocks
  • Which ASX stocks are focusing on expanding their digital footprints?


At the height of the Covid-19 outbreak in 2021, profit margins around the world were at record highs as waves of monetary stimulus were unleashed by governments.

According to data, the average profit margin in the US in 2021 reached its widest since 1950 at around 15.5%.

But a very different world has emerged post the pandemic.

Businesses are finding it harder to pass on price increases to consumers who are already feeling the pinch of rising interest rates. As a result, margins are being squeezed and have now become a key issue as companies struggle to maintain their pricing power.

As the recently completed earnings season shows, companies that are most susceptible to the cost of living squeeze – mainly discretionary stocks – have reported lower margins.

Domino’s Pizza (ASX:DMP) for example saw its bottom line full year earnings slashed by 23% in the past year, with its profit margins declining from 11.5% to 8.5% this year.

Electronics retailer JB Hi-Fi’s (ASX:JBH) EBIT margin declined from 8.61% to 7.99%, while Harvey Norman (ASX:HVN) said its franchising margin has collapsed from 8.19% to 5.82%.


Do online players have the upper hand?

Pure-play online retailers have not been spared, with most also reporting a lower profit margin compared to a year ago. But these players are coming off a much higher base than brick and mortar ones.

A survey recently conducted by Xero (ASX:XRO) suggests that online companies do have the upper hand.

Xero surveyed 171 accountants and bookkeepers to understand the differences between online and physical businesses in Australia.

Around half (or 48%) of accountants surveyed say online businesses have a higher net profit margin than bricks-and-mortar companies. Only 24% say vice versa.

About 60% of accountants say it costs less to run a retail business online vs brick and mortar, while 5 in 10 say online retailers break even sooner.

Importantly, almost 70% say online businesses are less likely to fail, and 64% say owners or shareholders lose less if they do.


Margin comparisons between online and brick mortar stocks

A quick comparison of companies in different sectors shows how a brick and mortar retailers fare against pure play online players:


Auto stocks

Code Name Sector Pure play online? Profit Margin
CAR Carsales.com Auto Yes 52%
TRA Turners Automotive Auto No 8%
ASG Autosports Group Auto No 3%
PWR Peter Warren Auto No 3%
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Travel stocks

Code Name Sector Pure play online? Profit Margin
SDR Siteminder Travel Yes 67%
HLO Helloworld Travel Travel No 12%
FLT Flight Centre Travel No 10%
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Fashion stocks

Code Name Sector Pure play online? Profit Margin
CTT Cettire Fashion Yes 7%
STP Step One Clothing Fashion Yes 17%
UNI Universal Store Fashion No 10%
CCX City Chic Collective Fashion No -17%
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Furnishing stocks

Code Name Sector Pure play online? Profit Margin
TPW Temple & Webster Furnishing Yes 4%
NCK Nick Scali Furnishing No 20%
DSK Dusk Group Furnishing No 14%
ADH Adairs Furnishing No 7%
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ASX stocks that have expanded their digital footprints

Many retailers on the ASX have some sort of eCommerce plan. Here are some that have expanded their digital footprints:


The Reject Shop (ASX:TRS)

The discount chain launched its online presence in August 2020 as the pandemic hit.

Currently, the online platform still makes a small part of its overall sales, but the company said that the platform will  serve as the foundation to expand into suburban and regional markets.

The move was also seen as a strategic shift to improve the company’s stock management and supply chain.


City Chic (ASX:CCX)

In its full year update, the omni-channel women fashion retailer said it has completed a strategic review focusing on its online and international businesses.

The aim, according to CCX, is to determine the most efficient path to profitable growth, considering the current economic pressures on customer demand and competition.

The outcome of the strategic review will see the business focus on the Her brand and high value products, while driving down operating costs.


Nick Scali (ASX:NCK)

Nick first launched a full eCommerce platform in May 2022.

The company has since invested money on enhancing its eCommerce user experience in order to drive growth.

In the second half of FY23, Nick Scali brand online written sales orders were $14.5m, up 14.5% on the pcp.


Universal Store (ASX:UNI)

In the latest update, the casual apparel retailer says its online platform represented 14.1% of total sales in FY23, up from 8.8% in FY20.

The company has continued to scale its digital and eCommerce capacity and service, and is currently looking to re-platform its international websites to enhance customer service further.

UNI says its customer-centric digital strategy has delivered on its mission to Make Shopping Easier, Make Shopping Personal and Make Shopping Valuable.


Accent Group (ASX:AX1)

The shoe retailer reported strong results from its digital platform, with online sales of $251 million contributing 19.1% of total sales.

From FY19, the growth in its digital sales is a staggering 211%. 

The company now owns 11 new and re-platformed websites, and says the growth has been driven by improvement in customer spend frequency and engagement. 


Baby Bunting (ASX:BBN)

The company said it has made further investment in its digital platform to transform the customer experience.

BBN opened its first store in Auckland in August 2022 and has also expanded its online offering in NZ.

In Australia, the company says its significant online presence has generated the “highest website visits of any Australian baby goods retailer”.

The company’s digital platform sales now make up 20% of its overall sales in FY23.


Endeavour Group (ASX:EDV)

While many companies are seeing growth in online sales, Endeavour Group CEO Steve Donohue says that more people are buying drinks at the company’s 264 Dan Murphy’s outlets rather than online.

Donohue said more customers were driving to bricks and mortar liquor stores to make purchases rather than buying online, to ensure they secured the best bargains.


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