Introduction

Our weekly Earnings Insights reports look at key commentary and qualitative insights from major US retailers and brand owners on the impact of the coronavirus crisis on second-quarter 2020 performance (ending July 31 for most companies). Companies featured are those within our Coresight 100 coverage list, and in this report, we focus on those that reported in the week ended August 16: Canada Goose was the only company to report in full, although ASOS, based in the UK but selling in the US, issued a pre-close trading update. For most US retail companies in this weekly series, the quarter under review will be the second quarter of fiscal year 2020 (ending January 2021), but some of the companies covered have different year ends and term their quarters differently (including Canada Goose and ASOS). From May, sales declines at US brands and retailers began to ease as stores reopened and lockdowns were lifted. In June, US retail sales saw an extraordinary 10.1% year-over-year jump amid still difficult circumstances, fueled by double-digit growth in several sectors. In July, retailers maintained growth momentum, with total US retail sales growing 10.0% year over year. However, amid concern over ongoing outbreaks, , Coresight Research’s August 12 survey found that the proportion of US consumers avoiding any type of public area remains high, at 84.8%. The avoidance rate has jumped by more than five percentage points since the beginning of July, reflecting consumers’ increasing concerns over the rising numbers of coronavirus cases in several states. We assess the recent performance of selected retailers and brand owners below.

Luxury

	Canada Goose (TSX: GOOS) 1Q21
Commentary	Total revenues declined by 63.3%, due to temporary store closures, reduced operating hours and lower traffic. By geography, Asia posted the weakest revenue decline at 45.3%. CFO Jonathan Sinclair said, “In North America and Europe, reopened stores are seeing slow starts as a result of lower traffic in and around our locations due to the impacts of the pandemic. This is as expected and consistent with earlier experiences in Greater China. In e-commerce, we are in the late innings of our slowest period, and we are on track in our preparations for peak demand.” Canada Goose is concentrating its new-store expansion in China. In June, the company opened its first store in Chengdu. This year, the company plans to double its retail footprint in Mainland China, opening four new stores this year out of seven stores planned globally. CEO Dani Reiss said, “Thanks to our digital insights, we knew demand in the region was strong going in, and the store is performing well relative to our expectations. Overall, the retail recovery in Mainland China is ahead of other regions. We believe that our strategic approach to growing our Mainland China DTC[direct-to-consumer] business this year has us very much on the right track.”
Outlook	Reiss said, “While there has been a gradual sequential improvement in performance, the negative financial impacts of Covid-19 have continued in the second quarter of fiscal 2021, with a significant revenue decline expected. On an annual basis, the company expects lower wholesale revenue and later shipment timing, relative to fiscal 2020.” The company plans to launch a cross-border e-commerce solution this fall and winter, expanding the international reach of its business. Furthermore, Canada Goose will expand its mobile omnichannel capabilities to its US stores, following its successful pilot in Canada.

 

Apparel

	ASOS Plc (AIM: ASC) 2H20 Trading Update
Commentary	The company’s trading update reported, “The second half has been a period of tremendous change for ASOS. We have made real progress and shown resilience through the period and are exiting the year in a strong position. We have a robust balance sheet with a differentiated product offer and global infrastructure to leverage.” Management did not give indications of performance by region.
Outlook	For fiscal year 2020, the company expects revenue growth of 17–19%, with profit before tax of £130–150 million (around $170–$196 million), ahead of market expectations, supported by stronger-than-anticipated underlying demand and significant and sustained reduction in returns rates.

 

Looking Forward

The companies featured this week underscore the buoyant demand for e-commerce—even in the sluggish apparel category—and the still-weak in-store demand for clothing. Reinforcing this, Coresight Research’s August 12 survey found that 27.0% of consumers are currently buying more clothing or footwear online than pre-crisis, up from 24.1% one week earlier.