With the recent results season in both Australia and the U.S. markets now over, it is an appropriate time to reflect on the results of those online retailers in Australia compared to their overseas counterparts. 

Their respective results could not be more different – the overseas online retailers demonstrated continued growth while the Australian online retailers could be classed as mixed at best, with two company results, in particular, disappointing already very low expectations.

The following information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.

We’ve just published a detailed report analysing the results of Australian online retailers, comparing them with offshore retailers and which companies we believe are better investments. An extract is below – for more, sign up for free to access the full Trending Insights report today.

Australian online retailers chart Redbubble

Australian online retailers – a mixed bag at best

Surfstitch

Surfstitch (SRF AU) reported a full year 2016 net loss after tax of A$154.7 million including writedowns of A$99.3 million in its goodwill, intangibles inventory, property and equipment.  This followed a loss of A$17.6 million in 2015.  The company expects to still be loss making in 2017 and has guided for earnings before interest, tax, depreciation and amortisation to be -A$2 million to -A$3 million.

Despite raising A$22.3 million in new equity during the year, Surfstitch’s cash position fell A$18.3 million to A$21.4 million by year end and expects cash to fall again by A$6 million to A$7 million in 2017.  With a current market capitalisation of A$51 million, current Surfstitch shareholders face a possibility of further equity raisings to bolster the company’s balance sheet but as a result, also dilute further their shareholdings.

At this stage, all shareholders can hope for is that the business can be stabilised under new management and that they can retrieve something from the proposed sale of Surfstitch’s Surf Hardware International website.  Or continue to hope that co-founder and former CEO, Justin Cameron (who resigned in March 2016) makes a bid for the company (as has been rumoured frequently).  Until then, the share price will likely linger after reaching a 10.5c low on the day of its results release (and compared to its A$1.00 listing price).

How did Temple & Webster, Redbubble and Kogan.com compare?

To read our analysis on the results of other Australian online retailers and which we believe are more likely to succeed, sign up for free and access the full Trending Insights report exclusive to AtlasTrend members plus other Investing Insights & Ideas.

Overseas online retailers – the big keep getting stronger

Rather than detail every individual result here, which are summarised on AtlasTrend’s company descriptions here, we will focus on the key themes that can be derived from the recent results of the likes of Amazon.com, Alibaba, eBay, Rakuten, Zalando and Expedia. These themes are below and detailed in our full report:

  • Diversity of earnings
  • Scale of earnings has not hindered growth 
  • Cash machines
  • Operational scale reflects global opportunities

In contrast to many listed Australian online retailers, the overseas online retailing investment universe is highly liquid given their overall market value and high levels of global investor interest.  More importantly, the fundamentals of these companies remain very strong. Many, if not all, are selling into a large global market and are global leaders.  Despite the market size of the likes of Amazon.com and Alibaba, they are still considered growth companies, particularly as they continue to build complimentary businesses to their existing e-commerce platform. They are also generally very profitable and cash flow generative companies and as we discussed in our July piece, their valuations look reasonable compared to their much smaller Australian peers who remain largely unprofitable.  Given that, we think the answer is pretty clear about where one should seek exposure to online retailing and e-commerce and that is overseas. And the recent earnings results only confirm this view.

 

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To read the full detailed Trending Insights report exclusively available to AtlasTrend members, sign up for free here. You can also find out the full list of companies in AtlasTrend’s Online Shopping Spree Fund, ranked as Morningstar’s top performing “Equity Global Technology Australia” (for the 6 months to 30 September 2016) when you sign up.

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About Kevin Hua

Kevin Hua is a Co-Founder of AtlasTrend, an online investment platform that makes it easy for anyone to learn and invest in trends transforming our world. Kevin has over 19 years experience in financial markets including as Senior Portfolio Manager at Atrium Investment Management and Stark Investments.