How Shaver Shop Became a Pandemic Success Story

The pandemic should have been a very difficult time for retailers as they were forced to close for extended periods due to mandatory shutdowns. And it was.

But despite this, some retailers have thrived by successfully adapting their businesses to the new reality and positioning themselves to take advantage of some of the unexpected behaviors that have emerged from consumers.

One retailer that adapted very well was Shaver Shop (ASX:SSG). It is a small specialty retailer, focusing not only on razors, but also on health, beauty and personal care. The demand for these products has actually increased during the disruptions of the pandemic. People couldn’t go to the salon so they had to start taking care of themselves.

Despite having its stores closed for long periods of time, Shaver Shop managed to quickly build its online presence and capture that demand. 56% of its sales came from online during the July to September 2021 period when NSW, Victoria and ACT were in lockdown. Total sales were down just 5% despite losing 5,000 store trading days.

This compares to online sales of just 13% before the pandemic. To quantify this, online sales grew from $20.7 million in fiscal year 2019 to $75.7 million in 2022. In addition to its own website, it operates online stores on Amazon , My Deal, eBay and Trade-Me.

As things opened up, shoppers gradually returned to stores and in the last quarter only 22% of sales came from online sources.

But Shaver Shop isn’t just a pandemic success story. It has been increasing its sales every year for 10 years. It received a big boost from the pandemic, but it still managed to grow its sales in 2022, albeit at a more modest rate of 4%, but on a much higher basis.

The question now is whether it can continue to grow as the pandemic subsides. The addressable market for health, beauty and personal care products is estimated at over $10 billion in Australia and New Zealand. Currently Shaver Shop is only about 3% of that. While its store network in Australia is quite mature, with limited opportunities for new locations, there is still a big opportunity with online. In New Zealand, there are more opportunities to expand the store network if suitable locations can be found.

Its position is reinforced by the fact that it offers many exclusive products. 50% of sales come from these exclusive products and this generates 60% of gross profits. It also ranks highly on customer service metrics.

The board has a lot of retail experience with some industry veterans. CEO and Managing Director Cameron Fox has held the position since 2008 after joining Shaver Shop in 2006. This deep retail experience is reflected in the company’s culture.

Of course, sales growth is only part of the equation. Success requires that sales translate into profits and on that front, Shaver Shop is also doing well.

Its gross margins are approximately 44% and it generates a return on equity of 23%. Profits fell slightly in 2022, but are well up from pre-pandemic levels and remain strong with a net profit margin of 7.5%. It pays generous dividends that are fully franked and currently trades on a high dividend yield of 8.5%.

The balance sheet is strong with no debt, cash of $9.4 million and growing shareholders’ equity. Cash generation is very strong.

With a market cap of $146 million, Shaver Shop is considered a micro-cap stock. About 38% of the shares are closely held by key investors, which means that the level of liquidity in the stock is lower. This tends to hold the stock price up a bit and it only trades on a PE ratio of 8.9.

Given the high dividends, solid track record of sales growth and profitability, it could benefit from a market revaluation at some point. Otherwise, the dividends should still provide a pretty decent yield.

Disclaimer: Parties related to the author hold stakes in SSG

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