Whether it be sport, business, investing or entertainment – we love a story of success in the face of adversity.

Take Leicester City Football Club’s improbable Premier League title win in the 2015-2016 season as a prime example of winning against all odds.

Leicester’s triumph of perseverance and determination in the face of seemingly insurmountable challenges. Leicester’s team defied the dominant football giants with far greater financial resources to find themselves at the top of the league after it was nearly relegated the previous season.

The club was a 5000–1 underdog with bookmakers to win the division before the season kicked off. Leicester’s success wasn’t about revolutionary tactics; instead, they focused on getting the basics right, exploiting their opponents’ weaknesses, and benefiting from a touch of luck along the way. The club persisted in the face of challenges and went all the way.

Just as Leicester City Football Club rose from the brink of relegation to clinch the Premier League title, some ASX retail companies have similarly rebounded from being written off to thriving in a competitive market. These companies, once deemed as playing in a less attractive space, have shown resilience and adaptability, turning challenges into opportunities for growth.

We’ve recently discussed the resilience of ASX listed retail businesses despite facing significant headwinds and floated the idea of shopping for retail stocks back in October 2023.

We take a look at two TAMIM holdings that continue to defy the odds.

Kogan (ASX: KGN) is a multifaceted entity encompassing a diverse range of retail and service businesses, including Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Money, Kogan Energy, Dick Smith, Matt Blatt, Mighty Ape and Brosa.

With a primary focus on the Australian and New Zealand markets, Kogan generates the majority of its revenue and profit through the sale of goods and services. The company’s offerings span exclusive brand products, sourced from Kogan’s own labels, and third-party brands products, sourced from internationally recognised brands like Apple (NASDAQ: AAPL), Canon, Swann, and Samsung. Additionally, Kogan generates revenue through seller fees from its marketplace, commission-based earnings from verticals such as Kogan Mobile and Kogan Insurance, and advertising fees from its Advertising Platform launched in August 2023.

Kogan has recently moved to shift its business model away from a traditional online retailer.

The greater emphasis on Platform-based Sales led to Kogan FIRST and Kogan Verticals experiencing substantial growth, contributing to 63% of Platform-based Sales. This change signifies a move toward a capital-light, higher-margin business model, with a focus on recurring revenue streams. In FY23, the majority of Kogan’s Gross Sales and Gross Profit stemmed from subscription, platform, and software-based sales, offering enhanced profitability and reduced risk compared to traditional inventory-based divisions.

Despite a 9.9% decline in revenue to $248 million for the six months ending 31 December 2023, Kogan experienced significant growth in Kogan Verticals (25.6%), Kogan FIRST (109.7%) and Advertising Income (75.7%).

The Group’s profitability improved, driven by the increased contribution of Platform-based Sales, totalling 63% of sales. Additionally, the reduction in surplus inventory at the end of FY23 bolstered the profitability of the Product Division. The company implemented cost-saving initiatives, reducing total Operating Costs across the Group by 18.4%, including logistics network consolidation and renegotiation of service contracts.

The outcome of these improvements led to Kogan reporting a statutory profit after tax of $8.7 million.

Kogan adjusts for non-cash equity-based compensation and unrealised losses on forward foreign exchange contracts with its adjusted profit settling at $10.2 million. In management’s view a better reflection of the underlying performance of the business. With a robust balance sheet supported by $83.3 million in cash and no external debt, Kogan remains well-positioned for growth. The company’s commitment to a capital-light business model is evident in the reduction of inventory by 30.6%, showcasing its ongoing evolution and adaptability in the retail landscape.

Universal Store Holdings (ASX: UNI) owns a portfolio of premium youth fashion brands and omni-channel retail and wholesale businesses.

The Company’s principal businesses are Universal Store, CTC (trading the THRILLS and Worship brands) and the emerging Perfect Stranger retail concept. With a large retail presence comprising 100 physical stores across Australia complemented by online channels, Universal Store Holdings caters to the discerning fashion tastes of the 16-35-year-old demographic.

In the aftermath of COVID-19, Universal Store Holdings has witnessed a resurgence in consumer activity, reflecting a pent-up demand for social interaction and in-store experiences.

However, as the year unfolded, mounting cost-of-living pressures prompted a shift in consumer behaviour, with a focus on essential expenditures. The youth fashion consumer, previously shielded, grappled with rising interest rates and inflated rental costs, fostering a more cautious shopping approach.

Despite these challenges, Universal Store Holdings remains steadfast in its commitment to growth, delineating a strategic roadmap focused on expanding physical store networks, enhancing product differentiation, and fortifying customer service. Furthermore, the company emphasises sustainability in product sourcing and supply chain operations, alongside investments in technology to enhance operational efficiency.

As mentioned, Universal is focused on three key areas:

Universal Store
Founded in 1999, Universal Store has evolved into a brand aggregator representing over 50 premier labels, offering the latest in youth fashion trends. With a significant portion of sales derived from private brands and sister businesses like THRILLS, Universal Store caters to diverse fashion sensibilities, curating outfits for various occasions. As of December 2023, the brand operates 79 stores nationwide.

THRILLS
Established in 2013, THRILLS has cemented its position as a culture-defining fashion label, offering a range of casual wear for both men and women. The brand was acquired and the purchase was finalised at the end of October 2022 with its brand characterised by high-quality garments and vintage-inspired designs, THRILLS operates ten standalone stores, in addition to a vibrant wholesale channel.

Perfect Stranger
Introduced in 2014, Perfect Stranger caters to the fashion-forward woman, offering a range of on-trend pieces distinguished by cohesive collections and accessible price points. With eleven standalone stores as of December 2023, Perfect Stranger embodies boutique retail experiences tailored to contemporary tastes.

Universal produced a resilient first half result for FY24.

Group sales increased 8.5% to $158 million compared to the prior corresponding period. Notably, Universal Store witnessed a marginal decline in sales, offset by significant growth in Perfect Stranger and CTC sales. The company saw underlying operating profit (EBIT) of $30.8 million, an 8.1% increase while net profit after tax was $20.7 million, a 16.7% increase on the first half of 2023. Despite inflationary pressures gross margins improved by 80 basis points supported by the CTC brands.

Universal maintained a strong cash position of $42.3 million at period end, and net cash of $27.4 million. The company was able to absorb the CTC acquisition payment and pay a dividend of $0.165 comfortably from its operating cash flow.

Looking ahead, Universal Store Holdings anticipates continued growth momentum, with plans to open additional Universal Stores, Perfect Stranger, and THRILLS outlets by June 2024. With a strong cash position and a focus on prudent financial management, the company remains poised to capitalise on emerging opportunities in the dynamic youth fashion landscape.

The narratives of Kogan and Universal Store Holdings Limited underscore a profound resilience and adaptability in the face of formidable challenges.

These retailers continue to defy the odds navigating economic uncertainties through strategic shifts and steadfast commitment to innovation. They have not only weathered the storms of changing market dynamics but also continued to thrive and grow. In the ever-evolving landscape of retail, their stories serve as beacons of inspiration, demonstrating that with perseverance and strategic vision, success can indeed be achieved against all odds.