15 Mar, 2018
Landlord deal in the bag for Oroton
The Age
The Age

Within two weeks the fate of one of Australia’s oldest retailers, Oroton, will be decided but it is safe to say the top end handbag and accessories chain appears to have been saved.
In the end it was not a voluntary administrator, or it’s largest creditor and would-be owner Will Vicars that determined its fate. It is a bunch of retail landlords that have worked out that taking a haircut on rent is safer than the risk of finding a new tenant to occupy almost 60 stores.

While the uber landlords like the big real estate investment trusts insist they won’t engage in bargaining with tenants and will simply replace them with another retailer, the extent to which these words are realistic or bravado remains to be seen.
This week the chief executive of Scentre, Peter Allen - the owner of Westfield Malls in Australia - briefed media with fighting words.
He took a tough line in response to fashion and food retailers who have come under pressure from failing business models, changing consumer sentiment and the impact of online shopping.

"It's pretty often that retailers want to try to take advantage of the situation to try to get cheaper rents," he said.
To be fair, Oroton would probably never been able to pull off getting out of onerous property leases without the cover provided by company administration. For the administrators and for Vicars, who is the major creditor and will become the owner of the business, it was binary - if the rents were not cheaper the business wouldn’t survive.

(The situation has much in common with Ten Network whose business laboured under onerous program contracts which administration enabled it to escape.)
Vicars was previously a major shareholder and became the major creditor but will in effect swap the $35 million he is owed for ownership of 100 per cent of the business.
He has also established his credentials over the years as a tough negotiator. He acted for Gretel Packer when she went up against her brother James to sort out the spoils of the family estate.
The Oroton outcome is one that will be closely watched by the many retailers that have formed a conga line to the doors of retail landlords to beg for rent relief.
Some like Solomon Lew’s Premier Investments have been through the process and come out the other end after closing about 85 stores over the past five years. And he hasn’t let up on threats to close more if landlords won’t cut rents.
Franchisor Retail Food Group, which owns the Brumby's, Donut King, Gloria Jeans and Michel's Patisseries chains, will shut as many as 200 stores.
And last week there were unconfirmed reports that the troubled Specialty Fashion Group had done a deal with one of its landlords, Scentre, to cut rents by 20 per cent.
Vicars was looking for rent reductions of 40 per cent - whether he achieved this outcome has been a well guarded secret.
Barring an outside contender coming to make a last minute offer, the deal is in the bag for the Vicars-led bailout of Oroton.
Vicars has already been declared preferred bidder by the voluntary administrator Deloitte Restructuring Services' Glen Kanevsky and Vaughan Strawbridge who were appointed late last year after Oroton’s corporate adviser Moelis ran a six-month sale process with no takers, and there was no support for an equity issue.
A fair chunk of landlords have agreed to voting in favour at the upcoming creditors' meeting, and while some will vote against, others will abstain.
Oroton has closed three out of its 62 stores since being placed into voluntary administration in November - which points to it achieving a good outcome on rent negotiations.
However, it is understood that as lease contracts roll off on other stores some may not be renewed.
Vicars was looking to have rents slashed by up to 40 per cent on some sites, but for better performing stores the reductions achieved are said to have been smaller.
One thing seems sure - Oroton will remain in private hands and not look to equity markets to house the business.
Former Cue Clothing Company chief executive David Kesby, who has been recently acting as a consultant to Oroton, looks set the be appointed to the new board once the administration is lifted.

15 Mar, 2018
Why mega-malls are defying the downward trend
Drapers Online

Why mega-malls are defying the downward trend

The store is dead, many doomsayers have declared in recent years. However, a visit to Westfield Stratford City or Westfield London, Bluewater, Intu Trafford Centre and their ilk would pour scorn over those claims.

The so-called mega malls are thriving. Retail analyst Globaldata predicts sales at large-scale shopping centres will grow by 7.2% over the next five years, outpacing other bricks-and-mortar retail locations, which have forecast growth of 5%.

At a time when many retailers are closing stores, why are mega-malls still so popular?

“I put it down to a divergence of the good becoming better and the weak becoming weaker,” says Ann Summersproperty asset manager Graham Seaton. “The experience you get at some of these mega-centres is pretty special.”

In fact, a mere presence in some of these bigger centres can help build brand equity, says Harper Dennis Hobbs head of retail consultancy Jonathan De Mello. This also makes them popular with overseas retailers: “Opening in such locations allows them to market their brands more effectively across the piece. It typically drives a halo effect for online and wholesale.”

De Mello says some big international brands are opting to only open in key cities and mega-malls, while relying on online for a significant portion of their sales, because online is “such a profit maker” once brand equity is achieved.

Size alone does not make these super-malls thriving destinations. Sarah Mander, assistant director, retail leasing at developer Hammerson, says consumers are now looking for experiences when they go to these centres.

This is something Philip Lunn, co-founder of developer Lateral Property Group, is keen to deliver in his new Axiom scheme, which is scheduled to open in Castleford, West Yorkshire, in 2021. The UK’s biggest new out-of-town shopping centre since Bluewater opened in 1999 will house more than 75 retail, restaurant and leisure units. Marks & Spencer, Next and Primark have already signed up at the 600,000 sq ft scheme.

Lunn refers to Axiom as a “shopping resort” and has taken inspiration from the experience-driven retail malls in the Middle East and US.

“Customers want more,” he says. “They want leisure, they want ski slopes, they want experiences. They want a family day out where the kids are going to have fun. You’re not just dragging them around the shops.”

Lunn promises “really cool stuff” at Axiom, which he describes as a shopping centre for the “Instagram generation”. This includes “dancing fountains” and a sizeable events space. The site also benefits from being next door to Xscape Yorkshire, one of the UK’s largest indoor ski slopes.

15 Mar, 2018
Myer in class action mediation as Premier Investments ramps up pressure
Financial Review

As activist investor Solomon Lew prepares his next attack, Myer has been given two months to settle a multimillion-dollar class action from shareholders who claim they lost money when the department store chain missed profit forecasts in 2015.

The Federal Court has ordered Myer and TPT Patrol into mediation, giving the two parties until May 18 to settle the case or go to trial. A three-week hearing has been set down for August.

TPT Patrol is trustee for the Amies Superannuation Fund and launched the class action in December 2016, alleging shareholders suffered loss and damage because of statements made by Myer regarding its 2014 full-year results.

TPT Patrol has alleged that Myer engaged in misleading or deceptive conduct and failed to abide by its continuous disclosure obligations by providing profit guidance without a reasonable basis and by failing to inform the market about information that had a material impact on the value of its shares.

The class action covers shareholders who bought Myer shares on or after September 11, 2014, and held those shares until March 19, 2015.

On September 11, former Myer chief executive Bernie Brookes said he expected Myer's profit in 2015 to exceed the $98.5 million earned in 2014. On March 19, Mr Brookes revealed that profits were expected to fall as much as 24 per cent to between $75 million and $80 million.

Myer shares fell 20¢ on the day to $1.28 and are now trading at record lows around 41.5¢ following three profit downgrades over the last 12 months.

Myer's former chief executive Richard Umbers warned last month that first-half net profit would fall as much as 41 per cent to between $37 million and $41 million following an unprecedented 6.5 per cent drop in sales during the January clearance sales.

A week later Mr Umbers was shown the door by new chairman Garry Hounsell, who has been appointed executive chairman while the company hunts for a new chief executive.

Stake's value plunges
Myer faces more legal action if its largest shareholder, Solomon Lew's Premier Investments, follows through with threats to take the department store chain to court for misleading shareholders about its prospects last year.

Premier bought a 10.8 per cent stake in Myer last March for $101 million, or $1.15 a share, and has seen the value of its stake fall by more than $60 million.

The losses, worth about 40¢ per Premier share, will cloud Premier's first-half results, which are due to be released on Friday.

Citigroup analysts expect Premier's sales to rise 7.7 per cent to $634 million and retail earnings to rise 9.4 per cent to $102 million, with strong growth from Smiggle and Peter Alexander expected to offset a 16 per cent decline in earnings from the mature clothing brands – Portmans, Dotti, Jacqui E, Just Jeans and Jay Jays.

Citigroup analyst Bryan Raymond said Premier shareholders would be looking for more detail about Premier's strategy for its investment in Myer.

"Premier intends to be an activist investor in Myer rather than a potential acquirer in the near term," he said.

Mr Lew is expected to use the results announcement to ramp up his campaign for an extraordinary general meeting to oust the entire Myer board and seek the appointment of three of its own nominees.

Mr Lew claimed last month that Myer was in "peril" and needed a totally new board in order to have any sustainable future.

"It is time for all Myer shareholders to unite to save their company," he said.

15 Mar, 2018
Kikki.K to accelerate global growth
Inside Retail

Swedish stationery brand Kikki.K has partnered with product development and design industry leader, Gartner Studios, to accelerate its growth across the USA and Canada.

The retailer is currently housed at 78 Nordstrom stores in the USA and 81 Indigo stores in Canada, with the deal with Gartner to fuel its ambitions of opening an additional 400 wholesale doors across the globe by the end of 2018 and over 3000 wholesale doors over the coming years.

Kikki.K’s partnership with Gartner will ‘simplify and systemise the USA and Canadian product offering and distribution’ for both wholesale and direct to consumer e-commerce fulfilment.

“I’ve dreamt of seeing kikki.K products in the lives of people across the USA & Canada since the very beginning,” said the stationery firm’s founder Kristina Karlsson.

“We made that dream a reality with our online store and then our launch in Nordstrom and Indigo in 2017. I’m so excited we’ve now partnered with Gartner Studios to help introduce our brand to even more of the USA and Canada.”

14 Mar, 2018
Retailing behemoth Zara launches its Australian online store on Wednesday
Screenshot/ Zara

Zara is launching an online store in Australia.
Domestic online sales account for more than half of total retail sales growth in Australia.
This post will be updated once the store is live.

Spanish fast-fashion retailer Zara will launch its online store in Australia tomorrow, March 14.

The local website has been replaced with the simple message “Dear Australia, shop online March 14″ in the lead up to the event.

It’s been seven years since Zara launched in Australia, going on to establish 15 Zara fashion stores nationally and two separate Zara Home outlets, although in recent months, the brand has reportedly been in discussions about closing poor performing outlets.

The local online retail market is currently led by The Iconic, however Zara newest offering could change that. It’s also expected to be another blow for bricks and mortar brands already losing the battle to online merchants.

While Australian retail sales have been pretty weak recently, increasing by just 2.1% in the year to January, continuing the deceleration seen in the past few years, domestic online sales are currently growing at 32% per annum and account for more than half of total retail sales growth in Australia.

“A year ago the share was half that, and two years ago it was less than 10%,” says Macquarie Bank.

“If you needed a statistic to summarise the disruption currently occurring in Australian retail, it is this.”

Zara has also been trialing a number of digital shopping strategies in other international markets, including a pop-up store for click-and-collect orders in London.

It has more than 2200 stores around the world and rakes in $US9 billion in revenue each year.

This post will be updated once the store is live.

13 Mar, 2018
OrotonGroup shareholder's rescue deal due this week
Financial Review

Former Cue Clothing Company chief executive David Kesby could be appointed to the new board of troubled accessories retailer OrotonGroup under a rescue plan led by fund manager Will Vicars.

Mr Kesby has been advising OrotonGroup on its retail and property strategy since it collapsed last November owing about $40 million to creditors.

Mr Kesby could not be contacted on Monday, but it is understood he may be invited to join a new board created as part of a deed of company arrangement and privatisation proposal put forward by Mr Vicars, the chief investment officer of Caledonia Funds Management.

Mr Kesby was chief executive of Cue, one of Australia's most successful home-grown fashion labels, for almost 23 years until he resigned in July 2015 to become a retail consultant.

Mr Vicars, who was OrotonGroup's second largest shareholder and a major creditor, has been working on the DOCA since being named the preferred bidder by the administrator, Deloitte director Vaughan Strawbridge, on December 23.

Mr Vicars owned 18 per cent of OrotonGroup and had been under pressure from shareholders to privatise the company. He made a last-minute offer after a six-month sale process run by the company's adviser Moelis failed to generate firm bids.

Mr Vicars and his advisers have been in negotiations with almost 20 landlords seeking rent reductions of as much as 40 per cent to avoid having to close more of OrotonGroup's 50-odd remaining stores.

Two Oroton stores in Sydney's Pitt Street Mall and Macarthur Central in the Brisbane CBD closed in January.

OrotonGroup is understood to have had mixed success in the rent negotiations, with larger landlords such as Scentre Group and Vicinity baulking at major reductions and smaller landlords more supportive.

However, it is understood that most of the landlords are in favour of the Vicars rescue plan and no more stores will be closed.

Mr Strawbridge said on Monday he expected to receive the final DOCA proposal and complete his second report to creditors this week.

"The DOCA is very close to being received," Mr Strawbridge said. "Once we've received that we'll be able to call the second [creditors] meeting this month."

Once creditors vote on the DOCA an application will be made to the courts to privatise the company.

It is understood that while Mr Vicars is putting together a new board of directors, Oroton's senior management team will remain largely intact, although the future of interim managing director and major shareholder Ross Lane is unclear.

The Lane family's stake had been whittled down from more than 55 per cent to 21 per cent over the last few years and is now effectively worthless.

OrotonGroup came close to collapse in June when lender Westpac baulked at extending debt facilities until Mr Vicars put up $3 million in credit support.

The future of Mr Vicars' put and call option with Westpac over $35 million in working capital and overdraft facilities rests on the outcome of the voluntary administration process.

12 Mar, 2018

HOUSE_STORE_FRONTHomewares and kitchen retailer House will launch its first four stores in the UK next month, with six more locations to open before the end of June.

Parent company Global Retail Brands (GRB) has set its sights on opening 75 stores over the next three years.

Established in Australia in 1978 with a current store network of 170 stores throughout Australia, House’s first UK store will launch at Westgate in Oxford, followed by Meadowhall in Sheffield.

House will also launch an online store in April.

Steven Lew – founder & executive chairman of GRB – said the retailer’s team are “obsessed with everything that is cooking, dining and entertaining.”

“We love launching new brands and being the first to market for our loyal customers,” he said.

The specialty retailer holds up to 4,000 products in its stores and up to 10,000 products online – including cookware, glassware, kitchen gadgets, small electrical appliances, knives and linens

“We are also excited to reveal that we have won the exclusive rights to launch a number of international brands into the UK that are not yet available here,” said Lew.

House will be the latest in a growing number of Aussie retailer expanding into to the UK, including Wesfarmers-owned Bunnings, Typo, Kikki.K, Honey Birdette and Lovisa.

Lew, son of Premier Investments chairman and retail veteran Solomon Lew, is being advised by consultants MMX retail, who is also assisting Premier on its Smiggle UK expansion.

“The House concept has been exceptionally well received since we announced the intended UK launch last Autumn,” said Nick Symons, partner at MMX Retail

“The quality of their store fit-out and their product ranges, combined with strength of the staff, has impressed all the major shopping centre owners and their advisers.

“Landlords have realised that House provides a very different proposition for the customer, with a true omnichannel experience – demonstrating that physical stores combined with a quality online presence, can enhance the overall customer experience and the success of the business.

9 Mar, 2018
Online shopping shifts into second gear as retailers up their game
The Age
Photo: Jim Rice

New research by Australia Post based on parcel delivery volumes estimates that total e-commerce spending on physical goods grew 19.2 per cent in 2017 to $21.3 billion.
That rate of growth had accelerated from 2016, when it ticked up by 11.5 per cent.
Australia Post's general manager of eCommerce and International, Ben Franzi, said that while lower prices, access to a wider range of products and convenience were the major factors for people shopping online, retailers were contributing to its popularity by improving their service.

"Retailers are also investing in making the online shopping experience more seamless, particularly with making returns more convenient, which is also encouraging more people to buy online," Mr Franzi said.

Australian retailers account for about 70 per cent of all online shopping, he said.
Clothing and fashion was a key driver of e-commerce growth, increasing 27.2 per cent last year after growing 16.7 per cent in 2016, Australia Post said.

"We expect that growth to continue as the market matures," Mr Franzi said.
American e-commerce giant Amazon opened its Australian operations in December, with the expectation that would accelerate consumers' shift online.

National Australia Bank research released this week showed online retail sales increased 14 per cent in January compared to the same month last year.
The Australian Bureau of Statistics released on Tuesday estimated that online sales accounted for 4.7 per cent of total retail turnover in January compared to 3.6 per cent in January 2017.

NAB's data, crunched with analytics firm Qantium, suggests Australians spent around $24.7 billion online in the 12 months to January, which would equate to almost 8 per cent of the spending at bricks and mortar retailers.

In good news for Myer and David Jones as they try to pivot their businesses towards e-commerce, department stores saw had the best online growth in January, jumping 21 per cent compared to 12.6 per cent growth last January, NAB said.
The toys and games category grew at the same rate, compared to 15.3 per cent last year.
Australia Post's research also highlights the impact of online shopping events, with stand-out growth in May when Click Frenzy is held, growing 9.6 per cent month-on-month growth in 2016 and 32.2 per cent in 2017.

For November, when there is another Click Frenzy event, and last year local retailers embraced Black Friday and Cyber Monday promotions, sales grew 16 per cent month-on-month in 2016 and 18.7 per cent in 2017.

The ABS revealed total retail sales grew 0.1 per cent on a seasonally adjusted basis, below the economists' consensus forecast of 0.4 per cent. It followed a 0.5 per cent fall in December.

On a year-on-year basis sales grew 2.3 per cent in January, which was better than December's 1.6 per cent but still below the 12 month average of 2.6 per cent.
Maquarie researchers said domestic online sales growth now accounted for more than half of the total growth in retail.

"If you needed a statistic to summarise the disruption currently occurring in Australian retail, it is this," Maquarie said in a note to clients.
"A year ago the share was half that, and two years ago it was less than 10 per cent."

9 Mar, 2018
Why 'stepping up is the only way to win' for John Lewis
Drapers Online

Sir Charlie Mayfield (below), chairman of John Lewis Partnership, said the business will continue to invest and “step up” to the challenging market, as restructuring and redundancy costs hit full-year profits at the group.

Profits before bonus and tax at John Lewis Partnership – which includes supermarket Waitrose – fell 62.7% for the year to 27 January compared with 2016/17.

Restructuring and redundancy costs at the business totalled £72.8m for the year. In February 2017 John Lewis placed 773 members of staff in consultation as part of a restructuring. It created 386 new jobs for those affected, resulting in a total reduction of 387 jobs.

Gross sales at the partnership were up 2% for the year, and partners received bonuses of 5% of their salaries, totalling £74m.

Speaking today at a press conference following the results announcement, Mayfield said that last year had been “challenging as anticipated”, and added that 2018 would be no easier: “Trading will continue to be volatile, and there will be no let up from the competition.”

He added that the business needed to face the difficult environment head on: “We expect there to be continuing pressure on profits. This is no time for a defensive crouch. Our game plan is to step up to these challenges – that’s the only way to win.

“Our level of investment is 20% higher on average than our competitors. Last year was about heavy lifting. Internally this year, we will focus more on the customer and on innovation.”

Mayfield said the business has 5% fewer members of staff than it had last year, and he expects this to drop further: “These numbers will continue to decline. We’re moving staff on to longer contracted hours, so there will be fewer people, but they will be working longer. We’re also investing in staff and developing their careers. “

He added: “Technology is another factor that will affect the workplace, and it isn’t being factored in by a lot of other retailers. The level of displacement in the workplace is greater than we’ve ever seen before, so we’re trying to prepare for that.”

Lower gross margins at Waitrose – driven primarily by weaker sterling – contributed to a 21.9% drop in profits before partnership bonus, tax and exceptional items at the wider group to £289.2m.

However, John Lewis fared better. Gross sales at the department store were up 2.2% to £4.8bn for the year, while operating profit before exceptional items was up 4.5% to £254.2m. Like-for-like sales edged up by 0.4%.

Managing director Paula Nickolds said John Lewis had a “strong performance in very challenging conditions”: “We outperformed the market and increased market share in all three departments [fashion, home and electricals]. We aim to delight and inspire with our in-store experience. Shoppers are looking to do everything in store. It was a strong year for John Lewis against a backdrop that is anything but benign.”

Fashion sales at the retailer were up 3.2%, boosted by a “particularly strong” performance across womenswear, which was up 5%. Own-brand womenswear was up 15% on the year to January 2017.

Own-brand and exclusive product now accounts for 35% of the fashion sales mix, and John Lewis wants to boost this to 50%.

To grow and develop the own-brand offer, John Lewis is recruiting for 80 new roles across its design and buying departments, in an “unprecedented investment” for the retailer.

The retailer will be hiring designers, technologists and brand managers. There will be a 70% increase in technologists and a 50% increase in the number of designers in the business as a result.

“There is a desire to create our own products that are targeted at our customers,” said Nickolds. “We need our own perspective.”

2 Mar, 2018
Lush bags top honour at Retailer Awards
Inside Retail Awards Night

Lush Cosmetics has won Inside Retail’s customer experience innovation of the year award for large businesses at the annual Retailer Awards Gala in Melbourne on Thursday night.

The politically-engaged cosmetics brand also bagged the in-store customer experience of the year award, being recognised by judges for its investment in customer service and ability to draw in customers around community initiatives.

“Thanks to our customers for the support you’ve given us over the years. Customers want to choose the kind of world they want to live in when they open their wallets, so please continue to shop consciously,” Lush Australia director Peta Granger told an audience of 500 industry professionals.

“Businesses can use their influence to stand up against hard right politics.”

Lush came out on top of a group of large retail businesses to win the award, demonstrating excellence in 10 different categories judged by a panel of six industry experts, including former Target and Big W chief executive Launa Inman and former Co-op CEO Peter Knock.

Another winner on Thursday night was Prezzee Digital Gift Cards, which took home the customer experience innovation of the year award for small/medium business, the customer initiative of the year award, and the online customer experience of the year award.

Prezzee, an online store that sells other retailers’ gift cards, was recognised for shaking up the gift card industry by bringing the time-tested product into the digital world.

“It’s been a huge year for Prezzee and its going to be an even bigger year this year, thanks to all the team and all our partners,” Prezzee said.

Other winners included Patagonia Australia, Winning Group as well as Super Retail Group brands Rebel and Supercheap Auto.

Full list of 2018 Retailer Awards winners:

Lush Fresh Handmade Cosmetics – Customer Experience Innovation of the Year for Large Businesses
Prezzee Digital Gift Cards – Customer Experience Innovation of the Year for Small or Medium Businesses
Patagonia Australia – Corporate Social Responsibility Initiative of the Year Award
Appliances Online – Customer Excellence, Team of the Year
Prezzee Digital Gift Cards – Customer Initiative of the Year Award
Lush Fresh Handmade Cosmetics – In-Store Customer Experience of the Year Award
Winning Appliances – Innovative Store Design of the Year
Rebel Project Choice & Super Cheap Auto (tied) – Omni Channel Initiative of the Year Award
Prezzee Digital Gift Cards – Online Customer Experience of the Year Award
Sustainable Focus – Retail Supplier of the Year Award
“We’re very proud to have this award, there was a lot of blood sweat and tears that went into our store in Fortitude Valley – thanks to our marketing team, operations guys, buying team – thanks to the guys who make it work every day, our in-store team,” Winning Appliances said.

Inside Retail editor and awards judge Jo-Anne Hui Miller said that she felt the standard of entries was higher this year.

“Retailers are striving to create better online experiences for customers, especially in terms of returns and speed of delivery,” she said.

2 Mar, 2018

A new name, new CFO and a hub dedicated to eCommerce. That’s what 2018 looks like for Accent Group Limited.

Last year, the company completed the acquisition and integration of the Hype DC business. As such, it consolidated and rebranded itself from RCG Corporation to the Accent Group moniker.

Co-CEO Daniel Agostinelli says while RCG had been a great vehicle for the company, customer data pointed to the Accent name as more recognisable.

“The majority of the business today comes out what is in effect Accent retail. We felt that given that Accent is a name that’s also very well established in the footwear space, with brand principles, that we should name the company Accent Group.”

The move will also see the appointment of a new CFO in February 2018, or even earlier.

Matt Durban will take over from Michael Hirschowitz, relocating to be closer to the major businesses.

“The organisation is much bigger in Melbourne given that the hype of Platypus businesses are all housed in the Melbourne office,” Agostinelli says.

“We will keep some Sydney operations going and we actually feel that it strengthens our position, to have some key management in both markets.”

At the core of the company’s strategy for 2018 is eCommerce, more specifically a new digital hub located in Melbourne. The hub will employ up to 25 people, acting as a digital retail ‘trading floor’.

Agostinelli says Accent Group needs a continuous flow of data and information to capitalise on eCommerce spending.

“ At any one time, you’ll know what Platypus has sold, where it’s sold it, what size the shoe was, what’s trending and that goes for all of our sites. Essentially all of our sites will be online in the new year.

“About 15% of Australian footwear is online and we are not anywhere near that number yet, so we see major growth here for our business.

“The numbers we’re talking about are fairly strong and the reason we built the digital hub is to ensure that we can actually capture those sales correctly and efficiently rather than just trying to capture them.

“The general plan for us to have a much greater share than we have today of the online space for branded footwear.”

The hub also has a dedicated marketing team of three people who use the data to better understand and develop the best marketing tolls to drive sales.

Consistent day-to-day reviews on the data collected from the hub will influence where money is spent, the type of Google SEO investment and the types and frequencies of EDMs.

Agostinelli says the hub has already yielded results that will influence company strategy in 2018, identifying the growing demand for click-and-collect among its brands.

“In terms of what it’s identified, it’s certainly identified that it’s a much bigger market than we expected and it’s also allowed us to turn on things such as click-and-collect, click-and-despatch and that effectively allows us to open up our whole inventory catalogue to the whole market.

“If you run out of a shoe in one store, well, store 80 may have it and they will send it to you from that location same day. So, it’s amazing how fast technology is moving and what can be done these days to what couldn’t be done five years ago.”

In 2018, Accent Group will also look to complete the conversion of its entire ‘The Athlete’s Foot’ store network to the new performance store format.

This year, this conversion process, coupled with other factors, saw EBITDA for the brand fall by 8%.
Agostinelli says the company hopes to have the fitout of the entire 40 store network completed by June 30.

“The conversion is not complete. By June 30th, we should be at about 40 stores. You can imagine that we can’t refit stores unless we’ve got brand new leases, so that’s where we’re at now.

“The current stores, from our point of view, certainly look fresher and more with today’s environment and that’s allowed us to be very strong in areas that we tend to own in this space.

“From that point of view, we’ve got a good, new robust team and make things happen, but it’s fair to say it’s been a tough market.”

The company will also decentralise the brand’s online store in February/March. What this means for franchisee partners is that they will now be able to get the entirety of a sale made online.

For the Platypus brand, know as ‘the jewel in the crown’, retail expansion remains on the horizon in the new year.

Agostinelli says the he wants to see the current footprint grow from 90 to 110-120 stores this year across Australia and New Zealand.

He believes the expansion will be supported strong eCommerce growth, with sales in 2017 growing by four times compared to years prior.

“Platypus is simply going to grow into more stores. You know, every time you think you’re almost getting shorter, you end up doing a couple of things.

“We’re still finding a lot of areas that Platypus can operate, that we certainly haven’t explored to date, and our thinking is that in ‘18/’19, we will continue to do that.”

Conversely, Agostinelli says the newly adopted Hype DC brand will slow the growth in store numbers and shift focus to overall store size.

“We may move from any 100 square metre squares today – if we were going to renew, we’d need to be 250 square metres.

“We’re through with playing the game of who’s got the most stores, it’s who’s got the most profitable and relevant stores.

That’s where we think Hype will play in the future and they
will certainly be much more elevated than they are today.

“Having said that, the last quarter has seen a great turnaround on all things Hype. We’ve put a brand-new computer system in, being Apparel 21, which now fits with the rest of the Accent Group businesses, and that’s made things much more efficient for us.

“You can imagine putting a new system in the 60 stores is no easy feat, but we’ve done that. We’ve strengthened payroll, we’ve strengthened all our systems which will allow us to take the next step for that business.”

As part of that change, the company will also look to shift its pricing for the Hype DC brand.

Agostinelli believes the business can tap into the growing market of consumers looking to buy higher-end sneakers.

“That’s sort of where we see Hype fitting, a much broader elevated seller of higher-end sneakers and better quality sneakers with higher price point so, in effect, the more ‘sneaker freaker’ type guy.

“Well, Hype DC can get $180-$200 very easily compared to Platypus which really operates in that $140-$150 area.”

The final piece of the 2018 puzzle? Amazon. Agostinelli says that while the company knows it will have an impact, it has put the wheels in motion to combat the retail giant.

“Anyone who’s not afraid of Amazon would be a fool. From our point of view, they will take some sort of a bite from our industry, so we’re certainly not taking them lightly.

“Equally, we feel, particularly with our digital hub and our store presences and the brands we carry, that we’ve got enough ammunition to hold our own.

“They will do what they will do and, to us, it’s just going to be simply another competitor in the market.

“They have to win that battle and, so far, it doesn’t look like anyone’s supplying them. So, from our point of view, it’s just another competitor. That’s how we’re viewing it.”

2 Mar, 2018

Zara is launching an eCommerce site for the Australian market.

The fast fashion giant is set to celebrate the eCommerce launch with a private function at Sydney Opera House on March 13.

The brand has already unleashed a country-specific site - - with March 14 listed as the launch date.

Zara parent company Inditex is online in 45 of the 94 markets it operates in.

Inditex sales at its more than 7,500 stores and online increased 13 per cent at constant exchange rates between November 1 and Decemeber 11, 2017.

1 Mar, 2018
Caltex to take over franchises in convenience store revamp
A Caltex sign market the site of another of its convenience stores

For the past two years Julian Segal has presided over a rigorous evaluation of the potential for Caltex to launch a radically different strategy for its retail petrol network, a full-scale and innovative convenience store network. It’s been increasingly clear, as the evaluation and pilot program deepened, that the result was a foregone conclusion.

In announcing the group’s full-year results today (a typically solid performance, with replacement cost earnings up 18 per cent), Segal formally committed Caltex to a convenience store roll-out that will see Caltex take control of the near-500 outlets now operated by franchisees at a cost of $100 million to $120 million over the next three years to give it the ability to deliver a consistent consumer offer and experience.

It is typical of Caltex in the Segal era that the announcement will come as no surprise to anyone who follows the company. It has been well-flagged and well-tested, with an accelerating and expanding pilot program over the past two years that has seen its “Foodary’’ concept rolled out to 26 stores.

The pilot stores have produced “encouraging’’ results, with an average non-fuel sales uplift of 35 per cent and fuel volume growth of five per cent.

It is also typical of Caltex that it made a candid acknowledgement that the model hasn’t yet been perfected, with supply chain inefficiencies, cost-of-goods and better recruitment and training areas where there is scope for improvement.

To support the concept Caltex has already been busy, acquiring the Nashi sandwich and coffee retail chain and entering partnerships with a range of food and beverage brands. It says there has been strong customer acceptance of the fresh food and barista coffee offer but mixed performance from it services offer.

Segal is trying to grab a share of a large -- $8.3 billion – market for fresh food and beverages and services that is growing at between three and five per cent a year. Last year, Caltex says, it grew 4.5 per cent.

The interest in convenience is a response to the flat to declining trends for petrol volumes and margins and the opportunity provided by the network of 810 Caltex-branded stores.

The late-2016 announcement of BP’s proposed $1.8 billion acquisition of Woolworths’ retail network and a planned convenience joint venture along the lines of the very successful model BP has with Marks & Spencer in the UK and elsewhere wasn’t the catalyst for Caltex’s interest in the sector.

It was studying the potential of convenience well before that announcement, but the potential loss of about $150 million of earnings before interest and tax if BP displaced it as Woolworths’ supplier would have intensified its interest.

As it happens, the Australian Competition and Consumer Commission has declared it opposes the BP deal.

BP has yet to reveal its intentions but would have little to lose and much to gain if it were to challenge the commission’s stance. With BP not listed here and Woolworths’ earnings rebounding strongly there are no time or financial pressures on either company to produce an immediate definitive outcome.

Woolworths already has ambitions for its “Metro’’ convenience format but it was envisaged that the companies would completely re-make the convenience store supply chain for the BP sites, borrowing from BP’s successful experience with Marks & Spencer.

In the meantime, Caltex plans to transition its current network of 314 company-owned sites and 433 franchise sites to an entirely company-owned and operated network by mid-2020 and will launch between 50 and 60 of its new “Foodary’’ formats and between five and ten standalone “Nashi’’ sites this year, investing $100 million in the process.

The convenience store strategy is one element, albeit the big one, in a broader re-positioning of Caltex as it seeks to leverage its capabilities against the backdrop of the longterm adverse trends developing it its legacy businesses.

Last year it separated itself into two distinct business streams. One includes its fuels businesses and the infrastructure and supply chain that support it while the other is its petrol and convenience business, where it has aspirations of market leadership.

The new structure reflected a view that the cultures, systems and processes required for each stream – and the growth options -- were quite different.

It has made acquisitions in Australia and New Zealand to bulk up both streams and targeting regional expansion and growth in its trading operations with the fuels and infrastructure stream as it seeks to generate a growth overlay to its current core, generally regarded as exceptionally well-managed but with clouded growth potential.

Segal and his team have, in the nearly nine years since he became CEO, produced consistently strong performance and generated a lot of shareholder value while continually evolving both the group’s structure and strategies.

The scope for more significant and accelerating change was opened up three years ago when Chevron, after nearly 40 years as the dominant force on the Caltex register, sold its 50 per cent stake into the market.

While the growth strategies are being more evident and more ambitious, Caltex hasn’t lost its discipline. It said today it was undertaking an asset optimisation review which will investigate different ownership and operating models for its assets, including its real estate and infrastructure.

Those assets include the freehold for 417 retail service station sites, 18 fuel terminals, 65 fuel depots and five major pipelines.

Caltex said it was “well-progressed’’ in its review if the preferred ownership model and was working through the options that would deliver the next long-term value for shareholders, as measured by total shareholder returns. The review is expected to be completed by the end of the June quarter this year.

The review is the latest example of the quite relentless dynamic within the group, which continuously questions and reviews its structure and strategies through the prism of shareholder value through quite structured and well-resourced processes. There’s a lot of discipline to the way Caltex is managed and governed.

1 Mar, 2018
Can a new top team turn around House of Fraser?
House of Fraser

House of Fraser’s new chief executive, Alex Williamson, has been building his top team since his arrival at the department store chain in August.

The newest recruit, as Drapers revealed last week, is former managing director of Fenwick’s Bond Street flagship, David Walker-Smith, who is taking on the role of chief product and trading officer.

This followed the appointment last month of Reiss chief digital officer Simon Pickering as buying and merchandising director for clothing and accessories. Internally, Williamson promoted Gary Slattery, retail director since 2016, to executive director for retail, and Gary Monk, transformation director since 2017, to executive director for operations.

At the same time there were a slew of senior departures: Peter Gross, chief operating officer since 2008, chief information officer Julian Burnett, and executive product and trading director Maria Hollins.

Williamson is due to reveal his strategy for the ailing department store group next month, so does he now have the right team in place for a turnaround?

1 Mar, 2018
Macy's Posts First Sales Gain in Three YearsMacy's Posts First Sales Gain in Three Years
Macy's flagship store in Herald Square, New York | Source: Shutterstock

Macy’s Inc. posted a surprise sales gain last quarter and sees the momentum carrying into 2018, renewing investors’ optimism in the battered department-store chain.

Total comparable sales — a key benchmark — rose 1.4 percent in the fiscal fourth quarter, which includes the holiday season. Analysts had predicted a 0.6 percent decline. The shares surged as much as 13 percent in early trading after the results were posted.

The results mark a major milestone for the Cincinnati-based chain, which had suffered 11 straight quarters of comparable-sales declines. Chief Executive Officer Jeff Gennette, who took the helm at Macy’s last year, has vowed to bring shoppers back by opening more off-price locations, closing underperforming stores and reducing superfluous inventory.

The turnaround strategy now looks to be bearing fruit. The company expects comparable sales to range between the break-even point and 1 percent growth this year.

“We are encouraged to see a trend improvement in our brick-and-mortar business,” Gennette said in a statement Tuesday.

The stock climbed as high as $31.11 in premarket trading. Before the rally, the shares were up 9 percent this year.

Mall malaise

Fourth-quarter net sales amounted to $8.67 billion, matching analysts’ estimates. Excluding some items, profit was $2.82 a share in the period, which ended February 3.

Falling foot traffic at malls and a broader slump in apparel has waylaid the department-store industry for years. Shares of Macy’s plunged 30 percent in 2017 as investor pessimism deepened.

With the outlook brightening again, other department-store stocks also gained on Tuesday. Kohl’s Corp., Nordstrom Inc. and J.C. Penney Co. all rebounded in early trading.

1 Mar, 2018
Walmart Launches New Private-Label Clothing Brands
Source: Shutterstock

Walmart is launching new private-label clothing brands, a move its rivals Target and Amazon have made as well.

The world's largest retailer is unveiling four new lines for women, men and children with items from $5 to $30 that will be available Thursday. It's the most ambitious clothing launch in years for the Bentonville, Arkansas-based company, which is trying to shed its just-basics image and become a destination for trendier products from food to home design.

Walmart says the move comes in response to its customers' desire for more fashionable items like skinny jeans, ruffled clothes and bohemian looks.

"She wants understandable fashion," said Deanah Baker, senior vice president of apparel for Walmart's US division. "She wants to look smart and stylish. She doesn't need to walk down the runway."

Online leader Amazon and discount rival Target have also been building their own clothing brands, a move that helps boost profit margins because it eliminates the middleman and is exclusive to that retailer.

Amazon has moved deeper into fashion, offering its own labels like Lark + Ro that often sell for less than similar name-brand items. It started testing a subscription service last year called Prime Wardrobe, which lets customers try on clothes at home before they actually purchase them. And analysts at Cowen & Co. expect Amazon to pass Macy's as the largest US clothing seller, and boost its share of the US clothing market from 6.6 percent last year to more than 16 percent by 2021.

Target refreshed its clothing lines and saw its baby and children's brand Cat & Jack hit more than $2 billion in sales in its first year through last July. It also launched a home decor line called Pillowfort. This month, Target said it's testing a Cat & Jack subscription box for babies of six to seven items. The company has also been sprucing up its store displays to get shoppers inspired to buy.

Walmart, meanwhile, is refreshing its website this spring with a focus on fashion and home furnishings. Clothing and home goods accounted for 9 percent of its overall sales in the year that ended in January 2017, according to a Securities and Exchange Commission filing.

The retailer says its new Time and Tru clothing brand caters to women who want to pull looks together. Terra & Sky caters to plus-size women, while Wonder Nation is for children. The company is also relaunching its private brand George, which was from its British unit ASDA, to sell items only for men in the US.

To make room for the brands, Walmart is retiring such labels as White Stag and Faded Glory, and George's women's collection in the US. It's also upgrading store clothing departments with new signs and photography, and some locations will be remodeled with lower sight lines and upgraded fitting rooms.

Still, the launch is not without risks. Walmart launched a clothing collection called Metro 7 in 2005 aimed at the fashion-savvy, and even advertised the looks in Vogue. But it flopped with Walmart customers, and the discounter had to discontinue the collection.

Baker's confident that won't happen with the new brands. "We started with the customer," she said.

28 Feb, 2018
Maria Hollins exits HoF as David Walker-Smith joins
Maria Hollins

House of Fraser’s executive director for buying and design, Maria Hollins, has left the business, and is set to be replaced by former Fenwick director David Walker-Smith.

Walker-Smith will take up the new role of chief product and trading officer. He resigned from his role as managing director of Fenwick of Bond Street in March 2016. He will join HoF on 12 March.

Hollins joined HoF in May 2016 from Asos. She started working at Asos in November 2011 as trading director, before being promoted to retail director in September 2013. It is not yet known what her next role will be.

Alex Williamson, chief executive, said: ”David has had a stellar retail, buying and merchandising career to date. Our ability to attract an individual of David‘s calibre is a real testament to our ambitions for growth in the UK. David’s appointment adds additional strength to our leadership team and he will play an instrumental role in delivering key elements of the Transformation Programme.

“I’d like to take this opportunity to thank Maria for her hard work over the past two years. I look forward to working with David in the next chapter for the Group.”

Walker-Smith added: ”This role is an opportunity to enhance the overall experience of House of Fraser by collaborating and innovating with product and brands to build unique customer propositions. Alex has huge ambitions for House of Fraser and I’m looking forward to delivering the transformation with him and the team.”

The move is the latest in a series of changes under Williamson.

As exclusively revealed by Drapers, Reiss’s chief digital officer Simon Pickering joined HoF as buying and merchandising director for clothing and accessories earlier this month.

The department store chain has also promoted Gary Slattery, retail director since 2016, to the newly created role of executive director for retail. Meanwhile Gary Monk, transformation director since 2017, has become executive director for operations.

Peter Gross, chief operating officer since 2008, and Julian Burnett, chief information officer since 2015, have left the business.

28 Feb, 2018
Noni B pays bumper dividend as profits rise fourfold to $11.8m
Noni B chief Scott Evans has rewarded shareholders with a 9c a share dividend after delivering a fourfold increase in December-half profit. Louie Douvisw on Facebook

Womens wear retailer Noni B has rewarded shareholders with a bumper 9¢ a share interim dividend after net profit rose more than fourfold to $11.8 million in the December-half.

The result was marginally ahead of consensus forecasts around $11.6 million and compared with a net profit of $2.5 million in the first half of 2017.

While rival womenswear retailer Specialty Fashion Group struggles to stay afloat and PAS Group's sales and earnings went backwards, Noni B went from strength, buoyed by the acquisition of James Packer's Pretty Girl Fashion Group in 2016, strong online sales growth and new stores.

Underlying earnings before interest tax depreciation and amortisation rose 54.5 per cent to $22.1 million, slightly ahead of Noni B's January guidance.

Sales rose 35 per cent to $193.2 million, with 28 new stores augmenting same-store sales growth of 3 per cent and online sales growth of 68 per cent. The previous December-half included a four-month contribution from the Pretty Girl business.

Managing director Scott Evans said same-store sales had risen around 3 per cent in the two months ending February and the group was well placed for the June-half.

Analysts are currently forecasting a full year net profit of $16.7 million, compared with a bottom line net profit $3.2 million in 2017, or $8.9 million before one-off restructuring costs.

Cash flow was strong, with cash-on-hand at December 31 of $34.1 million, while bank debt fell to $21.5 million, placing the company in a net-cash position. This was despite the early payment of a final $3 million deferred consideration for Pretty Fashion Girl to Consolidated Press.

Noni B declared an interim dividend of 9¢ a share, its first since 2014, when the company fell into the red and the founding Kindl family sold its controlling 42 per cent stake to investment company Alceon for 51¢ a share.

​Since Alceon's takeover offer, Noni B shares have risen four-fold, closing at $2.14 on Tuesday.

27 Feb, 2018
Adairs’ profit jumps over 60 per cent
Inside Retail

Bedding retailer Adairs’ has closed the book on its horror half-year result in fiscal 17, unveiling a 62.5 per cent jump in net profit to $13.9 million.

The retailer’s earnings before interest and tax (EBIT) increased by 73 per cent to $20.9 million in the six-months ended 31 December, on the back of a 19.7 per cent increase in top-line sales to $149 million.

The result comes after more than six-months of continuous sales improvements at Adairs following what management now concedes was a mistake-ridden 1H17.

Like-for-like (LFL) sales were up 14.8 per cent, compared to negative 4 per cent in the prior corresponding period, following efforts to reshape its product mix in 2H17.

“Over the first half the team have focused on delivering a fashionable well coordinated product range together with a superior retail experience,” Adair’s managing director and CEO Mark Ronan said.

“Our continued focus on operational excellence has come through in our results…this half has put Adairs back on a growth trajectory, regaining our sales momentum given our improved product and in store execution.”

Strong trading has continued in the first seven weeks of the second-half, with LFL sales growth of 13 per cent across the network, although management did not update its guidance following a recent upgrade.

Adairs still expects EBIT in the $40 – $44 million range for FY18, with between $300 – $310 million in top-line sales.

There are now 164 Adairs stores, with four opened during the first half, three upsized and two refurbished. The company is targeting between 166-168 stores by the end of FY18.

Adairs’ gross profit increased by 22.2 per cent on a 130-basis point increase in margins to 60.6 per cent, as management moved to tighten its promotional calendar to reduce markdowns.

Cost-of-doing business fell by 44.4 per cent (47.4 per cent in PCP) as Adairs’ store roll-out began to fractionalise costs, driving operating leverage.

Occupancy expenses also fell by 1.2 per cent to 13.3 per cent, on the achievement of rent reductions on leases up for renewal during the half.

Speaking on its New Zealand expansion, Adairs said that stores across the pond are meeting initial expectations, although said that gross margins were impacted by inventory and supply chain issues, which drove a lower-than forecasted EBIT.

Two new stores are slated to open in NZ in the second-half.

Online sales increased by 98.7 per cent to $17.1 million in the first-half, representing 11.5 per cent of total sales, following the launch of a re-platformed website and a broadening of its online product range.

“We are confident that the issues of last year have been resolved. Our focus on excellence in retail execution together with effective management of both the gross profit and cost of doing business will underpin Adair’s continued growth,” Ronan concluded.

27 Feb, 2018
Record sales, female focus deliver for Shaver Shop
Inside Retail

More stores and record sales have helped grooming and beauty specialist Shaver Shop lift its first-half profit 9.2 per cent to $6.9 million.

Revenue for the six months to December 31 rose 19 per cent to $93.4 million after sales increased despite a challenging retail environment.

Earnings also grew to $11.2 million, from $10 million in the previous corresponding period.

“We are pleased to have delivered record sales and earnings, as well as 5.5 per cent growth in same store sales in the first half, despite the challenging retail environment,” said managing director and CEO Cameron Fox.

“We have a robust business model and are excited by the opportunities we see for the group, particularly in growing the number of female customers with more female focused brands.”

Shaver Shop has added several female brands to its mix over the last 24 months including Dyson Supersonic , Veet, Scholl, StylPro, Foreo and Dafni.

“We are really pleased to see our female beauty category grow more than 380 per cent over the first-half given the successful sourcing of innovative and exclusive products,” said Fox.

“Following the strong brands added to the portfolio over the last two years, we are excited to be launching another major female brand late in the second-half of this financial year as well as launching a new ‘own-brand’ range that will strategically complement our current portfolio of beauty products.”

Online sales rose 66.6 per cent in the six months after website investments and increased exposure to social media.

The company on Friday said it had opened seven new stores and had bought back four franchises extending its network to 106 stores and nine franchise stores in the half year.

Shaver Shop said it had received a tax benefit from the buyback of the franchise stores which would continue for the next four years.

The retailer’s corporate store network grew to 106 stores over 1H FY18, with 100 stores in Australia and six in New Zealand at the end of 2017, while the company also operates nine franchise stores.

“We continued to execute our greenfield store and franchise buyback programs in the first half,” said Fox.

“Seven new stores were opened and we acquired four franchises. We have also locked in one new store to open late in the second-half.”


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