8 Apr, 2020
Flight Centre chopping 800 stores, raising $700m
Financial Review

Flight Centre is cutting 800 stores and raising $700 million to help it ride out a bleak scenario of the coronavirus throttling the travel industry for 18 months.

The cuts eliminate almost half the Flight Centre stores catering to leisure travellers and are part of the strategy to reduce costs by almost 70 per cent at the Brisbane-based travel agency.

But Monday's move also causes pain as Flight Centre’s existing shareholdings are diluted in a massive capital raising. Risks remain, too, including uncertainty about how long the pandemic will linger.

Flight Centre is among companies, including peer Webjet, slashing costs and raising funds after the virus triggered mass shutdowns of borders and economies.

The shutdowns mean Flight Centre's total transaction value – representing all money flows such as cash transferred to airlines – in March fell to as low as 20 per cent of normal levels.

To combat the impact, Flight Centre wants to reduce costs from $227 million monthly to $65 million.

It has already stood down or made redundant almost 6000 staff, dumped marketing spending and rejigged landlord arrangements.

Flight Centre chief executive Graham "Skroo" Turner flagged deeper staff hits, depending on government packages globally such as Australia's JobKeeper program.

"Property and people costs will have to come down more," he told The Australian Financial Review.

The company last month flagged closing 35 per cent of stores globally. Now the target is 50 per cent. That latest figure includes 40 per cent of Australian stores, or 426 outlets including brands such as Travel Associates.

Mr Turner said this would leave Flight Centre "with the right number of larger stores with more people in them in better locations".

The company is also raising $282 million through a placement of shares with institutions and $419 million via a non-renounceable entitlement offer to existing investors, as flagged in the Financial Review's Street Talk column. Macquarie Capital and UBS are underwriting the offer to pick up any unsold shares.

"We're confident that this will, even with almost no income over the next 12 to 18 months, this'll give us enough money to be able to take advantage when travel restrictions are lifted," Mr Turner said.

Flight Centre is raising cash at $7.20 a share, a 27.3 per cent cut to the last traded share price of $9.91.

The company’s own disclosure flags continuing risks including the pandemic’s squeeze on economies impacting travel spending, fallout from cancellation policies and the hurt to branding from cutting stores.

Risk of no revenue

Carter Bar Securities analyst Peter Drew said positives from the raising include Flight Centre potentially running for 18 months with almost no revenue. He expected income to be "substantially reduced", but not so that it is too bleak.

The company could also cut its cost base on a more permanent basis, he said.

The downside with the capital raising was dilution, as shares on issue would nearly double. This would happen at a company that Mr Drew said had managed to avoid raisings since 2007.

"That’s the reality," he said. "It’s an essential capital raising."

Mr Drew said future questions included whether Flight Centre had raised too much money. But the worst case would be to raise too little now and have to return to the market, he said.

The dilution comes with almost 40 per cent of the new equity stemming from the institutional placement, involving the use of temporary rules relaxing limits on fundraising.

The other entitlement offer is 1 share for every 1.74 shares investors already own. Company founders – Mr Turner, Bill James and Geoff Harris, who account for almost 42 per cent of existing stock – are taking up $25 million in their share entitlement, below their theoretical limit of almost $175 million.

Mr Turner pointed out the founders "are heavily diluted as well".

"I’m afraid that's what happens when you want to do a [large] share placement," he said. "It’s part of our long-term survival strategy. There’s not a lot of choice really."

Flight Centre’s lenders are also bumping up loan facilities by $200 million and will waive covenant testing for the June and December periods.

Citigroup analyst Bryan Raymond said Flight Centre's overall liquidity would be about $1.98 billion, but risks lay in factors such as debtors not being able to pay up cash to Flight Centre.

"Given the scale of the crisis ... we see elevated risk around the magnitude of debtors" in the retail and corporate arms worth about $543 million, and in bonuses for mass sales worth about $330 million, he said.

Mr Turner said the company was generally confident in collecting debts.

The pandemic was the toughest challenge Flight Centre had faced "and it is inevitable that some businesses across our industry will fail, given the significant loss of revenue", he said.

But Flight Centre flagged the possibility of being in a stronger condition than rivals and being able to access good store sites if required when the pandemic eased.

The company said some work, including charter operations, was ongoing. And in China, where the virus first broke out, weekly ticket sales were slowly recovering although remained at 15 per cent the average of the beginning of year, the company said.


8 Apr, 2020
David Jones online doubles as foot traffic plummets in March
Inside Retail

As customers increasingly self-isolate and avoid what remains of bricks-and-mortar retail, David Jones has seen sales through its online channel more than double in the month of March.

Online sales rose 108 per cent during the month, and made up 20.3 per cent of sales. However, overall sales for the period fell 19 per cent on the same period of FY19.

South African parent-company Woolworths Holdings said while the majority of David Jones stores across Australia and New Zealand remain open, smaller stores such as those in Barangaroo in Sydney and James Street in Brisbane have been closed. 

“The impact of the slowdown due to COVID-19 was seen earlier in stores that have a higher proportion of tourist trade and Asian demographic customers,” Woolworths Holdings said in a trading update. 

“The impact has subsequently become more widespread across all stores and customer segments with a significant reduction in foot traffic in March.

The group said footfall had continued to fall, and it was not focusing on stimulating trade, reducing inventory and generation cash reserves. How the business plans on doing these things, however, was not specified.

Woolworths Holdings stable-mate Country Road Group, made up of Country Road, Mimco, Politix, Trenery and Witchery, closed all stores on 28 March for at least four weeks.

In the process the business stood down its retail employees while keeping its online channel running. 

During the first two weeks of March store traffic in these stores fell 36 per cent, and a further 60 per cent in the following two weeks, causing a 32.3 per cent decrease in sales compared to the previous period. 

Across its Australian, New Zealand and South African operations, Woolworths Holdings is expecting to take a 20 per cent hit to headline earnings for the year to 28 June 2020 due to global shifts and restrictions on trade in place. 

In response, the Woolworths Holdings board, group CEO and senior executive teams are foregoing 30 per cent of fees and salaries over the next three months.

6 Apr, 2020
Harvey Norman execs take pay cut, cancel dividend as crisis worsens
Inside Retail


[Harvey Norman told shareholders on Thursday evening the business would be revoking its decision to pay its FY20 interim dividend of 12 cents per share.

Additionally its executive team and non-executive directors have opted to forgo 20 per cent of their salaries and director’s fees respectively for the next three months. 

“In the present environment, the Board believes that preserving cash is the most prudent course of action to protect shareholder value,” company secretary Chris Mentis wrote in a letter to shareholders. 

The announcement saw shares fall 7 per cent on Thursday evening, from $2.97 per share to $2.76 per share. By the time of publication on Friday, shares had rebounded slightly to $2.77 per share. 

The decision will keep $149.5 million of cash in the business and comes two weeks after Harvey Norman revealed a 9.4 per cent increase in comparable sales in its Australian stores for the period of March 1st to 17th. 

At the time, chairman Gerry Harvey described to 60 Minutes that coronavirus could be an ‘opportunity’ for retailers in certain categories, noting that sales of freezers had quadrupled and air purifiers had doubled. 

Public backlash was swift, and two days later Harvey admitted he was “mortified” that he had come off as a “heartless, greedy old bastard”.

“Now everyone thinks I’m this callous old bastard out making a profit on other people’s misery… but believe me, that was not my intention,” Harvey said, according to SMH.

“I was trying to give a positive view [of the COVID-19 crisis].”

Harvey Norman was contacted but hadn’t provided comment by publication. 

The Harvey Norman board’s decision is made in the context of dozens of retailers entering a hibernation state amid a collapsed bricks-and-mortar retail sector, with customer confidence hitting an almost-50-year low.

ANZ head of Australian economics David Plank said confidence on current economic conditions had fallen almost 50 per cent over the last two weeks to its lowest ever level. 

“And many other aspects of the survey are exceptionally weak. The announcement of the largest fiscal package yet may stabilise confidence, but much will depend on how the pandemic evolves,” Plank said. 

However, according to Plank, there are some glimmers of hope.

“Future finances were up marginally and inflation expectations rose. In fact, there was a sharp uptick in the weekly reading of inflation expectations, which rose to 4.3 per cent.”

6 Apr, 2020
Retail spending bounces back in February
Inside Retail

Retail spending increased more sharply than expected in February thanks to a surge in spending on basic necessities in supermarkets and department stores.

Retail trade rose by 0.5 per cent in February to $27.8 billion, seasonally adjusted, according to figures released Friday by the Australian Bureau of Statistics. 

Online retail contributed 6.6 per cent to total turnover in February 2020.

“Retailers reported a range of impacts from COVID-19 in February, with increases in food retailing slightly offset by falls in more discretionary spending,” said Ben James, ABS’ director of quarterly economic wide surveys.

Preliminary retail figures released two weeks ago suggested shoppers frantically buying toilet paper, rice, pasta and other goods due to coronavirus fears would result in a 0.4 per cent rise for the month.

The February rise follows an unrevised fall of 0.3 per cent in January, which was weighed down by people staying indoors because of the smoke from the devastating bushfire that hit eastern Australia throughout the summer.

January was also the nation’s first back-to-back monthly retail decline since August 2017.

The latest figures were boosted by a 3.1 per cent rise in department store spending, a 0.8 per cent rise in food retailing, and a 0.7 per cent rise in household goods, but were weighed down by a 2.9 per cent fall in the clothing and footwear sector.

The next result will take into account the mass store closures that begun in March, and will be released in the week of April 20.

3 Apr, 2020
Kathmandu announces $207 million equity raising

Kathmandu Group has announced a $207 million equity raising plan in the wake of uncertainty surrounding COVID-19.

Responding to the current climate, Kathmandu is set to fortify its balance sheet with pre-emptive equity raising to cushion the impacts from a prolonged COVD-19 situation. 

The Group has launched a fully underwritten $207 million equity raising at an offer price of $0.50 per share via a $30 million placement to certain institutional investors, together with an approximately $177 million 1.2 for 1 pro-rata accelerated entitlement offer. 

Kathmandu Holdings’ Group CEO Xavier Simonet said that while the business experienced positive first half results, the Group needed to ensure it could weather the impacts of prolonged pandemic. 

"The Group’s first half financial results highlight the strength of our three global brands, Kathmandu, Rip Curl and Oboz.

"These results also show the strong position we would have been in to drive the next wave of our growth in line with our long-term diversification strategy had the global COVID-19 pandemic not occurred.

"In this situation of uncertainty and challenges, the health and wellbeing of our team and customers is paramount, while we maintain business continuity and ensure we are well positioned to bounce back quickly when more normal operating conditions return.

"The Board is taking pre-emptive action with the capital raising announced today, to ensure our Group remains strongly capitalised during the current market uncertainties.

"The proceeds of the equity raising will be used to deleverage the Group’s balance sheet and provide liquidity and funding in the medium-term should we experience a prolonged global COVID-19 pandemic," he said. 

The equity raising further strengthens the actions the business has already taken to combat COVID-19 including closing its stores and challenging all operating expenses. 

The use of the equity raising proceeds will go towards; paying down the existing Revolving Multi-Option Facility ($86 million); providing additional cash on balance sheet ($115 million); and, funding the transaction costs associated with the equity raising. 

Post equity raising, the Group will have total liquidity of NZ$315 million, with no debt maturities prior to November 2022; and will reduce net debt as at 31 January 2020 from 1.9x down to pro forma 0.5x.

The announcement of the equity raising follows a trading halt which was placed on Kathmandu ordinary shares on 31 March which will be lifted on April 02. 

3 Apr, 2020
Bunnings merger with Adelaide Tools gets green light
Inside Retail

After speculating that Bunnings’ proposed acquisition of Adelaide Tools would lessen competition in the South Australian Market, the ACCC has revealed it will not oppose the merger.

According to the competition watchdog, the transaction isn’t likely to substantially impact competition due to the existence of expanding competitors such as Total Tools and Sydney Tools. 

“Although Bunnings has a clear overall focus on the DIY segment, it does market heavily to attract trade customers and is focused on growing its tool sales to tradespeople,” the ACCC said. 

“[However], the differences between Bunnings and the Adelaide Tools businesses and the existence of large expanding specialist tool retailers… meant that we didn’t consider the threshold of a substantial lessening of competition was reached.”

Despite this, the ACCC said the decision shouldn’t be seen as an indication that it wouldn’t continue to scrutinise the DIY retailer, and any attempt to remove any competitive threat to the business would be “very closely scrutinised”.

Bunnings managing director Mike Schneider said the Bunnings team would now work toward integrating the business into the group, while allowing it to operate as a standalone power tools and heavy machinery business.

“While our businesses are very different, we see strong alignment between the Adelaide Tools and Bunnings brands,” Schneider said. 

“We strongly believe that competition is great for customers and we remain as committed as ever to driving customer value through all of our offers.”

3 Apr, 2020
Qantas could be taken over by cashed-up Wesfarmers, Macquarie says
The Sydney Morning Herald

Qantas, Star Entertainment, Domain or Kathmandu could all potentially be taken over by Wesfarmers if the cashed-up retailing conglomerate listens to investment bank Macquarie.

Research from Macquarie's equity strategy team, sent to clients on Thursday, unveiled a laundry list of ASX-listed companies the Perth-based behemoth could target after its Coles sell-down this week.

Wesfarmers offloaded a further 5.2 per cent of its stake in the supermarket chain on Tuesday, boosting its balance sheet with pre-tax proceeds of $1.06 billion, or a profit of around $130 million.

While the primary reason for the sell-down was to shore up its position during the coronavirus pandemic, chief executive Rob Scott told The Age and The Sydney Morning Herald the company was looking at acquisitions and had already been approached by some struggling businesses.

"We have been approached by some companies that are facing funding challenges, and we do look at those opportunities," he said.

Analysts have since been speculating what businesses Wesfarmers could look to snap up, with JP Morgan's Shaun Cousins saying the battered share prices of many companies presented the company with a number of buying opportunities.

Macquarie went one further, issuing a list of businesses which would meet the criteria for an acquisition: shares are down 30 per cent or more from a three-year high, an enterprise value under $5 billion, a return on equity lower than their ten-year average, and a history of profitability.

"This provides us with a list of proven business models, that are the right size and valuations that are currently attractive," they said.

Thirty-eight companies met the criteria, including Viva Energy, takeover target National Storage, car dealer AP Eagers, Bega Cheese, casino giant Crown, Flight Centre, and fellow retailer JB Hi-Fi.

Macquarie also compiled a smaller list of companies which would be a good strategic fit for Wesfarmers, though they do not all fit the financial criteria.

On that list is Ardent Leisure, Boral, Brambles, Domain, Fletcher Building, Incitec Pivot, Kathmandu, Lynas, Orica, Qantas, Star Entertainment and Super Retail Group.

Of these, Macquarie picked Orica and Incitec as the most likely targets due to their alignment with Wesfarmer's chemicals, energy and fertiliser segments.

Wesfarmers put a $1.5 billion bid in for rare earth miner Lynas last year, which was rejected by the company. It dropped the bid in August, but Macquarie believes it could revive its pursuit of the miner given its decline in value.

In retail, Kathmandu and Super Retail would have "sufficient scale" to be relevant to Wesfarmers, Macquarie said, even though the analysts viewed both as less likely targets given Wesfarmers already has significant retail exposure.

This was a view shared by Wesfarmers shareholder Contact Asset Management, with director Will Culbert telling The Age and The Sydney Morning Herald Wesfarmers shouldn't limit itself to the retail sector.

"As a conglomerate with a long and successful history, I don’t think that they need to necessarily constrain themselves to only the retail sector," he said.

"It is difficult to speculate on what Wesfarmers will do...however, it appears to be a very good time to have a war chest and a strong balance sheet. We would expect Wesfarmers to maintain its long-established discipline of acquiring businesses that meet its [return on capital employed] hurdles."

Despite Macquarie's extensive shopping list, it did temper expectations of an imminent acquisition, saying the company is "likely to be conservative given current economic uncertainty and looming risk of shutdowns".

Wesfarmers shares were down 1.8 per cent to $35.02 by mid-afternoon on Thursday.


1 Apr, 2020
Wesfarmers boss warns JobKeeper payment won't go the distance
The Sydney Morning Herald

Wesfarmers boss Rob Scott has warned the federal government's $130 billion JobKeeper wage subsidy may need to be supported by additional measures at the end of coronavirus pandemic

Mr Scott told The Age and The Sydney Morning Herald while he supported yesterday's announcement of a $1500 fortnightly wage payment for nearly six million Australian workers, the subsidy "only goes so far".

Mr Scott – who oversees the operation of Bunnings, Officeworks, Kmart and Target – said while the package was "very generous" and critical for the economy, there was an "important need" for businesses to keep operating during the crisis if they are able to do so safely.

"Notwithstanding the generous package, there are many, many people who will face a lot of financial hardship is as a result of businesses being unable to operate," he said.

Wesfarmers' businesses have stayed open during the crisis, with hardware chain Bunnings and office supplies company Officeworks both seeing a heightened level of demand in recent weeks.

Due to this, Mr Scott said his business was not currently planning to take advantage of the subsidy, but warned if a more significant shutdown came into place, Wesfarmers would apply.

"If we don't take more personal responsibility for complying with the government's mandates around social distancing and gatherings, then we will see a more significant shutdown, and that will be extremely damaging to the economy," he said.

With the payments amounting to just $39,000 for a full year salary, Mr Scott noted it wouldn't cover the loss of wages for many of Wesfarmers' employees.

"We should all be mindful while the JobKeeper subsidy certainly helps workers for businesses that are essentially shut down, we all need to brace ourselves for what is likely to be a more significant downturn in GDP and the economy," he said.

"The more we can do to keep businesses operating and help businesses big and small manage the cash flow burden in the months ahead, that will be important."

Virus to accelerate retail's structural change

Following a recovery from the coronavirus pandemic, Australians can expect to see a more concerted push into online selling along with further closures across bricks and mortar stores, Mr Scott predicts.

Australian retail had been in the midst of a structural change prior to the virus, and the disruption over the past month is likely to have "accelerated" those shifts, he said. One such change will likely be in retail leasing.

"There are some challenges facing bricks and mortar retailers relating to the way leases are structured, the size of stores, and also some of the more onerous regulations that disadvantage retailers that employ a lot of people versus online retailers that employ far less," Mr Scott said.

"So I think we'll see further rationalisation."

Yesterday, Wesfarmers completed a $1.06 billion sale of a further 5.3 per cent stake in supermarket giant Coles, netting the company around $130 million in pre-tax profits, and shareholders have already begun to question the best use for the company's fresh funds.

Primarily the profits will be used to boost Wesfarmers' balance sheet, Mr Scott said, though the conglomerate was also actively seeking opportunities to invest despite the "many risks" present in markets currently.

"We have been approached by some companies that are facing funding challenges, and we do look at those opportunities," he said.

"But in the current environment, those types of opportunities we would only look at in a collaborative way to help companies with any funding issues they may have."

31 Mar, 2020
The Age
The Age

About 1700 staff employed by retail group Brand Collective – that manages labels including Shoes and Sox, Clarks and Mossimo – will be stood down at the end of the week as the government scrambles to assemble a wage-support package and the retail body predicts more store closures.

The head of the Australian Retailers Association supports the government's package but called for greater clarity on rent support, predicting more closures in clothing, footwear and accessory stores as businesses struggle with falling foot traffic resulting from stay-at-home advice designed to contain the spread of the coronavirus pandemic.

Russell Zimmerman, executive director of the ARA, said technology related outlets and book stores appeared safe, for now, as demand for products assisting in the transition to work-from-home arrangements was on the rise.

"Where it comes to people trying on clothing as a consumer, they might be very concerned about trying a jumper on that might have wiped across someone's face that might have had coronavirus," Mr Zimmerman said. "Immediately clothing and footwear comes to a standstill."

The three-pronged burden facing retailers – keeping staff safe, plummeting sales and brand damage for those stores that do remain open – meant it was becoming increasingly untenable to keep bricks-and-mortar stores operating, Mr Zimmerman said.

"Retail is staring down the barrel of sales that have gone down by approximately 75 per cent," Mr Zimmerman said, adding store owners were only making enough money to cover wages.

"How do you pay for your stock? For services? Your utilities bills? There is insufficient money going through to operate a business. If you continue to operate your business in this fashion, you will become technically bankrupt."

Mr Zimmerman said a lack of force majeure clauses that include pandemics meant business owners are still legally responsible for covering lease payments and, while the industry supports the federal government's work around wage support, it awaits further guidance on rents.

The private sector has stepped in to support with rents, with Australian banks now extending the six-month deferral of loans to businesses with up to $10 million in debt, including commercial landlords, on the condition tenants affected by the pandemic are not evicted for failing to pay rent.

However, others in the industry, including Brand Collective chief executive Martin Matthews, are calling for mandated rent-free periods or rent subsidies for business owners until the major disruption ends.

Brand Collective revealed it would temporarily stand down the majority of its workforce from next week as the business told its landlord it could no longer afford to pay rent.

"There is a high degree of uncertainty about our legal obligations during this period and we are hoping to work constructively with landlords to manage this – shopping centres can’t survive if retailers don’t survive," Mr Matthews said. "Clear government guidance on how landlords should approach rent holidays during this period is required."

The kitchen and laundry appliances chain best known for its Appliances Online blimp that flies over Sydney also announced this weekend it would shutter a string of stores in an effort to adhere to occupational health and safety standards and assist in curbing the spread of the coronavirus.

Winning Group, the parent company of Appliances Online, will close 22 bricks-and-mortar facilities starting Monday but said it would continue its online operations and committed to retaining its staff with full salaries.

Chief executive John Winning said it was a "proactive" step to close the stores "in a commitment to the safety and health of our team and our customers".

These closures come as troubled department store Myer joined swathes of other Australian shopkeepers that have temporarily halted trading. The 120-year-old company said it would shut 60 stores from Sunday for at least a month.

While there had been speculation Myer might open "dark stores" – using store fronts to operate click and collect-like operations – for now, the retail giant is pushing customers to shop online.

27 Mar, 2020
Coronavirus Australia: Bunnings introduces tough new buying limits

Australia’s Bunnings stores have introduced new buying restrictions as panic buyers clear the shelves of essential items.

Speaking to Today, managing director Michael Schneider said the new measures were designed to ensure nobody missed out on high-demand products.

“As the uncertainty continues we want to make sure we can reassure customers that if you come to Bunnings you can get the products you are looking for,” Mr Schneider said. “And you can get the things done at home you need to.”

Under the new, temporary restrictions, which came into effect today, shoppers will be restricted to a maximum of four items per person for cleaning and storage products, gardens sprayers and batteries.

There will be a maximum of one item per customer for generators, gas bottles, respirators or face masks, fuel cans, methylated spirits and turpentine.

In a release, Mr Schneider stressed most Bunnings products were still available for customers as usual.

“We’re seeing increased demand for some products and we want to be as fair as possible for customers,” he said.

“We are working closely with suppliers to get stock into stores to meet customer demand and our suppliers have been a huge support in making this happen.

“Our store teams are doing an incredible job looking after our customers and working to get stock onto the shelves as it comes in and I’d like to thank them for all their efforts.”

He also apologised for the inconvenience caused by the limits as well as for temporary stock shortages and thanks customers for their patience.

The chain has already ditched its iconic weekend sausage sizzle and cake stall fundraisers due to the deadly pandemic.

The news comes after Bunnings’ parent company Wesfarmers revealed all 53 New Zealand Bunnings stores would now be open to trade customers only and closed to the general public for four weeks following the government’s new restrictions on “non-essential services”.

And yesterday, a Melbourne Bunnings employee broke down in tears on air during a call to GOLD104.3’s Breakfast Show host Christian O’Connell while describing the “rude” and “disrespectful” actions of some customers since the outbreak took hold.

“I work at Bunnings and the amount of disrespectful, impatient people coming through is disgusting. We are run off our feet, we are trying our best – understand that everyone, and for those that are giving us respect and are being patient we can’t thank you enough,” he said before being overcome with emotion.

“It’s a struggle … we are trying, we are definitely trying 100 per cent … trying not to have a breakdown is impossible. Woolworths, Coles any retail worker, we are doing our best.”

27 Mar, 2020
Premier CEO Mark McInnes goes home with no pay

Premier Retail CEO Mark McInnes has voluntarily decided to work from home without pay until April 22.

His entire Just Group executive team, who manage brands such as Just Jeans and Portmans, have been stood down and agreed to work from home when required with either no pay or reduced leave entitlements.

Similarly, Premier non-executive directors have voluntarily decided to not receive any remuneration during this period.

The moves come as parent company Premier Retail prepares a total shut down stores, affecting 9000 employees.

Premier will temporarily close all retail stores in Australia from 6 pm (local time) today, 26 March 2020, until 9 am (local time) Wednesday 22 April 2020.

This follows similar decisions the business has been forced to take in New Zealand, the United Kingdom, and Republic of Ireland.

This means all employees in Australia are to be stood down, except for a small number of employees required to perform limited essential work.

"This means our team members will not attend work and will not be paid," the company said in a statement. 

"We have put in place special arrangements for employees to access accrued annual and long service leave entitlements to reduce the impact over this time."

Globally these closures will impact over 9,000 employees.

In Australia and New Zealand close to 70% of stores are already in holdover or with leases expiring in 2020 providing the Group with maximum flexibility.

These extraordinary circumstances mean Premier intends not to pay any rent globally for the duration of the shutdown.

Premier will provide further updates when new information becomes available but no later than April 21.

27 Mar, 2020
Spell & The Gypsy Collective launches online wellness series

Spell & The Gypsy Collective has launched an online series of health and wellbeing Instagram Live videos in the wake of COVID-19. 

While the business decided to close its Byron Bay boutique on March 24 until April 6, the label launched At Home With Spell to maintain and cultivate a connection with its consumers. 

The series includes daily Live videos that cover subject matters ranging from sound meditation to styling sessions presented by Instagram personalities including Ruby Tuesday Matthews, Karissa Sparke and Amelia Edmondson. 

Announcing the program on Instagram, Spell co-founder Lizzy Abegg said that the buisiness wanted to do something that felt valuable to its community. 

"Over the years, we’ve always felt uplifted and supported by our online community and we know you’ve always been there for us. 

"We’ve come together in celebration of one another, in love of similar things, through the good times and the bad (Blue Skies recall anyone?!), through fires and floods, and coming together to support Australia in her time of need.

"During these times of uncertainty we wanted to do something that feels valuable to our community, we wanted to inspire beautifully, bring lightness in a time of darkness.

"We thought we’d reach out to some of our friends to help us find little moments of joy and play while doing the right thing and staying home to flatten the curve!

"We bring you At Home With Spell, a live series with wellness, movement, insight, creativity and styling to keep us connected during the lockdown," she said. 

The At Home With Spell program began on March 24. 

27 Mar, 2020
'Irresponsible': Retailers call for total lockdown
Financial Review

Major retailers have called on the Morrison government to order a total shutdown of all non-essential stores and services including shopping centres or risk causing more damage to a sector already struggling to stay afloat.

Premier Investments, footwear retailer Accent Group, jewellery chain Lovisa, menswear retailer Retail Apparel Group and APG & Co, which owns Saba, Sportscraft and Jag, have joined Michael Hill and Mosaic Brands in closing all their Australian stores.

The federal government has been reluctant to date to order the closure of all non-essential services in an attempt to protect parts of the economy.

But a growing number of discretionary retailers are taking the matter into their own hands to protect staff and customers and after seeing a sharp slump in foot traffic. Traffic in shopping centres fell 46 per cent year-on-year last week, according to ShopperTrak data, as consumers heeded the government's advice to practice social distancing.

Some retailers, including Premier, Accent, Lovisa and Mosaic Brands, which owns Noni B, Katies and Millers, say they won't pay rent on shuttered stores, adding to pressure on landlords to provide rent relief.

"How can we have people walking around shopping centres that have potentially got the virus – it's just irresponsible," said Daniel Agostinelli, the chief executive of Accent Group, which is shuttering all 522 Platypus, Hype and Athletes Foot stores and standing down about 4500 staff.

"To me it's absolutely irresponsible the shopping centres are still open," Mr Agostinelli said. "I'm absolutely amazed that is not being done, given the advice to the public."

"We would support a full lockdown of shopping centres," said Lovisa chief executive Shane Fallscheer, who is closing Lovisa's 155 Australian stores and standing down about 800 full and part-time staff.

Lovisa stores are now temporarily closed in eight countries – Australia, New Zealand, South Africa, France, Spain, Malaysia, the US and the United Kingdom.

The retailer has stood down all store staff in markets that have closed and is cutting jobs at support centres around the world through a combination of temporary stand-downs and redundancies. The retailer suspended its 15¢ a share interim dividend to save $16 million in cash and increased and extended its financing facilities for a further three-year term.

"I would have preferred a total lockdown,'"said Alceon Retail director Richard Facioni, the chairman of Mosaic Brands, which has closed almost 1400 stores and stood down almost 7000 employees.

"My sense is the government is doing everything they can to avoid total lockdown and doing everything they can to preserve parts of the economy – they'll only want to go to the next step if they absolutely have to," Mr Facioni said.

"What is happening is the retailers are making the decision for the government – as each retailer shuts there is less of a reason for customers to go to these centres – it's a self fulfilling prophecy," he said.

No choice

Premier Investments chief executive Mark McInnes said the retailer had no choice but to temporarily close all of its 900-odd retail stores in Australia for four weeks until April 22 and stand down about 7000 staff. Premier's entire executive team has also been stood down and will work from home with either no pay or reduced leave entitlements.

Premier, which owns Smiggle, Dotti, Peter Alexander, Just Jeans, Jay Jays and Jacqui E, has also been forced to close all stores in New Zealand, the United Kingdom, and Republic of Ireland. Globally, the store closures will impact over 9000 employees.

"This is the hardest decision ever made by Premier – our team are our family and we want to do everything we can to keep them employed," Mr McInnes said, "but we believe that it is necessary and the right decision for them, their families, our customers, and the country."

In an escalation of its long-running fight with landlords, Premier said it would not pay any rent globally for the duration of the shutdown. In Australia and New Zealand, almost 70 per cent of its stores are already in holdover or with leases expiring in 2020, strengthening the retailer's negotiating position.

"Everyone in the value chain is having to endure some pain," said one retail analyst, who declined to be named.

"The banks seem to understand they have a social licence (to operate), the landlords don't seem to recognise they have a social licence," he said.

Citigroup analyst Bryan Raymond said in a sales environment where foot traffic is down 20 to 30 per cent, closing stores would reduce cash burn, compared to staying open and paying staff and rent.


"[Premier's] staff and rents costs accounted for $527 million in 2019 (42 per cent of overall group sales), and should provide Premier enough headroom to withstand weaker trading conditions in the coming months, particularly given their strong balance sheet," Mr Raymond said.

Super Retail suspends dividend

Super Retail Group's Supercheap Auto, Rebel, BCF and Macpac stores in Australia continue to trade but it has been forced to close 81 Supercheap and Macpac stores in New Zealand, which accounts for about 7 per cent of annual revenues.

As reported earlier this week, the retailer considers itself an essential services retailer because it sells products such as hand sanitisers and wipes, batteries, water filters and water-purifying products, portable gas and fuels, and supplies local governments and emergency services.

The outdoor leisure and sporting goods retailer was hit hard by the bushfires but has enjoyed strong sales growth in the last five weeks, with same-store sales at Supercheap Auto up 7.5 per cent, Rebel up 1.6 per cent and Macpac up 5 per cent, offsetting a 3 per cent decline in sales at BCF stores. This lifted total sales growth for the year to date to 2.7 per cent. Gross margins had also held up.

But the company has cancelled its interim dividend to save $43 million cash and has secured a new $100 million banking facility with ANZ Bank to provide more financial flexibility.

"While the business has performed solidly over the year to date period, the outlook for sales for the balance of the year is now highly uncertain," said chief executive Anthony Heraghty.

The COVID-19 crisis may also be the final nail in the coffin for accessories retailer Colette by Colette Hayman, which fell into voluntary administration last month. The administrators closed 33 underperforming stores last month in an attempt to lure buyers and have now been forced to close the remaining 105 stores.

23 Mar, 2020
Retail is detail and JB Hi-Fi is the master
Inside Retail

Recent retail commentary over the past two months has been dominated by doom-and-gloom headlines, and there’s no question the sector is suffering significantly from the coronavirus outbreak.

But that may be all the more reason to take a closer look at the most successful retailers in Australia, and try to determine what they’re doing right.

When JB Hi-Fi’s results were revealed last month, we all sat up and took notice. While various businesses are closing up shop or being significantly restructured in the hands of administrators or receivers – think Harris Scarfe, H&M and Bardot – JB Hi-Fi delivered sales results that eclipsed even the good performers. Again.

So, what do they continue to do that the others do not?

They say retail is detail and in the case of JB Hi-Fi, these guys are the master of every little detail – ruthlessly focussed on excellent execution and staying true to the brand’s roots. The value proposition holds firm: great brands at great prices with great in-store advice in great locations.

There really is no rocket science here, just excellently executed retailing.

As a brand, JB continues to excel in everything that is ‘personal and family entertainment’, leveraging that expertise and well-earned trust to broaden into adjacent categories. This has played out through tech-based categories and also white goods which has been further strengthened with the successful acquisition and assimilation of the Good Guys a few years ago.

Being masters in tech allows JB to surf the endless wave of our ever-growing reliance on connectivity at home, at work, at school and everywhere in between. This category also contributes enormously to one of their key success metrics which is sales per square metre while lending itself brilliantly to a growing online sales channel.

Add their ruthless focus on the cost of doing business and it’s no wonder JB continues to go from strength to strength.

It would be easy to underestimate JB’s seemingly ‘homemade’ approach to digital advertising, catalogues (yes, they still use these) and instore communications and signage, but make no mistake, it takes an astute eye to maintain this ‘local expert’ tone across such a burgeoning network of stores and a flotilla of webpages.

Paradoxically, the commitment to high-quality store sites in high traffic, high visibility locations must come with above-average cost but doing the maths equation means that their other costs are kept incredibly low.

As I said, no rocket science here, just a ruthless commitment to great brands in valued categories, in the right locations, at great prices, supported by knowledgeable staff.

It begs the question of what other brands can do to be more like JB. It’s almost a case of going back to first principles. Break down your business to the bare basics and ask yourself, are your stores in the right locations? For JB, this has meant closing several locations and opening others in the past six months. It’s not an easy decision to make but the impact to your bottom line could be dramatic.

It also pays to invest in providing class-leading customer experience. Are your staff informed about your products and do they deliver a level of service that keeps people coming back?

Also ask yourself what are you famous for? If it’s nothing, find something quickly and own it.

Otherwise you’re in a load of trouble. And if you are famous for something, ask yourself how you can leverage that strength into adjacent categories that ‘make sense’ for your customers.

Growing market share is paramount when the market is not growing and this is one tried and true way to do that.

Getting back to these brilliant retail basics can make all the difference, especially in times where consumers feel under siege to the point of being highly discerning with their discretionary dollar.

JB Hi-Fi makes it look easy but given the state of Australian retailing at present, it’s obviously hard done.

Craig Flanders is the CEO of full-service agency Spinach. The agency’s clients include Baby Bunting, Drummond Golf, Liquorland, Sportsco and The Reject Shop.

23 Mar, 2020
How COVID-19 has impacted online retail sales so far
Inside Retail

In these crazy times, we are all concerned about the health of our families and staff, especially those at high risk, such as frail parents and grandparents.

I have a friend with Type 1 diabetes, who has an estimated 7 per cent mortality rate if infected. We need to keep ourselves healthy for people like that.

Of course, we are also worried about the future of our businesses, our own jobs and the jobs of the people we employ.

Retail in general almost certainly has a difficult few months ahead (toilet paper sellers aside), but how about online retail?

In the days of quarantine and self isolation, is this an opportunity for online retailers? And if so, how do we forecast in such an unprecedented period?

I spoke to 15 Australian online retailers across a range of industries – including fashion, beauty, exercise equipment, baby, toys and more – and sizes. The smallest turns over $5 million a year; the largest well over $100 million. All data was provided on condition of anonymity. 

The question I asked each of them was this:

What was the change in revenue in the week from Tuesday, March 10 to Monday, March 16, compared to a month ago, Tuesday, February 11 to Monday, February 17.

The average is -1 per cent revenue month on month, but as always, there’s a lot of detail lost in averages.

All this data was provided with strict anonymity, and the range of categories was too wide to be able to provide any category-level analysis. But still, here are some insights:

  • A few of the winners are beneficiaries of stockpiling. My informal survey didn’t include any toilet paper suppliers, but I did speak to a few retailers offering essential/desirable supplies that would be handy in the event of a quarantine. 
  • Some of the biggest losers are companies that sell highly social products, or products that are generally used in public. 
  • There are a few anomalies, which I don’t have a good explanation for. For example, my survey included a few fashion companies, and some reported quite negative results, and others quite positive. 

Here are some things to consider when forecasting:

  • At the moment, many people are spending money to stockpile essential items, which may temporarily divert funds from more discretionary purchases. 
  • Even if you can predict sales, you need to be working closely with your suppliers and logistics providers. They are facing their own set of challenges and may not be able to meet their normal order volumes or delivery deadlines. 
  • Warehouse staff can’t work from home, so you need to consider how you will respond if there’s an infection at your warehouse. I’m hearing rumours that warehouse staff are calling in sick already, and warehouses are understaffed. 
  • Will Australia’s internet infrastructure be able to cope with the massive influx of workers – and possibly soon students – working from home? This remains to be seen. 
  • Discounting seems to be all but inevitable. Even if you are one of the winners, it’s likely your bricks-and-mortar counterparts aren’t so lucky, and you may need to follow their lead. 

The biggest question to ask yourself is what is the opportunity for your business? Any change – even a bad one – presents an opportunity. 

Stay safe!

23 Mar, 2020
LVMH Converting Its Perfume Factories To Make Hand Sanitizer

LVMH announced today that it is converting three of its perfume manufacturing facilities where it normally makes fragrances for its Christian DiorGivenchy and Guerlain brands to make hand sanitizer instead. The first deliveries will be tomorrow and by the end of the first week, LVMH expects to have made 12 tons of the hydroalcoholic gel. The product will be given at no charge to French authorities and the largest hospital system in Europe.

LVMH is accomplishing several things with this move. It is, of course, responding to a shortage of hand sanitizer. But more than that, it is positioning itself to its consumers and its employees as doing what’s in the public interest. It is also justifying having its factories remain open and keeping its employees coming to work. All of those things make the company more purposeful and less commercial.

What’s so interesting about LVMH’s move is how quickly they are doing it and their understanding of what luxury means right now. Luxury used to be providing the highest quality products—now it means that and more. A true luxury business has to fill consumers’ needs at the highest level and by converting to hand sanitizer manufacturing, LVMH is doing just that. This moment is unique; at any other time, hand sanitizer for a luxury company would make no sense. But in this moment, perhaps even only this week or month, it’s appropriate and commendable to make what would normally be the most un-luxurious product and LVMH gets that. It is a great example of why they continue to be a leader in luxury.

It’s also interesting that LVMH did not present its switchover as producing its own branded hand sanitizer. There’s no indication that the hand sanitizer it is producing will be for one of its brands; it appears to be no-named. It’s counter to the idea that everything produced at the company is a luxurious product for high-end consumers. It’s highly flexible thinking that allows management to act in this way.

We are in a time where shutdowns will reduce profits all over the world. That is taking time for people to adjust to because it is happening so rapidly. What’s needed in this moment is for brands to look beyond the profits they are losing and ask what else they can do to preserve their position during this very difficult time for everyone. That’s what LVMH is doing.

What should other brands that have fewer resources than LVMH be doing now? It requires management to look inward and ask: what do I have that could help someone, anyone, right now? What’s in short supply that I have or could get in abundance? That is clearly the approach that LVMH took and it now falls on all of us to ask that question of ourselves.

23 Mar, 2020
How Australia's small businesses are staying afloat amid the coronavirus pandemic
ABC News
ABC News

Butcher Gary Hine has been running his shop in Mundaring, in Perth's hills, for 13 years and is a big believer in good, old-fashioned customer service.

But as the number of confirmed cases of coronavirus rises in Western Australia, he is becoming increasingly concerned about the health of his staff and customers.

So, from next week, he'll shut up shop — instead operating his business 100 per cent online.

"It's not a decision we took light-heartedly," Mr Hine said.

"There were a lot of sleepless nights with different scenarios going around in my head.

"But the most important thing is that we keep ourselves safe, our staff safe and our customers safe."

From Monday, customers will not be able to enter his butcher shop, instead placing their orders online, waiting for a notification telling them their produce is ready, pulling into the car park and having their meat loaded into their vehicle.

Mr Hine said he had a loyal customer base and was confident they would support the new business model.

"There's a lot of speculation out there at the moment that it's going to be all doom and gloom," Mr Hine said.

"I see it as an opportunity to adapt and to continue to keep our doors open and service the people who have looked after us for so long."

"It's a lot better than us getting sick and having to shut the doors."


'We can make sure everyone at least has toast'

ABC News

Further south, the Coogee Beach Bakery has just launched a free delivery service so that its customers, many of them elderly, can get staples like milk and bread dropped off at their door.

Owner Jackie Mayoss said the decision was a no-brainer for her and she was prepared to wear the delivery cost in a bid to support her local community.

"We know all of the streets, we know all of the customers. We're happy to drop things off and make sure they're OK," Ms Mayoss said.

"We're not going to be making extra money but it's nice to be able to help your neighbours.

"We can't do a lot, but we can make sure that everyone can at least have toast."


Books to your door

Sam Baker and his partner Natalie Latter founded their bookshop, Rabble Books & Games, in Maylands, almost two years ago.

ABC News

In the wake of coronavirus, the pair has also launched a free home delivery service for customers who may not be able to — or want to — enter the store in person.

"We are very keen to always be participating in our community and creating a space that is inclusive and is safe, and [the question is] how do we continue to do that?" Mr Baker said.

The delivery service will operate in Maylands and nearby suburbs, but Mr Baker said people had volunteered to make deliveries further afield.

"For the most part, it's going to be me driving the hatchback around," he said.

"We do really have an obligation, especially as a public space, to make sure that we are doing everything we can to, as they say, flatten the curve."

Mr Baker hopes the new service will enable him to continue to pay his four casual staff members, even if they have to self-isolate at home.

"I don't think there's anybody who works here who doesn't depend on that income," he said.

"It's going to be pretty tight coming up.

"There are a lot of changes that I think we're going to have to make on the fly.

"We're going to have to adapt to the situation as it develops."

This week the WA Government announced an economic stimulus package worth $607 million in an attempt to stave off the impacts of the coronavirus outbreak.

It includes a one-off grant of $17,500 for small to medium businesses with a payroll of between $1 million and $4 million.

It will cost the Government $114 million and is expected to bring relief to 7,400 businesses in WA.

20 Mar, 2020
Mark McInnes takes on landlords: "we are prepared to close many more stores"

Premier Retail CEO Mark McInnes has issued a missive to landlords.

"Respond to the current crisis."

Premier Retail has confirmed it has closed two stores in Hong Kong since the COVID-19 outbreak.

McInnes, who has had a long-running campaign against major landlords, said the current climate requires a swift response.

“Landlords have a major role to play to ensure retailers can operate in the short term for the long-term benefit of all stakeholders.

"Since the outbreak of COVID-19, we have closed two stores in Hong Kong and we are prepared to close many more stores globally if landlords do not respond to the current crisis.”

Premier Retail owns a number of prolific fashion brands including Peter Alexander, Just Jeans, Portmans, Jay Jays and Dotti.

McInnes and billionaire Premier boss Solomon Lew have long campaigned for fairer rental rates.

16 Mar, 2020
Paul Zahra to take over as CEO of the ARA
Inside Retail

Former CEO of David Jones Paul Zahra will succeed Russell Zimmerman as chief executive of retail’s peak industry body, the Australian Retailers Association, in May.

Zahra said he was optimistic about the future of retail and looking forward to supporting and advocating for the ARA’s members.

“In the last twenty years, the disruption and transformation of the sector has been significant as a result of ongoing changes in technology and consumer behaviour,” he said in a statement announcing his appointment on Thursday.

“However, what excites me is the untold story of innovation, whether in store formats, in online marketplaces, or the many small businesses that started life in someone’s living room.”

Creating “one voice” for all retailers

The ARA council said Zahra has the leadership skills and retail expertise to transform the ARA into “one voice” for small, medium and large retailers, after a long-planned merger with the National Retail Association (NRA) fell through last year.

“Paul brings a deep understanding of retail and the issues and opportunities faced by the industry and our members,” said ARA president Rowan Hodge.

“His inclusive and progressive leadership style, retail and digital expertise, broad networks, experience leading transformation, and strong vision for the ARA and the future of retail will be invaluable as the organisation moves forward.”

Hodge also thanked Zimmerman for his commitment to the ARA and its members for the past decade.

Zimmerman announced his retirement plans last November, saying he was making way for a new leader who had “the energy, youth and wherewithal” to take the ARA into its next phase.

From Sunshine to CEO

Zahra has worked in retail from the age of 16, when he was hired as a causal shop assistant at Target Sunshine, before being promoted to become the chain’s youngest ever store manager at the age of 22.

He went on to hold senior leadership roles at Target, Officeworks and David Jones, where he rose through the ranks to became CEO.

Zahra is a long-time champion of diversity and inclusion in the workplace and previously served as the chair of PwC’s diversity and inclusion advisory board.

Recently, he has been advising companies and boards of startups, small businesses and private equity on a range of issues, including leadership, disruptive change, digital transformation and diversity and inclusion.

16 Mar, 2020
LVMH Converting Its Perfume Factories To Make Hand Sanitizer

LVMH announced today that it is converting three of its perfume manufacturing facilities where it normally makes fragrances for its Christian DiorGivenchy and Guerlain brands to make hand sanitizer instead. The first deliveries will be tomorrow and by the end of the first week, LVMH expects to have made 12 tons of the hydroalcoholic gel. The product will be given at no charge to French authorities and the largest hospital system in Europe.

LVMH is accomplishing several things with this move. It is, of course, responding to a shortage of hand sanitizer. But more than that, it is positioning itself to its consumers and its employees as doing what’s in the public interest. It is also justifying having its factories remain open and keeping its employees coming to work. All of those things make the company more purposeful and less commercial.

What’s so interesting about LVMH’s move is how quickly they are doing it and their understanding of what luxury means right now. Luxury used to be providing the highest quality products—now it means that and more. A true luxury business has to fill consumers’ needs at the highest level and by converting to hand sanitizer manufacturing, LVMH is doing just that. This moment is unique; at any other time, hand sanitizer for a luxury company would make no sense. But in this moment, perhaps even only this week or month, it’s appropriate and commendable to make what would normally be the most un-luxurious product and LVMH gets that. It is a great example of why they continue to be a leader in luxury.

It’s also interesting that LVMH did not present its switchover as producing its own branded hand sanitizer. There’s no indication that the hand sanitizer it is producing will be for one of its brands; it appears to be no-named. It’s counter to the idea that everything produced at the company is a luxurious product for high-end consumers. It’s highly flexible thinking that allows management to act in this way.

We are in a time where shutdowns will reduce profits all over the world. That is taking time for people to adjust to because it is happening so rapidly. What’s needed in this moment is for brands to look beyond the profits they are losing and ask what else they can do to preserve their position during this very difficult time for everyone. That’s what LVMH is doing.


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