News

16 Jan, 2020
Mosaic shares tumble on bushfire update
Financial Review

Investors have sent Mosaic Brands' market value tumbling in reaction to a dire sales update over the business impacts of bushfires.

The fashion retailer – formerly known as Noni B - saw its shares decline 17 per cent to $1.87 by the close of trade, with Wilsons analyst John Hynd labelling the update disappointing.

"This is, unfortunately, a downgrade to consensus estimates," he said. "Mosaic previously had a [2020 financial year estimate] EBITDA target of $75 million since acquiring the Specialty Fashion assets, but given today’s announcement it's looking increasingly unlikely they will achieve it."

The announcement comes as businesses begin to grapple with the full toll of the bushfires, which have burnt through more than 10.7 million hectares of land and killed an estimated 1 billion animals, on their trades.

As the owner of the Noni B, Rivers and Katies clothing chains among others, the company said bushfires had directly hit about 277 stores, with even more reeling from the frail consumer confidence levels left in the wake of the fires.

Overall, comparable sales for the half-year ended December 29 were 8 per cent lower than the year before, with a significant curtailment from the second half of November into December.

Mr Hynd, who has rated the stock "overweight" with a target price of $4.20, said Mosaic was more exposed than its competitors to bushfire-related risks.

"Mosaic has a more significant non-metro store footprint than City Chic, for example," he said.

But the analyst said the exposure was reasonable for the type of customer the company has and there were some clear positives from today’s release, especially given trading appeared to be encouraging until the second week of November.

Mr Hynd said the main positives out of Tuesday's announcement were that Mosaic remains net cash and had a strong cash conversion through the period.

"Gross margins continue to improve and operating cost efficiencies appear to have been better than we had expected," he said.

Mosaic said it had a net cash position of about $4 million.

"As a result, the board anticipates a dividend for the period consistent with the company’s dividend policy of 60 per cent to 70 per cent of profit after tax," Mosaic said.

Looking ahead

The company also said earnings before interest, tax, depreciation and amortisation were up 13 per cent to $33 million over the corresponding prior period for the first half of the 2020 financial year. And online sales, excluding those of the newly acquired EziBuy, contributed 10 per cent of revenue in the same period.

"The Group is well prepared for the second half, with a dedicated team, excellent product and a healthy stock position," Mosaic said.

"Second-half earnings are anticipated to demonstrate higher growth, relative to [the 2019 financial year], than in the first half, particularly given the extraordinary external factors that have impacted first-half revenue."

Mosaic chief executive Scott Evans was unavailable for comment on Tuesday.

In light of the bushfires, the retailer had also donated $50,000 to the St Vincent de Paul Bushfire Appeal and pledged $860,000 of clothes to the GIVIT charity.

"Mosaic Brands' team members and stores have strong relationships with their communities across the country – especially in many of the regions affected by the bushfires," it said.

"The group continues to monitor this catastrophic situation closely to ensure the safety of its team during these very difficult conditions. It is relieved to be able to report that, to date, all team members are safe."

 

16 Jan, 2020
Iain Nairn appointed president of Hudson’s Bay
Inside Retail Australia

Former David Jones and current kikki.K chief executive Iain Nairn has taken up the role of president at Hudson’s Bay, Canada’s most prominent department store chain. 

The business currently trades in 89 locations across Canada, operating in the fashion, beauty, home, accessories, and food verticals. 

Starting January 12th, Nairn reports directly to chief executive Helena Foulkes. 

“Few brands have such a strong awareness and connection with customers as does Hudson’s Bay, and I am thrilled to join such an iconic retail institution,” Nairn said. 

“I am looking forward to working with the team and building on the great work that has been underway to evolve the Hudson’s Bay experience across all channels.”

It isn’t clear whether Nairn will continue his role as chief executive of stationery retailer kikki.K, though Inside Retail has reached out for clarification. 

Foulkes said Hudson’s Bay had taken time to conduct a thorough global search for a replacement for former-chief executive Alison Coville, who stepped down in February 2019. 

“Iain brings strong leadership, sharp focus, and in-depth expertise that I believe will make a positive impact on Hudson’s Bay,” Foulkes said. 

“To date, the team has made great strides in fixing the fundamentals, evolving our service model and elevating our merchandise assortment. 

“There is a tremendous opportunity in Canada to deliver an outstanding customer experience, and I am excited to work with Iain to elevate the brand and drive for future success.”

16 Jan, 2020
Australian chain Jeanswest goes into voluntary administration
The Australian Business Review

The victims of the prolonged downturn in the nation’s $320bn retail sector keep piling up, with national jeans and fashion chain Jeanswest placed into voluntary administration on Wednesday, just weeks after the collapse of department store Harris Scarfe and the demise of women’s fashion chain Bardot.

The failure of Jeanswest threatens almost 1000 jobs and kicks off what could be a round of further retail collapses in the next few months.

Brands that limped into the Christmas sales could finally fail after what may have been a disappointing holiday trading period.

KPMG’s Peter Gothard and James Stewart were appointed voluntary administrators of the Australian operations of Jeanswest Corporation

The administration does not cover the New Zealand arm of the once popular denim chain.

The iconic Australian retail brand opened its first store in Perth in 1972.

Jeanswest now employs 988 people in 146 stores across Australia. It is best known for its denim, wardrobe staples and maternity wear.

Mr Gothard, a KPMG partner, said Jeanswest would continue to operate while the administrators analysed the business.

“The administrators will be looking at all options for the restructure or sale of this established Australian retail business and are seeking urgent expressions of interest from parties interested in acquiring or investing in the business,’’ Mr Gothard said.

James Stewart, KPMG’s retail restructuring practice leader, told The Australian he was hopeful a saviour would emerge but he admitted that amid the current retail malaise it was now a “buyer’s market”.

“It is fair to say that there are some retail assets being sold in the market and some that aren’t,’’ he said.

The denim chain, owned by the Yeung family, had encountered problems like those other Australian retailers had seen.

“Jeanswest is an iconic Australian denim brand, well known in the leisure and casual wear market place. Like many other retailers, the business has been challenged by current tough market conditions and pressure from online competition. The administration provides an opportunity for Jeanswest to restructure so as to better respond to the challenging Australian retail market.”

Parties interested in acquiring or recapitalising the business are encouraged to contact KPMG, with the first meeting of creditors of the company to be held in Melbourne on January 28.

Jeanswest has been struggling for years. The Australian operations were recently bought by local management from its parent group, the Hong Kong-listed Glorious Sun.

In 2017 the then Hong Kong-based owner of Jeans­west warned that Australians were more interested in splurging their disposable income on “lifestyle spending’’, such as travelling or a new plasma television, instead of buying a new pair of jeans, resulting in a “lethargic” and “slothful” retail environment where only discounting would shift stock.

Sales in Australia and New Zealand had dropped 12.3 per cent to $HK973.77m ($181.5m) in calendar 2016, from $HK1.1bn in 2015.

There could be further failures in the retail sector as many struggling companies that held out for the Christmas sales — which typically drive the majority of profits for the year — come up short.

Recent data collected by ANZ suggest that Christmas sales were disappointing. Peak Christmas season (December 16 until Boxing Day) was much weaker year than in the past few years. Card data shows sales down more than 5 per cent in 2019.

“Very strong Black Friday sales are likely to be behind the weaker-than usual December retail sales figures,” ANZ said.

10 Jan, 2020
The Reject Shop defends share spike from ASX query
inside retail

The Reject Shop defended a sudden spike in share price after a query by the ASX left the business one day to respond or risk suspension from the market. 

During the period between the 18th of December and the 6th of January, The Reject Shop’s share price jumped 41.6 per cent from a low of $2.86 to a high of $4.05 per share.

In response, the ASX questioned if there was some unannounced, confidential information that would have this effect on its share price, and if so, requested the business release the information, be put in a trading halt, or in a worst case scenario face suspension. 

According to listing rule 3, a company listed on the ASX is required to disclose any information that a “reasonable person” would expect to impact share price as soon as is reasonably possible.

According to the department store, it could be the announcement of Andre Reich as its new chief executive officer on December 13th that caused the sudden rise in share price, as well as a buy up of The Reject Shop shares by Grahger Retail Securities. However, it isn’t certain.

“The company is not aware of the reason for the recent trading in its securities,” company secretary Michael Freier wrote to the ASX. 

7 Jan, 2020
Boardriders surfs tough retail conditions
Financial Review

Dave Tanner just pulled off a "Triple Lindy", the infamously implausible dive executed by Rodney Dangerfield’s character in the 1986 comedy Back to School that utilised all three platforms and appeared – at least in slow motion – to go on forever.

While heading the special situations team at California-based Oaktree Capital Management, Tanner spearheaded a move that has played out over six-plus years: buy into beaten-down surf company Billabong International; buy into rival Quiksilver, force a distress for control taking it into Chapter 11 Bankruptcy, and turn the company around; then take control of ASX-listed Billabong, which nearly didn’t happen, and try to integrate the two fierce rivals.

It was deemed an impossible feat, but Tanner is on his way. With his 50th birthday around the corner, he is hoping 2020 will be a year of personal and professional celebrations.

For the past 18 months the turnaround agent has been leading the herculean effort of combining the two biggest names in surf to create a $US1.5 billion ($2.2 billion) giant. The meshing of the two legendary companies – both of which were founded in Australia in the 1970s – was always on the cards.

“That's a long string,” says Tanner, who runs parent company Boardriders from its Huntington Beach headquarters, south-east of downtown Los Angeles. It houses the namesake brands as well smaller labels Roxy, DC Shoes, RVCA, Element, Von Zipper, Xcel, Kustom, Honolua Surf Co and Palmers.

Tanner admits it’s not been an easy road to integration given the group's operations span 26 countries, nearly 600 retail doors, 300 shop-in-shops, and has nearly 10,000 staff on its books.

The company recently built a new sourcing hub in Hong Kong that serves all the brands in the region, and pushed every brand and region from the Billabong side onto one cloud-based e-commerce platform.

Tanner boasts Boardriders is well on its way to reaching its initial goal of extracting $US90 million of synergies, and he has a fresh target of $US106 million – just as well, given the total cost of the integration has climbed to $US120 million from about $US100 million.

Of the 4000-odd Billabong staff, about 300 have exited since the takeover.

Described as “smart, shrewd and focused” by one industry source, Tanner says there is a future for all these iconic brands, despite the historical under-investment.

“The thesis has always been to take these brands that have really incredible global platforms, pretty strong equities that had been underserved by the operational backend of the business, underserved by the capital structures, underserved by the operational discipline within the businesses and to bring them together to create a truly global platform that serves the brands and that keeps the brand identity and the creativity going,” he says.

With about 30 per cent of its integration to play out it's far from an easy paddle, especially with obstacles such as navigating the recent cyber attack on its internal systems. According to Stab Magazine, the cyber attack likely started in Australia with a virus-laden email, which spread throughout the company.

Tanner says no customer data was compromised but it was just one more distraction.

“We want to start moving sooner rather than later on reinvesting some of those gains back into the business."

The sale of Billabong to Oaktree kicked off a flurry of deals in the surf space. Rip Curl founders finally sold to Kathmandu in October, while Nike offloaded surf brand Hurley to Bluestar Alliance LLC. In April, Volcom was sold by Kering to Authentic Brands Group.

Aussie Peter Townend, the first world professional surfing champion in 1976, has built a 40-year career in brand development and now consults in the surf and skate industries.

Townend warned that while consolidation in the $US11 billion global board sports market is the "way things are heading", possible cannibalisation of design and product can be a “dangerous thing”.

“How can you really keep a clear separation when you have executives of each walking past each other every day?" says Townend, who was also the first athlete sponsored by Quiksilver.

"The athletes – which are important and a key part of the culture – are coming through the door past the competition. How can that not have an effect?”

Townend does, however, give Tanner credit for keeping the surf teams high profile. "Both surf teams are legit.”

Boardriders remains the highest supporter of athletes, spending tens of millions every year on team members including Quiksilver Pro France 2019 winner Jeremy Flores (Quiksilver) and six-time world champion surfer Stephanie Gilmore (Roxy).

Tanner says the athletes are a key part of keeping the brands front and centre of its core market. But so are boardshort collaborations with bands such as Metallica and Foo Fighters, which line the hall at Burleigh Heads HQ.

This world of boardshorts and the search for the perfect wave is a long way from the US Air Force Academy in Colorado, where Tanner attended as an undergraduate and later trained to be a pilot.

He spent seven years in active duty which included a one-year deployment to Iraq, where he mostly flew C-141 and C-5 aircraft. He visited Australia to "decompress" after his tour.

Post-military he worked in consulting at McKinsey & Co, and had a stint in US politics working at non-profit The Democracy Alliance.

Tanner is clear that the skills obtained in the military – resilience, ability to adapt, working under pressure, communication, the rigour put into every task – is not only handy in trying to run and merge a global business, but also in everyday life.

He is an early riser, waking up at 4.30am most days. He doesn’t surf but goes for a run, and uses that military discipline when travelling. He drinks a long black twice a day, and often enjoys a neat tequila or bourbon at night.

Olympic history

The inclusion of surfing in the 2020 Olympics in Tokyo will expose more people to surf culture at one time than any previous event. It will not mean much for surfing nations like Brazil, Australia and the US, but it will open up the sport to Africa and China.

Bob Mignogna, the former publisher of Surfing Magazine and former director-general of the ISA (the global body governing the sport within the Olympic Movement), says the inclusion in the Olympics will do more for the image of surfing and surfers than any other accomplishment.

“The Olympics will provide global distribution of a live TV audience in the billions, watched by people in every one of the 220 nations in the world recognised by the IOC,” he says. "Being in the Olympics has meant that National Olympic Committees are required to fund the development of the sport in their country.”

Tanner, North and Healy agree that Olympic surfing is a win for the sport, but it's also gaining exposure via Kelly Slater's Surf Ranch and Spanish technology Wavegarden, used in URBNSURF's Melbourne wave pool.

"Wave Pools is just part of the evolution of the sport that we needed to have," Healy says.

North says stand-up paddle boarding has also broadened the participation rate, while more people are looking to take active holidays.

Tanner says the company is pushing into new categories as part of its growth strategy, with a big focus on technical gear and building innovation to meet customer demands.

The Billabong Adventure Division will offer technical winter jackets, base layers, and products that have technical features like breathability or water-repellent features. Roxy Snow for women is another growth avenue.

“Roxy is a great-performing brand, it has lots of legs as the only women-focused action sports brand out there,” Tanner says.

Healy says Quiksilver Womens is also an untapped market. Quiksilver went into womenswear half a dozen years ago, but exited despite turning over $50 million in sales per year.

“We have done our research and it resonates with the female, we think it’s a significant opportunity to make Quiksilver play with both genders as we see the success of Billabong,” says Healy.

One well-placed industry source says that given strong leadership has been appointed all appears to be going well in the short term, and Boardriders is poised to achieve the projected cost reductions.

“Billabong’s position in the marketplace appears to be strong and gaining, while Quiksilver appears to be improving reputation-wise, although it has a ways to go to be close to its former prestigious self,” he says.

“The key to the business is their distribution strategy, especially within company-owned stores. What will be the growth of Boardriders-branded stores and will they carry all products? What about the individual brands’ stores – will they cross-sell Quik in Billabong stores and vice versa?"

The source says once all the cost savings are realised, the top-line sales and profits must start growing.

“The jury is out, but it appears they are headed in a good direction … for now,” he says.

As for Tanner and his Triple Lindy, he hopes it all pays off. (Tanner owns about 3 to 4 per cent of Boardriders). He won't say what is next for himself, but Oaktree is not a long-term owner of the business so eventually a public float or trade sale will be on deck.

"Life has a way of working out and right now I love what I'm doing, and our job is not done, so we'll see what happens," Tanner says.

7 Jan, 2020
LG's futuristic new TV rolls up into a box with the press of a button — and it might cost as much as $60,000
Business Insider Australia

That’s the rollable TV from LG. With the press of a button, it disappears into a relatively small rectangular box.

But the LG Signature OLED TV R, as it’s officially known, is more than just novel trickery – it’s a unique, impressive approach to new TV design. It was unveiled at last year’s big annual tech expo, CES 2019, and this year, we may finally know the price: The futuristic TV starts at a whopping $US60,000 for a 65-inch model.

LG has yet to put an official price on its rollable OLED TVs, but the company’s head of global marketing for home entertainment, JS Lee, told CNET the price tag. (We asked LG ourselves to confirm the US price, and we’ll update this post if we hear back.)

Here’s everything else we know so far about LG’s amazing rollable TV.

The LG Signature OLED TV R is the next step in the evolution of its “Signature” edition TVs, as LG is announcing for the first time a consumer version of the rollable TV concept.

LG’s Signature series boasts 4K Ultra HD / HDR capability that’s as good or better than the competition, and it does it on an OLED screen that’s less than a quarter-inch thick.

With the LG Signature OLED TV R, LG is putting that capability into a 65-inch screen that rolls into a relatively slim, attractive piece of furniture when you’re not using it.

The idea is simple and logical: To hide the massive black rectangles – screens – that are prevalent in the modern home.

LG’s solution is to roll it into an austere rectangular box that’s easily mistaken for modernist furniture.

One benefit of the design of LG’s rollable TV is that it can be used in more ways than a standard TV. In “Line” mode, it’s got a dedicated user interface that enables music playback and conveys information like time and weather. You can even use the built-in Amazon Alexa assistant to command it with your voice.

Better still: Even when the display is all the way closed, the soundbar built into the base can be used as a speaker. And for you audio-heads out there, LG describes the soundbar as a, “4.2-channel, 100W front-firing Dolby Atmos audio system.”

LG has yet to officially announce the price of the rollable LG Signature OLED TV R, but LG’s head of global marketing for home entertainment, JS Lee, told CNET it would start at $US60,000.

By comparison, the LG Signature OLED TV W8 is currently available in both 65-inch and 77-inch models, and both are so-called “Wallpaper” televisions that don’t roll up. That line of TVs starts at around $US7,000.

The big difference here is that the LG Signature OLED TV R rolls up into a stylish little rectangle, and that difference apparently costs a ton of money.

That it’s essentially a TV stand, TV, and soundbar all-in-one is sure to add a few more dollars to the bottom line, but the bulk of the price difference is assuredly due to its rollable gimmick.

It’s not clear exactly when these will go up for sale, but they’re part of the 2020 line-up from LG and are expected to become available to consumers in the second or third quarter of this year.

7 Jan, 2020
Consumer confidence key to retail recovery
Financial Review

Retail spending is expected to pick up in 2020, but only if consumers regain confidence in the economy and spend rather than save.

Despite record low interest rates, billions of dollars in government stimulus and signs of recovery in the housing market, retail sales grew in 2019 at the slowest pace since the global financial crisis as consumers took advantage of low rates and tax rebates to pay down debt rather than open their wallets.

However, analysts expect consumers to loosen the purse strings somewhat in 2020 if house prices continue to rise and interest rates fall further.

The one caveat is consumer confidence, which deteriorated through 2019 as economic growth stalled.

The Australian Retailers Association expects retail sales to rise between 2.4 and 2.6 per cent over the next 12 months, while Deloitte expects spending to grow 2.6 per cent.

While that's an improvement on 2019, it's well below the long-term average of 3.8 per cent and highlights the pressure on listed retailers to find profitable sources of growth.

"We're positive [about 2020] on the basis that house prices have turned the corner, interest rates are very low, fiscal stimulus is being handed out – all those things are ingredients for a better retail sales environment," says Citigroup's head of research, Craig Woolford.

"We know people have more money but they've chosen to save it rather than spend it," Woolford adds, pointing to a 6 per cent fall in credit card balances in the four months to October.

He believes interest rate cuts spooked consumers about the strength of the economy, but if house prices continue to rise and the job market remains stable, confidence will gradually return and the savings rate will decline.

"If house prices don't rise during 2020 there's definitely a risk to retail spending," he says.

Citigroup's top retail picks for 2020 are companies exposed to a rebound in discretionary spending, led by Super Retail Group, which owns Supercheap Auto, Macpac, Rebel and BCF.

"The stock has not rerated to the same extent as other discretionary retailers," Woolford says.

Citi also has buy recommendations on Accent Group, Baby Bunting, Beacon Lighting, Lovisa, Michael Hill and Nick Scali.

Woolford says the food and grocery market is becoming more rational, but Citi is restricted on Woolworths and neutral on Coles, saying its shares are fully priced after rising 32 per cent in 2019.

UBS retail analyst Ben Gilbert is also more hopeful about the outlook for consumer spending and hence consumer stocks this year, citing a survey that found spending intentions have improved as household wealth has risen.

"House prices have started to rise again – we believe this has translated into expectations of improving household wealth over the next 12 months," Gilbert says.

However, after a 27 per cent increase in the discretionary retail index in 2019 and a 22 per cent increase in the consumer staples index, value will be hard to find.

UBS has a sell rating on Coles, which is facing rising costs and earnings risk and needs to step up investments in supply chain and technology, and is neutral on Metcash and Woolworths.

UBS' top picks among smaller retailers include Myer, Super Retail Group, Adairs and Premier Investments (mainly because of the growth potential of its Smiggle brand).

7 Jan, 2020
Why ethical fashionistas are stepping into someone else’s shoes
Financial Review

If you’re interested in all things fashion but don’t engage with the resale market, this statistic will make you sit up straight: second-hand clothing was a $35 billion business in 2018, according to retail-analytics firm GlobalData.

And it’s growing quickly. By 2028, GlobalData says the fashion-resale market will have almost tripled in size to $93 billion, making it 1.5 times bigger than its opposite number, the so-called ‘fast fashion’ industry.

Already, consumers seem to be cooling on long-dominant fast-fashion retailers such as H&M and Zara, which encourage shoppers to buy cheap, buy often and discard regularly. Earlier this year, H&M announced the closure of 160 stores worldwide after accumulating more than $6 billion in unsold inventory in 2018.

Instead, many shoppers are turning to high-quality pre-owned fashion. GlobalData says the fashion-resale market grew 21 times faster than the broader fashion-retail market over the past three years, thanks largely to online sales platforms.

“Consumers of all ages are becoming more conscious of the ethical issues surrounding fast fashion and the fashion industry more generally,” says Millennial tech entrepreneur Hannon Comazzetto. After all, “When you pick up a T-shirt for $5, there are reasons why it’s that cheap.”

She continues: “People are starting to say no to fast fashion. They’re looking for alternatives. The biggest problem is that the alternatives are typically expensive.”

Sensing an opportunity, Comazzetto recently left behind a career in law to found AirRobe, an Australian online marketplace for pre-owned women’s designer and luxury fashion. The site soft-launched in October.

In many ways, AirRobe is similar to more established online resale platforms such as The RealReal and Vestiaire Collective, both of which boast many thousands of users. But unlike those platforms, Comazzetto’s site is geared towards Australians, which reduces delivery times and costs.

Another key difference is that AirRobe does not hold any stock itself. Whereas The RealReal and Vestiaire Collective take delivery of goods from sellers, then authenticate the goods and pass them along to buyers, AirRobe simply vets each listing before it goes live on its website, then organises a courier to pick up the item from the seller and deliver it to the buyer.

 

So how does AirRobe protect its users from scams? “We have an escrow payment solution,” explains Comazzetto. “As a buyer, your money doesn’t get sent to the vendor until you’ve received the item. You can click a button and say: ‘Something isn’t right here’ and send it back to us.”

Items on AirRobe tends to cost between 50 per cent and 70 per cent of their original retail price – affordable enough to attract a wide range of buyers, but still significantly more expensive than the fast-fashion alternative. Comazzetto says it’s a price that a growing number of consumers are willing to pay to be environmentally and ethically responsible.

The reason we have been successful is because we have created a community of sustainability-conscious, like-minded individuals.

— Matthew Preisz, KOT-J

Her bricks-and-mortar counterparts concur. “A significant proportion of our customers are conscious about the environment and sustainable fashion,” says Hugh Barton, store manager for Melbourne luxury reseller Bruce. “Those priorities are motivating them as much as pricing. We’ve seen a massive increase in people wanting to buy recycled leathers and recycled shoes, for example.”

Bruce, which has two physical stores in Melbourne, deals exclusively in top-tier designer and luxury brands, including avant-garde labels, and only accepts items in ‘as-new’ condition. Its stock is priced accordingly: on a recent visit to the Fitzroy store, Life & Leisure saw an Issey Miyake jacket-and-skirt set made from textured ‘egg carton’ polyester fabric for $1400; a Yohji Yamamoto three-piece suit for $880; and a Paul Harnden linen coat for $1550.

Many of the uncommon designers that Bruce stocks used to be sold brand-new at Assin, a luxury-retail institution that had two outlets in Melbourne and a third in Sydney. Assin closed for good in 2017 – at the time, its owners cited increased competition from e-commerce.

Barton says Bruce has prevailed in large part because of his clients’ desire to buy sustainably. In addition, he says, the resale ecosystem gives those consumers who prize individuality a chance to purchase rare and past-season items by the designers they love. High prices do not seem to be a deterrent.

“We recently received some Maison Margiela pieces from 2005, which we featured on our social media accounts, and they had a great response,” he says. “People know and understand the story about that particular collection – it’s iconic. They came in-store to see it, whether or not they bought a piece.”

Matthew Preisz, who co-owns the Sydney bricks-and-mortar reseller KOT-J (formerly King of the Jungle) in Newtown, says the scarcity of many of the items he stocks is a drawcard for his customers. “Our store is recommended to them as a bastion of the labels they love and don’t see enough of in Sydney.”

On a recent visit to KOT-J, those scarce luxury labels included Comme des Garçons (a black linen dress from 2008, for $650); the now-defunct Japanese brand Number (N)ine (camouflage pants from 2004, for $570); and Boris Bidjan Saberi (a boiled-wool zip hoodie from 2010, for $485).

Preisz says foot traffic in the store “has completely exceeded our expectations” since KOT-J opened in 2018. “We feel the reason KOT-J has been successful so far is because we have created a community of sustainability-conscious, like-minded individuals.” Recent customers have included high-schoolers, stylish Baby Boomers, drag queens and more besides, he says.

“A gentleman walking past in a business suit might do a double-take when he spots our shelf of cult Rick Owens sneakers,” Preisz says. “Or a stylish mum with kids and dogs in tow will stop by to tell us stories of her past career as a stylist or design assistant for some of the very labels we have in store.”

Preisz nominates accessibility as another reason he believes the resale market will continue to grow. He points out that many consumers find walking into traditional luxury boutiques intimidating.

“Luxury fashion is inherently elitist,” he says. “The barrier to entry is far from just financial for many consumers.”

7 Jan, 2020
440 jobs, 21 stores to go at Harris Scarfe
Financial Review

About 440 jobs will be lost and 21 stores closed as part of Harris Scarfe's troubled journey into receivership, which started shortly before Christmas.

 

Deloitte told employees that 440 jobs would be lost and 21 stores closed. AAP

The decision was announced to employees on Monday.

"We have continued to trade the business since our appointment, and this has been well supported by loyal employees and customers," Deloitte Restructuring Services partner Vaughan Strawbridge said.

"So this has been a difficult decision, but one necessary to position the Harris Scarfe business for a successful sale and continued operation."

Mr Strawbridge and fellow Deloitte partners Kathryn Evans and Tim Norman said 44 stores would remain in the Harris Scarfe portfolio for sale – five more than initially anticipated.

It is unclear when the stores will be sold.

Of the stores to be closed, two are in Western Australia, six in Queensland, eight in NSW, three in Victoria, one in South Australia and another in the ACT. All will close within four weeks.

"All efforts are being made to redeploy affected staff around the rest of the store network, and all staff that leave the business will receive all wages and entitlements in full on the closure of individual stores," Mr Strawbridge said.

"Our review of the store network included a range of factors, including past and likely future profitability.

"Going forward, we certainly remain focused on running the broader store network, and selling the business as the best outcome for remaining employees and suppliers."

While Harris Scarfe is not the only retailer to unexpectedly collapse in recent times,  it was by far the largest when it entered voluntary administration on December 11.

Just a month earlier, the previous owner Greenlit Brands agreed to sell Harris Scarfe, Best & Less and Postie Plus to private equity firm Allegro Funds.

The sale allowed Greenlit to focus on its more profitable brands like Freedom, Fantastic Furniture, Snooze and Plush.

Yet shortly after the deal settled on December 2, Allegro realised the loss-making Harris Scarfe could not continue as a stand-alone business without major restructuring.

The private equity firm appointed BDO's Andrew Sallway and Duncan Clubb as voluntary administrators on December 11. They later that day named Deloitte Restructuring Services as the receivers.

At the time, the union representing Harris Scarfe employees, the Shop Distributive and Allied Employees Association, said it planned to file a dispute with the Fair Work Commission over the decision.

'Employees pay the price'

On Monday, SDA secretary Josh Peak said the development saddened him.

"Let there be no mistake, the events of today are built on the decisions of the past," he said. "Unfortunately, the ones who have to pay the price for these poor decisions are not the decision-makers, but the retail employees – and the families they support – who will find themselves out of a job this year.

"The SDA’s top priority is to ensure that all entitlements are honoured and paid out to all employees who will be out of a job next month."

This is not the first time the retail chain had struggled. In 2001, when the company was listed on the ASX, Harris Scarfe collapsed under $160 million of debt.

The controlling Trescowthick family lost $31.5 million in the ordeal, which also saw chairman Adam Trescowthick face several charges which Commonwealth prosecutors later dropped.

7 Jan, 2020
Fashion label Zimmermann to test investor interest
Financial Review

Luxury fashion label Zimmermann has appointed Rothschild Australia to test buyer appetite for the business, as its high-profile United States investor prepares to sell out.

US private equity firm General Atlantic, which was an early investor in tech giants including Slack, Facebook and Alibaba, took a minority stake in Zimmermann in March 2016 for an undisclosed amount, in order to support the label’s American rollout.

With 13 stores now established in the US, and more outlets set to be opened in America and Europe in 2020, Rothschild is expected to pitch Zimmermann as a global expansion story.

It is understood the founders of Zimmermann, sisters Nicky and Simone Zimmermann, are open to selling down their personal stakes, but are keen to stay invested and deeply involved in the business.

The size of any selldown by the founders would depend on the buyers and their plans for Zimmermann, sources said.

It is understood that the group’s overseas expansion has previously led to approaches from a range of international trade buyers and private equity investors. Rothschild advised on the sale of the stake to General Athletic four years ago.

Sources said indicative bids were submitted to Rothschild before Christmas, with a handful of parties ushered through to the second round of the auction.

Private equity firms are expected to be interested in Zimmerman, which makes earnings of $50 million to $60 million. Sources said The Carlyle Group was among sponsors that had taken an early look.

The label, which counts the Duchess of Cambridge and fellow British royal Princess Beatrice as fans – the latter wore a Zimmermann dress in the official photographs to announce her engagement last year – has 38 stores around the world, including 21 in Australia and four in Europe.

A Zimmermann spokesperson was not available for comment

Nicky Zimmermann started the label in 1991, designing dresses and selling them at Paddington Market in Sydney. An appearance in Australian Vogue magazine created a surge of interest that allowed her to open a small store in Darlinghurst.

The label’s early push into swimwear helped accelerate its expansion into overseas markets. Zimmermann is a feature each year at New York Fashion Week and has used the city as the base for its American expansion.

It sells its garments through the retail stores as well as online and wholesale.

While many Australian fashion labels have struggled in recent years, with big names including Karen Millen, Metalicus and Sambag collapsing, luxury brands have fared better. Late last year, European luxury giant LVMH acquired Tiffany & Co in a deal worth more than $23 billion.

Zimmermann will be the second luxury fashion brand to test market appetite in the past 12 months. The owner of RM Williams, L Catterton, has been running a sale process for the Australian bookmaker since May last year.

23 Dec, 2019
Retail's new rules of engagement
SOURCE:
AFR
AFR

Super Retail Group chief executive Anthony Heraghty says price, range and convenience is now no longer enough for top retailers.

The sudden collapse of discount department store Harris Scarfe into receivership last week was a brutal reminder of the fragility of the Australian consumer, and the pain being felt across the retail sector.

While Harris Scarfe is but one of a host of retailers to hit the wall in recent years, its collapse – so close to Christmas, and just weeks after it had been bought out by private equity firm Allegro Funds – still came as a shock.

The likelihood of Harris Scarfe being bought out seems pretty reasonable. But if there is a lesson from its collapse, it is that it is terribly difficult to be a general retailer, and a particularly a mainly physical one.

It’s an argument that Anthony Heraghty, the chief executive of Super Retail Group, has been making for some time. Super Retail is home to brands including Rebel Sports, Super Cheap Auto, BCF and Macpac.

Speaking to this column before Harris Scarfe’s collapse, Heraghty explained that top retailers can no longer just rely on winning customers and instead must create what he describes as fanatics – rusted-on, loyal customers who have a real connection to the retailer.

Fortunately for Heraghty and his investors – who have watched Super Retail shares soar 31.5 per cent since the start of the year despite the difficult economic backdrop – this is something that specialist retailers are best placed to do.

“If you’re a purveyor of general merchandise, it’s really hard to get that visceral customer connection,” Heraghty says.

“We think the days of creating a sustainable differentiation through range, price and convenience are over.”

What’s not over, though, is the importance of physical stores. Transaction data that Super Retail tracks through its loyalty program participants suggests that only 2 per cent of customers don’t use a store at all.

“Even Amazon is playing an omni-channel strategy,” Heraghty points out. “I think we can put that to bed and say yes, the world is not flat, it’s an omni-world.”

Obviously, Super Retail's strong bricks and mortar sales have much to do with the sort of goods that it sells across its chains – buying a tent or a kayak or even a fishing rod is a task many would prefer to do in store.

And Heraghty happily concedes that the categories Super Retail operates in – essentially sports and outdoors – are much easier to generate enthusiasm around than many other products.

But the challenge for Heraghty is how he leverages these advantages.

The former boss of Super Retail’s outdoor division, who also had stints at Pacific Brands and Fosters, was appointed chief executive in February, after former chief Peter Birtles brought forward his retirement following an underpayment scandal at the company.

While he wouldn’t discuss trading heading into the vital Christmas period, Super Retail’s last trading update in October suggested the business was in solid shape, with like-for-like sales growth of 2.7 per cent at Super Cheap Auto in the first 16 weeks of the 2020 financial year, 3.1 per cent growth at Rebel and 6.5 per cent growth at BCF. Total sales at Macpac increased 3.8 per cent, but like-for-likes  fell 2.1 per cent as the chain cycled against a strong result in the prior period.

Heraghty’s plan to create more fanatics has two intertwined strategies – people and data.

Super Retail’s data suggests the biggest driver of customer satisfaction is knowledgeable staff, so Heraghty has poured the training into staff.

“Personal connectivity matters – and the store network delivers,” he says.

Heraghty is also determined to have more than six million active customers in the company's loyalty programs, who already account for 56 per cent of group sales. Better data and analytics will allow marketing, merchandising and pricing that is better tailored to loyalty program members.

“We haven’t leveraged that and nor have we ... appropriately compensated customers for the details they give us,” he concedes.

There is science to this, but also art. The top 100 customers in the BCF loyalty program were recently sent a case of beer as a thank you, while at this year’s Bathurst car race, a group of Super Cheap Auto’s best customers were given tours of pit lane at the famous racetrack.

Those customers, Heraghty argues, will be fanatics for life. The question is how to industrialise that.

12 Dec, 2019
Inside Retail Australia

David Jones has lifted the curtain on the latest refurbishment at its Elizabeth Street store in Sydney – a new ground-floor luxury beauty and accessories department.

According to CEO Ian Moir, the 3500sqm space heralds a return to the glamorous days when David Jones was seen as “the grand old dame of luxury retail”, combining the old with the new. 

The floor features store-in-store concepts from some of the biggest international luxury brands in the world, including Chanel, Dior, Louis Vuitton, Burberry, Guerlain, Gucci and more. The level also houses three beauty treatment rooms for La Prairie, La Mer and Rationale.

“I think we’ve created something really special and we’ve created it right in the epicentre of luxury retail in Sydney. But with this old building, we can create something others can’t. We are proud of it and I think our customers will be very proud of it,” Moir said during a media call on Tuesday. 

“It’s a beautiful, elegant store, it’s a wonderful experience. I think people will feel what they used to feel when coming to David Jones – a sense of joy and wonder, it’s exciting and engaging.”

“Gucci is probably the most hotly anticipated beauty brand of the moment. It launched globally in May and has sold over a million lipsticks already, so we’re excited to offer this to Sydneysiders,” Rachel Duffy Packer, David Jones’ general manager of beauty, said.  

“It will be the first of its kind in Australia,” she said, pointing to the craftsmanship of the space and the handpainted panels. According to Duffy Packer, the concept is one of only 50 from Gucci around the world.

While department stores globally have been struggling to remain relevant and compete with online retailers, Moir is confident that customers will enjoy the new offering at the Elizabeth Street store. 

“Every great brand in the world is represented in one store, it’s a carefully edited choice that’s been made based on the understanding of who our customer is and what the market is, so it makes shopping a great experience that will resonate unbelievably well, not just with local customers, but those from overseas, particularly the Asian tourist,” he said. 

The layout of the store has undergone a transformation, moving from the “traditional beauty boxes” to a more open and approachable luxury environment, explained Duffy Packer.

“We feel that reflects how the customer shops, so they can meander through the brands. The customer is becoming increasingly less loyal to one brand and likes to shop across multiple brands,” she said.

The beauty sector has boomed in recent years, as can be seen in nearby Pitt Street Mall, where a raft of new stores and refurbishments have taken place. 

Just around the corner from David Jones’ Elizabeth Street store is global beauty giant Sephora. Myer also refurbished its beauty level earlier this year, while Innisfree recently opened a new store and Aesop launched its largest store in the world in the mall in September. Meanwhile, Mecca is located at The Strand, a short walk away.

“I think the beauty of a department store is we have the space and the environment to create a full expression of many of these brands,” noted Duffy Packer. 

“The customer can come and be fully immersed in the brand. As we do with all our David Jones stores, we have beauty service rooms that set us apart from the specialty environments, so we can give not only product but the great service alongside it.”

The refurbishment of the Elizabeth Street store has been criticised for disrupting the sales performance of the business, yet Moir claimed that even though foot traffic is down by a third, every level is “performing above expectations”. The store accounts for more than 15 per cent of the entire David Jones business.

“It’s a difficult customer experience at the moment, but when it opens up, it’ll be totally different, we’ll have foot traffic back again and I hope and pray that this store will perform way above its expectations,” he said.

Scheduled for completion in 2020, the $400 million transformation first kicked off in August 2017 and has since gone over budget, although that’s hardly surprising, said Moir. 

“It’s difficult, you’re dealing with a heritage building. It ain’t easy and this is on steroids, so it’s no surprise that we hit a few issues,” he said. 

“Also sometimes you know what? We just have to do it, we have to create it for the right customer experience. We’re over budget by about $20 million and at the end of the day, it’s no great surprise at a project of this scale.”

12 Dec, 2019
Harris Scarfe joins the list of retail casualties
Financial Review

Department store retailer Harris Scarfe has gone into receivership just two weeks before Christmas, and less than a month after owner Greenlit Brands agreed to sell the chain to private equity firm Allegro Funds.

Deloitte Restructuring Services partners Vaughan Strawbridge, Kathryn Evans and Tim Norman were appointed receivers and managers over Harris Scarfe by a secured lender on Wednesday following the appointment of Andrew Sallway and Duncan Clubb of BDO as voluntary administrators earlier in the day.

 

Harris Scarfe has gone into receivership less than a month after a deal to sell the chain to Allegro Funds. AFR

 

Last month Harris Scarfe's parent company, Greenlit Brands (formerly known as Steinhoff Asia Pacific) agreed to sell Harris Scarfe, Best & Less and plus-sized women's clothing chain Postie Plus as a "job lot" to Allegro Funds.

The sale enabled Greenlit Brands to focus on its more profitable household goods businesses, which include Freedom, Fantastic Furniture, Snooze and Plush.

The deal was completed on December 2, according to ASIC records. However, shortly after taking possession Allegro realised that the loss-making Harris Scarfe could not continue as a stand-alone business without major restructuring.

"Given the lack of profitability, the directors formed a view around the business and then appointed voluntary administrators," Mr Strawbridge told The Australian Financial Review.

The receivers will attempt to sell Harris Scarfe as a going concern while restructuring the business, possibly closing loss-making stores.

"There are challenges in the business – we'll look at how can we maximise the attractiveness of the business and set it up for success," Mr Strawbridge said.

Greenlit is believed to have previously attempted to sell Harris Scarfe as a stand-alone business, without success. "Selling a business through the administration process is very different," Mr Strawbridge said.

Harris Scarfe has 66 stores in Victoria, South Australia and Tasmania and has sales of about $380 million a year and 1800 staff.

It sells bed linen, kitchenware, homewares, electrical appliances and clothing, and competes with Myer as well as Woolworths' Big W and Wesfarmers' Kmart and Target chains.

Harris Scarfe also licenses the Debenham's brand in Australia and opened a small-format Debenham's department store in Melbourne's Collins Lane two years ago. Harris Scarfe announced in July the store would close early in the New Year.

Mr Strawbridge said trading at Harris Scarfe would continue as normal over the Christmas period and employees would be paid by the receivers, who will attempt to preserve as many jobs as possible.

He  is confident there are sufficient assets to meet all employees’ entitlements. However, the level of creditors has yet to be determined.

Best & Less and Postie Plus are not affected by the Harris Scarfe administration.

Retail victims

Harris Scarfe is the latest and by far the largest retailer to collapse this year amid the toughest trading conditions since the global financial crisis.

Fast fashion retailer Bardot collapsed last month and discount retailer Dimmeys, which had 31 stores, closed its doors the same month.

Online activewear retailer Stylerunner went into administration in October (its assets have been bought by footwear retailer Accent Group) and footwear chain Ziera fell over in September (its assets have been bought by the Munro Footwear Group).

 

Fashion retailer Karen Millen, Napoleon Perdis Cosmetics, menswear chains Ed Harry and Roger David, online footwear retailer Shoes of Prey and Beds R Us have also gone into administration in the past 12 months.

Despite record low interest rates and recent tax cuts, which are estimated to have boosted household disposable incomes by about $16 billion, consumers remain reluctant to loosen the purse strings.

Retail sales in October were flat and annual retail sales growth has slowed to 2.1 per cent, a two-year low.

Staff blow

The Shop Distributive and Allied Employees Association, the union representing Harris Scarfe staff, said the collapse was "yet another reminder that private equity companies have no long-term interest in retail and the employees in our industry."

The SDA plans to file a dispute with the Fair Work Commission over Allegro's
failure to consult with the union before the announcement and to speak to the receivers to discuss whether there were sufficient funds to meet staff entitlements.

"This announcement has come without warning and employees are shocked and will be very concerned as they head into Christmas," said SDA national secretary Gerard Dwyer.

“Harris Scarfe has been in the hands of private equity firm Allegro Funds for less than
a month. What has happened in that very short time is a reminder that such outfits are
simply interested in ripping what they can out of the company they have bought rather
than having any intention of ensuring the business becomes a going concern."

Harris Scarfe has a chequered history. It collapsed in 2001 under debts of $160 million when it was listed on the ASX and controlled by Melbourne's blue-blood Trescowthick family, which gained control of the chain in the 1970s.

The Trescowthick family lost $31.5 million in the collapse and former chairman Adam Trescowthick faced a number of charges in court actions which followed, but Commonwealth prosecutors in 2006 dropped 26 dishonesty charges against him.

Mr Trescowthick had been partially blamed for the collapse and had denied instructing the former Harris Scarfe chief financial officer to inflate profit figures in the years from 1996 to 2001.

12 Dec, 2019
Brand saved! Collapsed empire has new owner
SOURCE:
ragtrader
Ragtrader

Australian footwear business Munro Footwear Group has acquired the Ziera and Kumfs brands through its wholesale division Styling Services. 

Ziera, formerly branded as Kumfs, was placed into voluntary administration in September. After no interest was secured to purchase the entire Ziera business, it was then announced in November that the business would close stores in Australia and New Zealand.

At the time of announcing store closures, administrator Conor Elhinney a "slimmed down" version of the business could attract buyers in the future. 

This prediction has come to fruition with the MFG acquisition not extending to the Ziera-branded retail operations which will continue to be closed by the administrators.

This process is expected to take until the end of the year at which point the Ziera website will transfer to MFG. 

During this time the Styling Services team will continue to work closely with the Ziera business, its factories and current wholesale customers to ensure a smooth transition. 

MFG CEO Jay Munro said that the acquisition will expand the business' portfolio of comfort brands. 

"We know how important comfort is to our customers and that comfort is a rapidly growing category, and Ziera is a name synonymous with comfort.

"By combining Ziera’s 70 years of expertise in comfort technology with our successful history in supplying independent and major retailers, I’m confident that we will further develop the Ziera brand and offering for current and future customers. 

"On behalf of the Munro Family and Styling Services, I warmly welcome the Ziera brand and customers into our Group.

"We’re genuinely excited about the opportunity of adding our touch to what has been an industry leading and iconic comfort brand," he said. 

Ziera will join Styling Services' wholesale brands including Colorado, Diana Ferrari and Mollini. 

 

12 Dec, 2019
David Jones returns to “the grand old dame of luxury retail”
SOURCE:
Retail
inside retail

David Jones has lifted the curtain on the latest refurbishment at its Elizabeth Street store in Sydney – a new ground-floor luxury beauty and accessories department.

According to CEO Ian Moir, the 3500sqm space heralds a return to the glamorous days when David Jones was seen as “the grand old dame of luxury retail”, combining the old with the new.

The floor features store-in-store concepts from some of the biggest international luxury brands in the world, including Chanel, Dior, Louis Vuitton, Burberry, Guerlain, Gucci and more. The level also houses three beauty treatment rooms for La Prairie, La Mer and Rationale.

“I think we’ve created something really special and we’ve created it right in the epicentre of luxury retail in Sydney. But with this old building, we can create something others can’t. We are proud of it and I think our customers will be very proud of it,” Moir said during a media call on Tuesday.

“It’s a beautiful, elegant store, it’s a wonderful experience. I think people will feel what they used to feel when coming to David Jones – a sense of joy and wonder, it’s exciting and engaging.”

One of the highlights of the floor is the impressive Gucci space. 

“Gucci is probably the most hotly anticipated beauty brand of the moment. It launched globally in May and has sold over a million lipsticks already, so we’re excited to offer this to Sydneysiders,” Rachel Duffy Packer, David Jones’ general manager of beauty, said.

“It will be the first of its kind in Australia,” she said, pointing to the craftsmanship of the space and the handpainted panels. According to Duffy Packer, the concept is one of only 50 from Gucci around the world.

While department stores globally have been struggling to remain relevant and compete with online retailers, Moir is confident that customers will enjoy the new offering at the Elizabeth Street store. 

“Every great brand in the world is represented in one store, it’s a carefully edited choice that’s been made based on the understanding of who our customer is and what the market is, so it makes shopping a great experience that will resonate unbelievably well, not just with local customers, but those from overseas, particularly the Asian tourist,” he said.

The layout of the store has undergone a transformation, moving from the “traditional beauty boxes” to a more open and approachable luxury environment, explained Duffy Packer.

“We feel that reflects how the customer shops, so they can meander through the brands. The customer is becoming increasingly less loyal to one brand and likes to shop across multiple brands,” she said.

The beauty sector has boomed in recent years, as can be seen in nearby Pitt Street Mall, where a raft of new stores and refurbishments have taken place.

Just around the corner from David Jones’ Elizabeth Street store is global beauty giant Sephora. Myer also refurbished its beauty level earlier this year, while Innisfree recently opened a new store and Aesop launched its largest store in the world in the mall in September. Meanwhile, Mecca is located at The Strand, a short walk away.

“I think the beauty of a department store is we have the space and the environment to create a full expression of many of these brands,” noted Duffy Packer.

“The customer can come and be fully immersed in the brand. As we do with all our David Jones stores, we have beauty service rooms that set us apart from the specialty environments, so we can give not only product but the great service alongside it.”

The refurbishment of the Elizabeth Street store has been criticised for disrupting the sales performance of the business, yet Moir claimed that even though foot traffic is down by a third, every level is “performing above expectations”. The store accounts for more than 15 per cent of the entire David Jones business.

“It’s a difficult customer experience at the moment, but when it opens up, it’ll be totally different, we’ll have foot traffic back again and I hope and pray that this store will perform way above its expectations,” he said.

Scheduled for completion in 2020, the $400 million transformation first kicked off in August 2017 and has since gone over budget, although that’s hardly surprising, said Moir.

“It’s difficult, you’re dealing with a heritage building. It ain’t easy and this is on steroids, so it’s no surprise that we hit a few issues,” he said.

“Also sometimes you know what? We just have to do it, we have to create it for the right customer experience. We’re over budget by about $20 million and at the end of the day, it’s no great surprise at a project of this scale.”

12 Dec, 2019
Harris Scarfe joins the list of retail casualties
SOURCE:
AFR
AFR

Department store retailer Harris Scarfe has gone into receivership just two weeks before Christmas, and less than a month after owner Greenlit Brands agreed to sell the chain to private equity firm Allegro Funds.

Deloitte Restructuring Services partners Vaughan Strawbridge, Kathryn Evans and Tim Norman were appointed receivers and managers over Harris Scarfe by a secured lender on Wednesday following the appointment of Andrew Sallway and Duncan Clubb of BDO as voluntary administrators earlier in the day.

Last month Harris Scarfe's parent company, Greenlit Brands (formerly known as Steinhoff Asia Pacific) agreed to sell Harris Scarfe, Best & Less and plus-sized women's clothing chain Postie Plus as a "job lot" to Allegro Funds.

The sale enabled Greenlit Brands to focus on its more profitable household goods businesses, which include Freedom, Fantastic Furniture, Snooze and Plush.

The deal was completed on December 2, according to ASIC records. However, shortly after taking possession Allegro realised that the loss-making Harris Scarfe could not continue as a stand-alone business without major restructuring.

"Given the lack of profitability, the directors formed a view around the business and then appointed voluntary administrators," Mr Strawbridge told The Australian Financial Review.

The receivers will attempt to sell Harris Scarfe as a going concern while restructuring the business, possibly closing loss-making stores.

"There are challenges in the business – we'll look at how can we maximise the attractiveness of the business and set it up for success," Mr Strawbridge said.

Greenlit is believed to have previously attempted to sell Harris Scarfe as a stand-alone business, without success. "Selling a business through the administration process is very different," Mr Strawbridge said.

Harris Scarfe has 66 stores in Victoria, South Australia and Tasmania and has sales of about $380 million a year and 1800 staff.

It sells bed linen, kitchenware, homewares, electrical appliances and clothing, and competes with Myer as well as Woolworths' Big W and Wesfarmers' Kmart and Target chains.

Harris Scarfe also licenses the Debenham's brand in Australia and opened a small-format Debenham's department store in Melbourne's Collins Lane two years ago. Harris Scarfe announced in July the store would close early in the New Year.

Mr Strawbridge said trading at Harris Scarfe would continue as normal over the Christmas period and employees would be paid by the receivers, who will attempt to preserve as many jobs as possible.

He  is confident there are sufficient assets to meet all employees’ entitlements. However, the level of creditors has yet to be determined.

Best & Less and Postie Plus are not affected by the Harris Scarfe administration.

Retail victims

Harris Scarfe is the latest and by far the largest retailer to collapse this year amid the toughest trading conditions since the global financial crisis.

Fast fashion retailer Bardot collapsed last month and discount retailer Dimmeys, which had 31 stores, closed its doors the same month.

Online activewear retailer Stylerunner went into administration in October (its assets have been bought by footwear retailer Accent Group) and footwear chain Ziera fell over in September (its assets have been bought by the Munro Footwear Group).

Fashion retailer Karen Millen, Napoleon Perdis Cosmetics, menswear chains Ed Harry and Roger David, online footwear retailer Shoes of Prey and Beds R Us have also gone into administration in the past 12 months.

Despite record low interest rates and recent tax cuts, which are estimated to have boosted household disposable incomes by about $16 billion, consumers remain reluctant to loosen the purse strings.

Retail sales in October were flat and annual retail sales growth has slowed to 2.1 per cent, a two-year low.

Staff blow

The Shop Distributive and Allied Employees Association, the union representing Harris Scarfe staff, said the collapse was "yet another reminder that private equity companies have no long-term interest in retail and the employees in our industry."

The SDA plans to file a dispute with the Fair Work Commission over Allegro's
failure to consult with the union before the announcement and to speak to the receivers to discuss whether there were sufficient funds to meet staff entitlements.

"This announcement has come without warning and employees are shocked and will be very concerned as they head into Christmas," said SDA national secretary Gerard Dwyer.

“Harris Scarfe has been in the hands of private equity firm Allegro Funds for less than
a month. What has happened in that very short time is a reminder that such outfits are
simply interested in ripping what they can out of the company they have bought rather
than having any intention of ensuring the business becomes a going concern."

Harris Scarfe has a chequered history. It collapsed in 2001 under debts of $160 million when it was listed on the ASX and controlled by Melbourne's blue-blood Trescowthick family, which gained control of the chain in the 1970s.

The Trescowthick family lost $31.5 million in the collapse and former chairman Adam Trescowthick faced a number of charges in court actions which followed, but Commonwealth prosecutors in 2006 dropped 26 dishonesty charges against him.

Mr Trescowthick had been partially blamed for the collapse and had denied instructing the former Harris Scarfe chief financial officer to inflate profit figures in the years from 1996 to 2001.

 

12 Dec, 2019
Aussie start-up raises $70m from Goldman Sachs, Cisco
Financial Review

Sydney-based Secure Code Warrior has banked the largest ever external funding round for a local cyber security start-up, with Goldman Sachs, Forgepoint Capital and the venture fund of tech giant Cisco the lead investors in a $US47.6 million ($69.8 million) round aimed at establishing a global dominance in its market.

The company has attracted a host of big name companies, including Woolworths, Xero and Telstra locally and some of the world's largest banks, to use its game-style platform, which helps software developers write secure code.

The latest funding round, one of the largest locally this year, also sees Australian venture capital fund AirTree Ventures and Washington DC-based Paladin Capital follow on from their investment in a $US3.5 million funding round in September 2018.

The company's co-founder and chief executive, Pieter Danhieux, said the leap from a $3.5 million investment to $47.6 million in just over a year was an indication that when its first external funding occurred, the company was more advanced than many other start-ups that have attracted investment.

He said its early commercial success meant it could survive on its cash flow, and it is now looking to scale up dramatically. It is already established locally, in Europe and in the US, and has also begun winning clients in Asia.

Secure Code Warrior sells software as a service subscriptions to its platform, which includes training exercises that are styled like games and a Sensei plug-in that acts as a kind of spellchecker for coders, so they avoid writing security weaknesses into apps and services.

It will use the money raised to bulk up on staff, increasing its Sydney office from 120 people to about 250 in the next year, and will begin looking at potential acquisition targets in the adjacent cyber security start-up sector.

Cyber security is a board-level issue for almost all companies these days. Even traditional companies like banks, miners and retailers are all evolving into software companies.

— James Cameron, AirTree Ventures

"Everybody knows that there is a potential recession looming, and times of recession are a time of opportunity, because some other companies will struggle, but they have great technology," Mr Danhieux said.

"So it's an opportunity to scour the market, see what is good and try and maybe make an acquisition in that area ... While also focusing on staffing and organic growth through product development."

The company's learning platform is its biggest revenue generator. It has expanded in the past year to the extent that it now trains coders in 29 different coding languages, and has become increasingly popular outside its initial core market of banking and telecommunications.

Mr Danhieux said it was now being used by coders in large public sector environments including the European Commission, the Australian Taxation Office and the Department of Defence.

It is becoming more useful in day-to-day operations for coders due to a plan to integrate and embed it in developer tools, so that it can make suggestions on coding changes in real time rather than existing as a separate training platform.

 

Major opportunity

The trend towards DevOps, where developers write and then help run technology systems within organisations across all industry sectors, is a major opportunity for Secure Code Warrior. As more companies of all types start to look like tech companies, with larger teams of developers, the risk of companies writing cyber weaknesses into their operations increases.

Its gamification style remains fairly unique in the cyber security sector, but Mr Danhieux said there were a few competitors in the US starting to emerge with a similar idea.

He said Secure Code Warrior has a big enough head start to become established in big global enterprises, and that the large funding round, with carefully selected investors, will help it in that regard.

He said that he was initially doubtful that Goldman Sachs would be a suitable investor, due to an image he had of it as a big, old-fashioned institution, but that he was pleasantly surprised by just how well its venture team understood the opportunities in cyber security.

Goldmans had recognised the need for retraining, upskilling and securing work within its own operations and had made a strategic decision to target some investments in start-ups that were leading in the area.

"We heard CISOs (chief information security officers) and developers alike rave about Secure Code Warrior and the way it helps organisations build more secure code while helping maintain productivity and delivery timelines,” said David Campbell, managing director of Goldman Sachs’ merchant banking division .

 

"The digital enterprise and CI/CD (continuous integration and continuous delivery) are two major trends that are placing the app and the developer on the frontlines of the business. Increasingly the app is the business and if compromised, revenue and reputation are at risk."

Mr Campbell will now join the Secure Code Warrior board.

Fellow investor James Cameron, a partner at AirTree Ventures, said Secure Code Warrior was one of the fastest-growing Australian companies he had seen in a long time. He said the size and quality of investment coming into the company was indicative of the big opportunity it had ahead of it.

"They have really emerged as a global leader in a new category of software – developer-driven security – which is now a real focus for companies all around the world," Mr Cameron said.

"The market is enormous – cyber security is a board-level issue for almost all companies these days. Even traditional companies like banks, miners and retailers are all evolving into software companies.

"The new front in the cyber security war is being fought by their software developers, and Secure Code Warrior gives those developers the tools they need to write secure code."

12 Dec, 2019
Brand saved! Collapsed empire has new owner Read more at http://www.ragtrader.com.au/news/brand-saved-collapsed-empire-has-new-owner?utm_medium=email&utm_campaign=Newsletter+-+91219&utm_content=Newsletter+-+91219+CID_980aca134022242b1beb45c316763e5b&utm_s
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Ragtrader
Ragtrader

Australian footwear business Munro Footwear Group has acquired the Ziera and Kumfs brands through its wholesale division Styling Services. 

Ziera, formerly branded as Kumfs, was placed into voluntary administration in September. After no interest was secured to purchase the entire Ziera business, it was then announced in November that the business would close stores in Australia and New Zealand.

At the time of announcing store closures, administrator Conor Elhinney a "slimmed down" version of the business could attract buyers in the future. 

This prediction has come to fruition with the MFG acquisition not extending to the Ziera-branded retail operations which will continue to be closed by the administrators.

This process is expected to take until the end of the year at which point the Ziera website will transfer to MFG. 

During this time the Styling Services team will continue to work closely with the Ziera business, its factories and current wholesale customers to ensure a smooth transition. 

MFG CEO Jay Munro said that the acquisition will expand the business' portfolio of comfort brands. 

"We know how important comfort is to our customers and that comfort is a rapidly growing category, and Ziera is a name synonymous with comfort. 

"By combining Ziera’s 70 years of expertise in comfort technology with our successful history in supplying independent and major retailers, I’m confident that we will further develop the Ziera brand and offering for current and future customers. 

"On behalf of the Munro Family and Styling Services, I warmly welcome the Ziera brand and customers into our Group. 

"We’re genuinely excited about the opportunity of adding our touch to what has been an industry leading and iconic comfort brand," he said. 

Ziera will join Styling Services' wholesale brands including Colorado, Diana Ferrari and Mollini. 

 

5 Dec, 2019
Black Friday, Cyber Monday break retail drought
Financial Review

Retailers are hoping the tide has turned for consumer spending after stronger than expected sales over Black Friday and Cyber Monday and early signs confidence is improving as house prices rebound.

Online retailers Amazon and Kogan broke sales records over the four day shopping spree, and eBay, which was expecting double-digit sales growth, said spending rose more than four times faster than predicted.

Black Friday was also bigger than expected for bricks and mortar retailers, according to shopping centre owners Scentre Group and Vicinity Centres.

"We observed a strong uplift in customer and carpark traffic and valet services over the four-day period across our entire portfolio,” said Scentre Group director of customer experience Phil McAveety.

Vicinity said foot traffic at Chadstone shopping centre in Melbourne rose 24 per cent on Friday and 8 per cent over the weekend, traffic at Sydney's QVB rose 6 per cent and traffic at DFO South Wharf in Melbourne jumped 32 per cent on Friday,  22 per cent on Saturday and 11 per cent on Sunday.

National Australia Bank expected shoppers to spend $2.9 billion between Black Friday and Cyber Monday - $73 million more than last year - while the National Retail Association forecast spending online and in stores to reach $5 billion.

While it is too early to tell if sales met or beat those forecasts, retailers say the four-day spendathon, which started in the US in the 1950s and has spread around the world with the growth in online shopping, is now firmly established on the Australian retail calendar.

"Three to four years ago I wouldn't say nobody had heard of Black Friday, but people weren't talking about it - now everyone is talking about Black Friday," said Australian Retailers Association executive director Russell Zimmerman.

"It was massive and very well supported," he said. "I'd like to think it is a [turning point] but we'll wait to see what happens. We need to see confidence return."

Analysts are hoping a rebound in house prices (prices rose 1.7 per cent in November, the biggest rise in 16 years) will offset low wages growth and encourage consumers to loosen the purse strings after months of restraint.

Real retail sales fell 0.1 per cent in the September quarter and by 0.2 per cent over the past 12 months -  the worst result since the 1990-91 recession.

Citigroup analysts say consumers have used tax offsets to pay down credit card debts rather than spending on discretionary items, with credit card balances falling 6 per cent, or $600 million, since June.

However, this could be positive for spending in November and December, while the increase in house prices pointed to improving sales in the first half of 2020.

Consumer confidence is also improving. According to the ANZ-Roy Morgan survey, sentiment rose 1.2 per cent to 108.1 points this week, but remains below the long-term average of 113.1 points held since 1990.

UBS analyst Ben Gilbert said anecdotal feedback from retailers about Black Friday/Cyber Monday was very strong, helped by the fact the promotions were a week closer to Christmas and shoppers used the sales to buy presents.

"We've seen generally that if consumers are given a reason to spend, if there's something that excites them, they have the capacity to spend - it's a matter of enticing the consumer and giving them something too good to pass up," he  said.

"The question is what was pulled forward and what is incremental," he added, echoing fears retailers may have to work even harder over the next few weeks to achieve Christmas sales budgets.

According to ANZ research, the so-called ''Christmas effect'' is waning and the traditional December sales uplift has fallen from around 44 per cent between 1983 and 1989 to around 28 per cent because of the growth of online retailing and heavy discounting coming into the Christmas season.

“2019 is the first time in many years that Black Friday has fallen so late in November," increasing the number of people buying Christmas gifts,'' said eBay's head of retail insights Gavin Dennis.

"It will be interesting to see how an earlier Black Friday will affect this trend in 2020.”

Mr Gilbert believes the ''wealth effect'' of rising house prices might encourage consumers to spend more rather than save.

"While spending might not be picking up yet, if people are feeling wealthier there comes a point when they say 'the equity in my house is worth more' and they'll start shopping again," he said.

 

5 Dec, 2019
David Jones faces budget blowout for Elizabeth Street refurbishment
The Sydney Morning Herald

Department store David Jones has suffered a $20 million budget blowout to the refurbishment of its flagship Sydney store, in another blow for the already languishing merchant.

The revelation, buried within documents sent to prospective debt investors, comes as David Jones reported a 2.1 per cent drop in quarterly sales amid a weak trading environment

In the information memorandum sent to prospective investors for the company's recent debt raise, the retailer stated it was investing "approximately $220 million" in the redevelopment of its store on Elizabeth Street in Sydney.

This figure reflects a $20 million increase on David Jones' previously stated $200 million figure, which it had re-affirmed to the market at its full-year results in August.

A spokesperson for David Jones confirmed the increase, saying while the refurbishment was "progressing well" it had incurred some additional costs.

“The refurbishment of our Elizabeth Street flagship is progressing well with several floors already trading and Ground Floor set to open in coming weeks," they said

"As expected with a project of this size and significance there has been some incremental cost and this has been at a level within our expectations."

The refresh is slated for completion in March 2020 and will see it grow retail space by almost 40 per cent while making space for new bars and cafes.

But the closure and gradual re-opening of Elizabeth Street's 12 floors has cost the company, with the $20 million in additional costs an unwanted blow for the struggling retailer.

At its full-year results in August, David Jones' operating profit dropped from $64 million to $37 million, with comparable sales down 0.1 per cent, a result parent company Woolworths Holdings partially pinned on the disruption caused by the refurbishment.

A month earlier it recorded an impairment charge of $437.4 millionfor the David Jones brand, contributing to a total of $1.1 billion wiped off the company's value in the last two years.

In a trading update today, the company again blamed the re-fit for a 2.1 per cent drop in total sales for the start of the financial year.

Sales on a like-for-like basis dropped 0.7 per cent, partially helped by sharp growth from the business' online division, which grew 68 per cent over the 20 weeks to November 17.

Online now contributes to 10.4 per cent of David Jones' overall sales, up from 8 per cent at its full-year results and well towards the 20 per cent target the company hopes to achieve in five years.

Country Road Group, also owned by South African parent company Woolworths Holdings, saw its total sales drop sharply, down 4.7 per cent, and like-for-like sales also decline 0.7 per cent.

The group owns fashion labels Country Road, Politix, Mimco, Trenery and Witchery, with the company blaming the drop on its decision to cease supplying them to competing department store Myer.

Online sales for the group also grew healthily, up 7.7 per cent to represent 19.5 per cent of total sales.

National Australia Bank is currently in the process of running a $200 million debt raise for the retailer, with David Jones hoping to refinance its debts in order to diversify its funding sources.

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