22 Oct, 2019
Frank Lowy sells stake in Scentre Group
Inside Retail Australia

Sixty years after helping launch the first Westfield shopping centre in Blacktown, Frank Lowy has sold off his shares in Scentre Group, finalising his exit from the Australian retail market. 

The Lowy family’s 206.1 million shares sold for approximately $815 million to investment bank UBS, which went on to offer the shares for a 1.3 per cent discount on Wednesday’s closing price of $4.01, according the AFR.

Shares in Scentre Group fell 2.5 per cent on Thursday morning, sitting at $3.91 a share at the time of publication. 

The 87-year-old founder retired as chairman of Scentre Group in 2015, and from the role of chairman of Westfield Corporation in 2018, stating the decision was both frightening and a great relief. 

“All my life from a young man I have worked very hard and I enjoyed it very much, [but] I was really afraid with what I would do when I no longer had the responsibility,” Lowy said at a business conference in Sydney.

“And then the day came and I felt great relief instead of all those fears that I had – they all disappeared.

“It’s time to retire for me – if there is such a thing.”

Scentre Group and UBS have been contacted for comment. 

The property group also announced on Wednesday that chief operating officer Greg Miles would retire in 2020 after 23 years in the business. 

As a response, Scentre Group stated it would flatten its management structure. 

“Greg has been an invaluable member of the Scentre Group and Westfield executive teams for a significant period, the last four as Scentre Group’s chief operating officer where he has helped to shape a new organisation, brand and culture,” Scentre Group chief executive Peter Allen said. 

“We have been fortunate to have benefitted from Greg’s unparalleled experience, insight and judgement.”


22 Oct, 2019
Myer facing less fiery AGM as proxy firms endorse executive pay
The Age
The Age

Troubled department store giant Myer may break its unwanted streak of investor strikes at its annual general meeting (AGM) later this month, with some of the country's largest proxy advisory firms endorsing the pay packets of top executives including CEO John King.

Both ISS Governance and Glass Lewis have green-lighted the company's remuneration report, which outlines the pay deals for top executives. The Age and The Herald have also been told by well placed sources that prominent advisory firm Ownership Matters has also advised its clients to vote for all resolutions at the Myer meeting.'

These three firms also approved the company's remuneration report at Myer's fiery 2018 meeting which saw the retailer face a rare board spill after shareholders voted against the pay deal. But company sources are hopeful this year's AGM will be more subdued with the retailer recently returning to profitability.

At its AGM last year, 37.49 per cent of shareholders issued a protest vote against the company's report, instigated by majority shareholder and Premier Investments Chairman Solomon Lew.

This followed a similar vote in 2017, where Mr Lew convinced 29.3 per cent of shareholders to vote against the report.

Under federal laws if over 25 per cent of shareholders vote against a company's remuneration report for two straight years a spill vote is held to reelect the entire board.

Despite Myer receiving a rare second strike last year, the subsequent spill motion at its last AGM failed to reach the 50 per cent benchmark. The motion was backed by 35.90 per cent of shareholders as other major investors Investors Mutual and Wilson Asset Management continued to support the board.

Mr Lew has been a prominent critic of Myer ever since he acquired a majority stake in the retailer for $101 million at $1.15 a share in early 2017, an investment which has since halved in value.

He has been pushing to appoint new directors to Myer's board, which he believes are "an absolute disgrace" and "clueless", though has likened current chief executive John King to a decent jockey riding a poorly trained horse.

ISS and Glass Lewis both pointed to the efforts made by the Myer board to restructure its remuneration as a sign the company has listened to shareholders' demands.

These changes include a re-jigging of short-term incentives to be share-based rather than in cash, and a switch up of the comparison group of companies Myer uses to judge its long-term incentive hurdles.

Retailers such as JB Hi-Fi, Coles, Wesfarmers, Woolworths and Mr Lew's own Premier Investments are now included in the group.

"We have listened to shareholders and have made a number of changes to our remuneration structure during 2019 to better align the remuneration of our executives with the interest of our shareholders," chairman Garry Hounsell said last month.

Myer also posted its first profit growth in nine years at its 2019 financial year results, with underlying profit before one-off costs up 2.2 per cent to $33.2 million, a vast improvement on last year's $494 million loss.

This was despite a continued fall in sales, with much of the profit coming from significant cost-cutting. Regardless, shareholders were buoyed by the news, with shares soaring over 15 per cent.

Mr Lew himself has been uncharacteristically quiet on Myer, not engaging with questions about the retailer at Premier's own end-of-year results other than to say he could see some "green shoots" emerging.

Yet while ISS and Glass Lewis both recommended shareholders vote for the remuneration report, they both raised questions over Mr King's high level of fixed remuneration, which sits at $1.2 million.

Glass Lewis warned this was 104 per cent higher than fixed pay for comparable retail chief executives, but Myer defended King's salary, saying the company was competing for talent in a "very small pool" and the high salary package was necessary to attract and retain strong talent.

"While some shareholders may question the substantial quantum of the MD/CEO's fixed remuneration, in our view, the company has given an adequate explanation of its level," Glass Lewis said.

"We understand the need to attract highly capable executives in the face of challenging market conditions and the turnaround period that the company is undergoing."

21 Oct, 2019
Glassons taps into a $34 billion trend in QLD Read more at

Glassons will open its first vintage concept store at Robina Town Centre (QLD) today.

The site will include a Curated Vintage section, featuring items sourced from pre-loved markets globally, including vintage Levi's.

It comes amid a growing second-hand clothing market boom. 

Gumtree's 2018 Second Hand Economy Report revealed that 1.3 million Australians joined the $34 billion second hand sub-industry last year.

Glassons 300sqm store will also feature its full range of fashion, footwear and accessories as well as tech-first additions. These include digital jukebox CrowdDJ and click and collect.

Glassons operates 65 stores in Australia and New Zealand.


21 Oct, 2019
P.E Nation reveals new 2020 strategy: "it is of great importance" Read more at

P.E Nation will make half of its range more sustainable by the first quarter of 2020.

Dubbed 'The Conscious Nation', the intiative will see the brand implement a range of environmental strategies across production, packaging and delivery. 

It will follow the release of its first ever recycled athleisure set tomorrow. 

P.E Nation is set to drop an additional seven sustainable pieces in October 2019 as part of the Q4 launch.

This next instalment will consist of the ‘Flex It’ set, along with two new sports bras and three leggings, incorporating sustainable and recycled materials.

In addition to fabric-based improvements, P.E Nation is transitioning all packaging to be fully recyclable by the end of 2019.

Already using compostable envelopes and satchels, the brand will also use recyclable cardboard boxes and drawstring bags made from rPET (material made using recycled PET plastic) to further reduce their environmental impact.

The brand has re-designed all swing tags and labelling, which will come into effect by late 2019.

Recycled cardboards and post-consumer waste plastics (rPET) will be introduced for all swing tags, while woven and care labels will be comprised of 100% recycled polyester yarns.

Heat press printing will be introduced by Q1 2020 to further reduce environmental impact.

P.E Nation’s patches also will be made from recycled materials, appearing on the sleeves of jackets and sweats throughout the range.

P.E Nation is part of a group that is an AB member of SEDEX - an organisation dedicated to driving improvements in ethical and responsible business practices in global supply chain and Amfori Bepi - which provides a range of services that enable companies to drive focused, environmental improvements in their supply chain, and to trade with purpose.

Tomorrow, the brand will launch its first ever recycled athleisure set.

The 'Strike Set' is made from sustainable techno-fabric, ‘Vita Power by Carvico’. 

In addition to performance fabric attributes, Vita Power by Carvico is made of econyl regenerated nylon.

Econyl uses synthetic waste such as fishing nets to generate a new nylon yarn. 

It is not the brand's first initiative in this space, having launched a range of organic cotton tanks and tees in July 2019.

Co-founder Pip Edwards said this is a longstanding commitment. 

“As a brand, we are deeply committed to our people and the planet. The ongoing development of our social and environmental strategy is of great importance. 

"Our goal is to implement social and environmental practices across the whole business to ensure that we are delivering conscious fashion all the way from the supply chain directly to the customer.” 


21 Oct, 2019
Business Council lines up new president
Inside Retail Australia

Tim Reed, the former long-time boss of tech firm MYOB, is set to become the president of the Business Council of Australia, highlighting the growing influence of the modern economy on the nation’s big firms.

Mr Reed has been unanimously recommended by the BCA’s board to replace Grant King, who is stepping down after three years in the role, and as such is expected to be endorsed at the BCA’s AGM on November 20.

Mr Reed said he is “honoured and privileged” for this opportunity, having joined the board of the peak group for large businesses in 2017.

“The key thing for the BCA is to continue to prosecute the case that a competitive economy is what allows all Australians to prosper,” Mr Reed told reporters ahead Friday’s formal announcement.

He believes the top three challenges facing business and the BCA are skills shortages, regulation and the tax system.

He said state and federal governments must have the right policies in place for skills both in terms of migration and the education system.

Regulation must also help Australia to be competitive and not be stifled by red tape, while the tax system must encourage investment, particularly business investment.

He said it is important that company taxes continue to be examined, but acknowledged the government won’t return to the issue of reducing the 30 per cent tax rate for big business in this term.

However, he said in a majority of Australia’s 28 years of uninterrupted economic growth the company tax rate was below the OECD average but is now in the top quartile.

“I think believing we are going to have decades of economic growth while our company tax rate sits in the top quartile is naive,” Mr Reed said.

“We intend to make sure it remains on the agenda.”

However, Mr Reed does not believe the federal government should jump in with a round of stimulus measures in the face of a slowing economy.

“You have got monetary policy, you have fiscal policy and then you have regulation. We think the focus should be on the third of those,” he said.

He said the government has worked hard to get a surplus and won an election promising one and should be allowed to prosecute those policies it took to that poll.

But he is not impressed by the government’s so-called ‘big stick’ legislation that would force energy firms to be broken up if they fail to deliver cheaper energy prices.

He said the BCA has already spoken openly against forced divestments, believing it won’t bring down power prices while creating sovereign risk.

“We also acknowledge the government took that policy to the electorate. Therefore we are trying to ensure that the legislation is framed in a way that it does the least harm that it possibly can,” Mr Reed said.

21 Oct, 2019
Changing delivery demands put retail sites at risk
Financial Review

Retail landlords face the prospect of more tenants going to the wall as online sales grow faster than many retailers can reconfigure their sites to respond, rendering stores unprofitable and making them likely to close, consultancy EY warns.

Online will account for 19 per cent of Australia's retail sales by 2021, up from 7 per cent in 2016. But the greatest pressure for retailers and the landlords who accommodate them will come from demands for shorter delivery, said Martin Conneally, EY's global and Asia-Pacific logistics and fulfilment capability leader.

"While delivery times of seven and ten days may be seen as OK for some products, over the next year or two, next day is going to be the minimum acceptable offer for most retailers," Mr Conneally said in an interview.

“But real competitive advantage will come with same day delivery, or even better, delivery under two to four hours.”

The disruption of traditional retail was made starkly apparent this week with the purchase by Dexus of the 25,770 square metre large-format Homemaker Prospect retail centre near Blacktown in Sydney. It plans to turn the retail facility into an industrial property.

The scenario of changing retail demands painted by Mr Conneally suggests suburban Australia could see a similar level of disruption if traditional sites cannot meet changing demands.

The changing environment was already forcing retailers to reconfigure stores in strategic catchment areas of large cities – such as Geelong, Brighton, Brighton, Clayton and Musgrave in Melbourne, and Sydney's northern beaches, Alexandria, and Homebush – to reduce the front-of-store space available to displace stock for browsing customers and expand the back-of-store space to make it a logistical centre to enable fast local delivery, he said.

The country's largest supermarkets were already doing it, he said.

"It’s what we call a mini-fulfilment centre," Mr Conneally said.

"Woolworths have come out calling them 'micro-fulfilment centres'. Coles describes them as ‘dark stores’ based on the Tesco model."

But such a change in space configuration - which will be forced rapidly as online delivery expectations rise - would reduce the volume of walk-in sales for many retailers, he said.

"It needs an agility that most businesses cannot deal with," Mr Conneally said.

In most retail chains between 7 per cent to 15 per cent of stores were already unprofitable, but were kept open for strategic reasons or even basic ones such as being unable to get out of the lease. If those stores lost more of their retail footprint for the purposes of online fulfilment, they would become even more unprofitable and some stores that were profitable would also become unprofitable, he said.

"We’re on the brink of quite a few more retailers going through this administration process," he said.

"A lot of them. They’re reflective of stores becoming more unprofitable as they deal with competitive cannibalisation, whether dilution of store profit or through having to be servicing online orders through distribution centres."

17 Oct, 2019
The Reject Shop touts turnaround as same-store sales grow
Inside Retail Australia

The Reject Shop has announced a 0.3 per cent year-on-year increase in same-store sales for the first 15 weeks of FY20, its best Q1 comparable sales performance in four years.

“While only in the early stages of our turnaround, I’m pleased to communicate a return to positive comparable sales,” Dani Aquila, the discount retailer’s acting CEO, said in a trading update on Wednesday. 

The uplift comes after a 2.5 per cent decline in same-store sales in the second half of FY19. The retailer ultimately posted a full-year loss of $16.9 million including a $15.4 million write-down on the value of its assets and goodwill.

The Reject Shop attributed the poor performance to its decision to deviate from low-priced everyday items, which led to a drop-off in footfall and transaction values. Full-year sales were down 0.8 per cent at $793.7 million, despite a net increase of six stores. 

The business also has faced a leadership gap, with CEO Rob Sudano departing in May. Since taking over as acting CEO, Aquila has focused on returning The Reject Shop to its core focus as a discount variety retailer.

“We need to continue to focus on established discount categories. Going forward, this means a substantial investment in non-discretionary and low-priced accessory based categories that provide easy solutions for customers,” Aquila said at the AGM on Wednesday.

“A further tactic will be to promote increased deals that offer our customers substantial discounts on well-known and established brands. 

“This will naturally combine with reinforcing our value proposition through product placement, pricing and promotions.”

Aquila said the business would focus on lower and simpler prices, increase its investment into popular selling categories and expand its range to appeal to a younger demographic for the rest of FY20. 

Chairman Steven Fisher, who took over from former chairman Bill Stevens who stepped down in August, said the company also would take a more aggressive approach to occupancy costs.

“It is not sustainable that rental increases are running at between 2 and 3 time the CPI index, in an environment of low wage growth and record low interest rates,” he said at the AGM.

“The company will have no hesitation in exiting leases where the occupancy costs do not meet our rent to sales criteria. This approach may see further store closures, and in some cases relocation to more affordable opportunities.”

The retailer said on Wednesday that the selection process for the next CEO is well advanced and that it expected to make an announcement in the next six to eight weeks.

16 Oct, 2019
Investors in consumer stocks brace for profit warnings
Australian Financial Review

Investors in stocks exposed to discretionary spending are bracing for a series of profit warnings amid growing evidence record low interest rates and tax cuts have failed to convince shoppers to pry open their wallets.

The consumer malaise struck furniture retailer Nick Scali and radio network owner Southern Cross, which both suffered large share price falls on the back of profit warnings.

The first downgrade since reporting season came from furniture retailer Nick Scali, which warned on Tuesday net profits could fall as much as 32 per cent in the December half following a sharp slump in sales over the past few months.

Chief executive Anthony Scali said monthly store sales were down by 10 to 15 per cent between July and October, dragging same-store sales down by 8 per cent. Same-store sales grew 2 per cent in the first quarter 2019 but fell in the fourth quarter.

As a result, the company expects net profit for the six months ending December to fall by between 24 per cent and 32 per cent to between $17 million and $19 million.

Shares in the former market darling fell by as much as 21.6 per cent to $5.64 before closing down 14 per cent at $6.21.

The shares are now trading well below the level at which Nick Scali's largest shareholder and major supplier, Chinese furniture company Jason Furniture (Hangzhou) Co Ltd, sold its entire 13 per cent stake in a block trade last month.

Jason, better known as KUKA, sold its shares through UBS at $6.85 a share to institutional investors including  Perpetual Investments and Airlie Funds Management (now Magellan).

Mr Scali sold KUKA half his 27 per cent stake for $7 a share in March 2018, saying the strategic stake would help the retailer realise its growth strategies.

He  blamed the fall in sales over the past few months on slowing housing sales, weaker renovation activity and a generally cautious consumer attitude.

"With lower interest rates and signs of improvement in the number of housing transactions recently, Nick Scali believes this may translate to a lift in sales in the second half," he said.

The profit warning dented demand for other consumer stocks, with Harvey Norman shares falling 6 per cent to $3.97, JB Hi-Fi by 4.5 per cent to $33.06 and Super Retail Group by 3 per cent to $9.02.

Lighting retailer Beacon appears to have fared slightly better, telling shareholders at its annual meeting on Tuesday that sales momentum in its core business had improved in August and September after same-store sales fell 2.3 per cent in 2019. However, Beacon shares slipped 2 per cent to $1.13.

"Beacon Lighting remains closely aligned to the housing sector and anticipates improved housing sales volumes and renovation expenditure in the future to support sales and profit growth in the core business," CEO Glen Robinson said.

Southern Cross Media shares fell 23 per cent to their lowest level since 2014 after the  company blamed the weak advertising market for an 8.5 per cent hit to revenue.

Southern Cross, which owns Australia's largest radio network and operates the Hit and Triple M radio stations, said ad spend had missed expectations for the first quarter and the weakness was felt across  radio and television.

Ad bookings slowed

"We're seeing weaker ad markets across first quarter, which seems to be linked to a lower desire to invest and spend in advertising," said chief financial officer Nick McKechnie.

"We're seeing it as being broad in the market. SMI data is showing all sectors were back about 9 per cent. We think it's kind of broad based, linked to the level of consumer and business sentiment in the economy."

The company had predicted in August that ad spend would pick up in September and October, based on a higher number of earlier bookings than the previous year. Instead, the number of ad bookings slowed down.

The company said it was managing its cost base with "extra discipline" to minimise the impact on earnings.

"That means asking: if someone leaves business, does that role get replaced immediately? Or can we wait a few months? Do we need to spend [the] same amount on travel and other discretionary costs?" Mr McKechnie said.

Nevertheless, UBS analysts cut their 2020 earnings (EBITDA) forecasts by about 7 per cent and earnings per share forecasts by 11 per cent.

16 Oct, 2019
Strandbags owner invests $8 million in luggage startup
Inside Retail Australia

Direct-to-consumer luggage brand July has received $10.5 million from investors, including $8 million from Strandbags’ owner Michael Lewis, to take on luggage giant Samsonite. 

The online retailer, which opened its first bricks-and-mortar store in Melbourne Emporium in August, says it will use some of the capital to launch in Singapore by the end of the year. It also plans to launch in New Zealand in the next six months and further Asia Pacific markets in 2020. 

“We’re not just opening stores [in these markets],” Athan Didaskalou, July’s co-founder, told Inside Retail. “We’re setting up warehousing and local teams.” 

According to Didaskalou, Australian brands that operate in Asian markets remotely are “arrogant”. 

“They think they can do everything from Australia,” he said. “It’s not just about [providing] local delivery and customer service, it’s about understanding the mindset of the country you’re in.” 

The elephant in the room

The retailer, which currently offers three sizes of hard-shell suitcase – carry-on, checked and ‘plus’ – is investing the rest of the capital into product development. Didaskalou declined to provide specific details about forthcoming products, but said they would “shock” market leader Samsonite when released next March.

“Samsonite is known for being ‘strong and light’. We’ll be tackling them on that ground,” he said.

Didaskalou said the company is more focused on taking market share from Samsonite than competing with US-based direct-to-consumer rival Away, which entered the Australian market via a Sydney pop-up earlier this year.

“Everyone wants to either talk about Away or Horizn Studios,” he said, referring to a Berlin-based brand in the same vein as July and Away, which was valued at more than US$1.4 billion this year.

“The elephant in the room is the 90 per cent market share-holder, which is Samsonite,” he said.

“They own something between 10 and 15 brands and absolutely dominate the market, especially in Asia Pacific. These are the people we’re going after.” 

July has another trick up its sleeve. The brand has developed a new method of monogramming its suitcases using ultraviolet light, which will enable the retailer to offer new fonts and designs from artists and personalise products at scale. It currently takes about an hour to hand paint each design.

The new system will launch in three weeks, and Didaskalou anticipates being able to personalise every suitcase it sells in 2020.

Working towards profitability

Didaskalou said he and fellow July co-founder Richard Li, who also co-founded online furniture brand Brosa, have received “phenomenal” insights and advice on the luggage business from Felicity McGahan,
Strandbags’ managing director, and Lewis, its owner.

“I wouldn’t say it was a formal part of the deal for them to mentor us, it was more that they really know the space and wanted to help support [us],” he said. 

Strandbags currently is undergoing a digital transformation, and July is providing the bricks-and-mortar retailer with feedback on how it could operate better online and what today’s customers want in terms of delivery and e-commerce, according to Didaskalou.

July is on track to reach $5 million in sales this year, its first full-year in business, and working towards profitability. The company is in the process of opening new stores in Melbourne, Sydney and Singapore, and employs 24 people. It will continue to sell its products exclusively through its own channels. 

14 Oct, 2019
Mars Wrigley brings all brands under one roof
Inside FMCG

Mars Wrigley Australia has revealed plans for a state-of-the-art  
warehouse in  
West Melbourne, which will house all of the confectionery giant’s products under one roof. 

The 44,000 sqm temperature-controlled facility, which is expected to be up and running late next year, will have the capacity to house up to 49,000 pallets of products such as Mars, M&M’s, Snickers Skittles and Extra.

Automation is a key feature of the technologically-advanced facility, with Automated Guide Vehicles (AGVs) to assist workers with moving pallets around the warehouse.

“It’s an exciting project for our business and one that’s been several years in the making. This will be one of the most advanced warehouses in Australia, with Automated Guide Vehicles assisting our workers to increase warehouse flow, improve racking, and reduce handling – creating a safer working environment,” Marius Vermeulen, supply chain director at Mars Wrigley Australia said. 

“We’re looking forward to realising the benefits this new facility will deliver to our customers, our business and consumers through an enhanced customer service offering that will allow us to continue to share our much-loved brands with Aussie consumers today, tomorrow, and into the future.”

Mars Wrigley has partnered with Toll Group and Charter Hall on the construction of the new facility.

14 Oct, 2019
Winning opens multi-sensory flagship in Melbourne
Inside Retail Australia

Winning Appliances has opened a new showroom in Melbourne where customers can immerse themselves in fully-designed lifestyle kitchens, watch professional cooks prepare food in a ‘culinary theatre’, grab a coffee and – oh yeah – shop for fridges, washing machines and other appliances from leading brands.

The showroom, located on Swan Street in Richmond, aims to provide a unique, multi-sensory shopping experience. 

“It’s been designed to allow customers to imagine what the appliances will look like in their dream kitchen, in different styles, rather than just the products themselves,” John Winning, the CEO of Winning Group, said in a statement about the showroom. 

The Richmond store is the 16th showroom and 5th flagship for the 113-year-old family business and follows Winning’s acquisition of Brighton-based Michael’s Appliance Centre last year. 

It’s the first store in Winning’s network to stock luxury overseas brands The Galley, Kalamazoo and Fhiaba, alongside leading appliance brands, including Gaggenau, Miele, V-Zug,

Designed by Melbourne-based studio Cera Stribley Architects, the showroom is meant to evoke a luxury home environment, with steel-frame windows, brick walls and timber floorboards. 

As a company spokesperson pointed out, light-coloured flooring would not typically be the first choice for a store that is expected to get high levels of foot traffic. 

Speaking at a launch event on Wednesday evening, Winning said the company does not build “cookie-cutter” stores and it doesn’t offer “cookie-cutter” customer service. 

“We pride ourselves on the old-fashioned customer service we’ve been offering for many generations. I’m the fourth generation [to work in the business],” he said. 

Winning was joined on stage for the ribbon cutting ceremony by his parents and uncle, who is an ambassador of the Winning brand.

14 Oct, 2019
Kmart draws on personalisation to customise Christmas gifts
Inside Retail Australia

Discount department store Kmart will offer personalised shirts, socks, and stockings during the upcoming holiday period through a partnership with Wesfarmers-backed Onthego.

Onthego, which is partially owned by Kmart-owner Wesfarmers, launched a funding round alongside the announcement to continue expanding its customer acquisition efforts and advance its technology. 

“Customers are moving more and more to online to self-serve their personalisation ideas, from socks to Christmas stockings and tee-shirts with your name on it,” Onthego founder and chief executive Mick Spencer said in a statement. 

“In a time where customers have a lot of choice, retailers must be nimble and innovative in their customer offering, ensuring customers come back to their website or stores. 

“Customisation has proven [to be a] market that builds more brand loyalty.”

The customisation business already provides personalised clothing options through Officeworks, and previously told Inside Retail that the business saw a “massive opportunity” to expand across Wesfarmers’ other businesses. 

“If I fast forward five years there’s obviously going to be a huge amount of potential there, and the great thing is Wesfarmers are really keen on this young, ambitious company that they’ve got access to,” Spencer told IR.

Spencer also said the business plans to expand internationally, with a short term focus on South-East Asia and New Zealand, and a longer view to enter the UK, Europe or North American markets. 

14 Oct, 2019
Walmart appoints new CEO in wake of Foran move to Air NZ
Inside FMCG

Walmart US announced John Furner as its new president and CEO, in the wake of Greg Foran’s decision to take up the chief executive role at Air NZ.

Furner will report directly to Walmart’s global president and CEO Doug McMillon when he takes up the position on November 1. Foran will stay with the retail giant until January 31 to help with the transition.

Furner began his career with Walmart in 1993 and went on to lead operations, merchandising and sourcing for Sam’s Club and Walmart International (China) as chief merchandising and marketing officer. 

“John has done a fantastic job at Sam’s Club, and he will continue the momentum we have in Walmart US,” McMillon said. 

“John knows our business well, having held many different jobs in the company over more than 25 years, and he is helping transform it for the future. He has the experience and judgment to know what we should continue doing and what we should change. He embraces technology and new ways of working, and he keeps our customers and Sam’s Club members at the center of everything we do, while delivering results for the business. I look forward to seeing his impact for our customers and associates in Walmart US.” 

Furner said he is grateful for the opportunity and ready to get started. 

“There’s no better place than Walmart U.S. to touch the lives of millions of customers and associates. Together with the team, we will build on the progress under Greg’s leadership and continue to make Walmart an even better place to work and shop,” he said in a statement. 

Foran said it has been an honour to lead the team at Walmart US. 

“I’m proud of what we’ve been able to achieve at a unique moment for retail and want to thank the associates who made it happen. It is bittersweet to leave Walmart, but this incredible opportunity to lead an iconic Kiwi brand was one I could not pass up, and I’m looking forward to this next chapter.” 

Walmart said that it will announce Furner’s replacement at Sam’s Club at a later date.

11 Oct, 2019
Rocket Internet blasts off with vitamin start-up
Financial Review

European investor Rocket Internet, which helped build The Iconic in online fashion retailing and HelloFresh in home meal deliveries, has turned its sights on  Australia's $5 billion vitamin industry.

Rocket Internet has injected extra funds into Australian start-up Vitable after robust early success in a new model of selling personalised packs of vitamin pills direct to busy consumers.

Vitable co-founder Larah Loutati said the company, which began operations in March, had ''cut out the middle man'' with its e-commerce model and was also tapping into the increasing focus on health and well-being.

Vitable uses an algorithm built by nutritional experts to tailor personalised sachets of vitamins and supplements for customers. They are delivered direct to households by Australia Post, in a market dominated by big brands like Blackmores and Swisse.

She said Vitable was pitched at the premium end of the market, and by stripping out the retail margins was able to keep costs down.

"In terms of price we're on par or under where Blackmores and Swisse would generally be,'' she said.

The company's vitamins are made under contract by fully accredited manufacturers in Australia, and the orders are packed at a pharmacy in New South Wales.

Ms Loutati founded the business with Ilyas Anane. Mr Anane said across the $5 billion vitamin market, about 75 per cent of consumers bought their products ''off the shelf'' from retailers like Chemist Warehouse without having tailored advice for their own particular needs.

Rocket Internet provided some seed funding originally, and then injected further funds into the business as it gained momentum. Sales had been tripling each month, albeit off a low base.

Rocket moves fast

Ms Loutati declined to specify the size of the stake which Rocket Internet had obtained.

But having Rocket Internet's funds and expertise was invaluable because they weren't afraid of expanding businesses quickly.

"It's definitely the speed at which they operate. We really like the way they move fast,'' she said.

Rocket Internet was a strong backer of The Iconic, which has grown to become one of the best known online fashion retailers in Australia. The Iconic is now part of the Global Fashion Group, which listed on the Frankfurt Stock Exchange in June in a $1.8 billion float.

Global Fashion Group also owns online retailers Zalora, Dafiti and Lamoda.

The Iconic’s revenues climbed by 38 per cent to $371 million in the year ended December, and revenues have risen fivefold since 2014.

Rocket earlier this year sold out of global home meal kits group HelloFresh, which in Australia is in a fierce battle with rival Marley Spoon. Supermarket giant Woolworths in June took a stake in Marley Spoon.

HelloFresh stint

Ms Loutati worked at HelloFresh in Australia, and for three years from the end of 2015 was the Head of Product Development and Consumer Experience for that firm.

She said the main customer base for Vitable was largely between the 25 to 45 age group. When the business was in the planning phase, the co-founders thought it would be the tech-savvy Millennials who might form the core customer base.

"Actually the customer segment is a little older than we thought,'' she said.

The Vitable expansion comes as big global players increasingly look to personalised nutrition as a growth industry. The health science arm of global food giant Nestle in late August acquired vitamin subscription service Persona in the United States.

Vitable wants to build its brand locally to give it extra clout in the eyes of Asian consumers before expanding into Asia.

"Expanding to Asia Pacific is definitely in our planning,'' she said.

11 Oct, 2019
Baby Bunting on track to deliver FY20 guidance
Inside Retail Australia

Baby Bunting reported a solid start to FY20 and reaffirmed its full-year earnings and profit guidance at its annual general meeting on Tuesday, where the business laid out its plan to grow market share by investing in digital, increasing sales from its existing stores, entering new markets and improving profit margin.

“We have had a solid start to the year and the business continues to be on track to deliver our FY20 guidance,” Matt Spencer, Baby Bunting’s CEO, said in a statement. 

The retailer is anticipating pro-forma net profit after tax to be in the range of $20-22 million and pro-forma earnings before interest, tax, depreciation and amortisation (as measured under the old lease accounting standards) to be in the range of $34-37 million, a 25-36 per cent increase year on year. 

Comparable store sales are up 3.1 per cent in FY20 so far, reflecting the cycling of unusual trading conditions in the first quarter of FY19 due to the closure of Babies R Us and clearance activity in September 2018. 

Sales growth has been affected by technical issues associated with the transition to a new web platform in July, which led to a drop in conversion. 

The retailer said traffic to the site continues to grow and the average item value has increased, and it has made further investments in its digital team to improve the customer experience on the new platform, and the retailer is still expecting comparable sales growth to be in the mid-single digits for the year 

“[W]e expect to see online sales growth momentum continue to build,” Spencer said.

Baby Bunting’s year-to-date gross profit margin is 36.6 per cent, up 270 basis points on the prior period and in line with guidance. 

Spencer attributed the better-than-expected result to the company’s investment in private label and exclusive products and fewer clearance activities, and said the same level of performance is expected to continue throughout the year. 

Private label and exclusive products accounted for roughly a third of sales so far this year, and the business is in the process of expanding its own-brand portfolio. In addition to its 4baby products, the retailer soon will offer a new range of soft goods under the Bilbi brand and will continue to launch new brands going forward.

The retailer also has identified opportunities to improve margin in its supply chain. These include reducing the amount of direct-to-store deliveries and instead routing products through its own supply chain. 

It’s exploring the possibility of relocating to a larger distribution centre and support office when the lease on its current premises in south-eastern Melbourne is up for renewal in April 2021 and establishing more store-based online fulfilment hubs to provide same-day delivery in metro areas. 

The retailer expects to open five to six new stores in FY20. The first of these opened at Westfield Doncaster last week, marking the 40-year-old retailer’s second store in a shopping centre, after entering Chadstone in 2018. 

Spencer at the AGM said shopping centres provide an opportunity to sell more convenience and consumable items and grow the sales in soft goods, such as apparel and bedding, while providing the same services as large-format stores, such as car seat fitting bays, dedicated parcel pick-up areas, layby facilities and parenting amenities.

“I believe the strength of our offer in shopping centres allows us to compete with a broader range of retailers and also exposes our value offer to more consumers,” he said.

Baby Bunting will open a third shopping centre store at Westfield Knox in the second half. This is in addition to two new stores opening in NSW – at Weatherill Park and Casula – this calendar year. 

The new stores will all feature the new look and feel that Baby Bunting unveiled at is Doncaster store, the first major brand change since the business was established 40 years ago by Gail and Arnold Nadelman.

11 Oct, 2019
City Chic broadens US reach with e-commerce acquisition
Inside Retail Australia

Over a year after divesting the Millers, Crossroads, Katies, Autograph and Rivers businesses to Noni B, and putting more focus on its flagship plus-size brand, City Chic Collective has announced it will acquire US specialty retailer Avenue’s e-commerce assets. 

The US Bankruptcy Court approved the brand’s proposed US$16.5 million acquisition of Avenue’s assets after the brand entered chapter 11 bankruptcy in August.

According to City Chic, the acquisition will provide the business with a broader reach within the US plus size market, and expects it will deliver accretive growth for the business’ international operations. 

“Avenue’s e-commerce assets represent a unique opportunity to accelerate our US customer growth and expand across plus size segments,” City Chic chief executive Phil Ryan said. 

“This acquisition delivers on our vision of ‘leading a world of curves’. It means that City Chic now has a portfolio, or a collective, of online business that we can leverage to further build our Northern Hemisphere presence.

“Our City Chic, Avenue and Hips & Curves brands will allow us to speak to more plus size women and deliver on-trend, well-fitting garments across multiple price points.”

Online sales across Australia and the US made up 44 per cent of total sales for City Chic in FY 19.

In April, City Chic also acquired US online plus-size intimates brand Hips & Curves for US$2 million. 

The shift away from multi-brand retailing toward a more focused approach has made a significant impact on City Chic’s performance – with stock price rising from approximately 80 cents in June of 2018, when the Specialty Fashion divestments were made, to $2.80 per share last week. 

The retailer posted strong sales over its first year as a standalone business, with revenue improving 12.6 per cent to $148.4 million, while comparable sales grew 12.2 per cent. 

11 Oct, 2019
Why celebrities are flocking to Bird & Knoll scarves
Financial Review

The co-founder of this Australian fashion label is inspired by the slow and thoughtful design of Europe's artisan tradition.

When it comes to gathering design inspiration for her luxe-bohemian collections, Natalie Knoll, co-founder of Australian resort wear label Bird & Knoll, looks primarily to her European summer vacations.

“I love that there’s still such a healthy regard for the artisan in Europe,” says the South African-born Australian, who launched the label in 2014, alongside New Zealander Macayla Chapman, with a series of cashmere-blend scarves printed with photographs from Knoll’s travels to Morocco, Greece, Israel and beyond.

“In Europe, you can still find these little gems where talented people are crafting their wares. That attention to slow and thoughtful design and detail has definitely impacted our creative process.”

Bird & Knoll’s collections of effortlessly elegant scarves, dresses, tunics and jumpsuits in silk, linen and cotton have attracted a slew of celebrity fans, including actors Emily Blunt and Elizabeth Banks and, perhaps most notably, India Hicks.

The former model and cousin and goddaughter of Prince Charles is also a passionate traveller, and stocks Bird & Knoll at her upscale Bahamas boutique The Sugar Mill, whose laid-back island style has been a big inspiration for Knoll’s own resort collections.


Bird & Knoll’s Venice scarf, $298, is inspired by the lamp posts of Piazza San Marco. 

“I love to travel anywhere that offers excitement and full-on adventure,” says Hicks. “I have five wildly spirited kids who are always ready for something a bit mad. We’ve bungee jumped off the Victoria Falls Bridge in Zimbabwe, zip lined in Costa Rica and kitesurfed in the Carolinas.”

Hicks says she was drawn to Bird & Knoll’s uniqueness and authenticity, and has their white cotton Freida shirt dress on high rotation. “It’s very flattering, it’s just the right weight, and it doesn’t make me look like I’m wearing my dressing gown.”

Knoll’s passion for European travel was cemented when she lived in London for six years a decade ago, and she cites Italy as a favourite destination. “This year my husband and I travelled to Puglia and Sicily with our two teenage daughters, with a stop in Rome on the way," she says. "We absolutely fell in love with the gorgeous Puglian towns of Lecce, Ostuni, Otranto and Polignano a Mare – so rustic and typically Italian.”


Otranto in Puglia boasts spectacular Mediterranean beaches.   iStock

Rome, however, continues to hold a special place in Knoll’s heart. “There’s a certain charming grittiness to it that gets me every time.”

Each Roman adventure involves a pilgrimage to Taverna Trilussa in the Trastevere – “a must for their amazing pastas, served in the pan they’re cooked in” – and the designer gets her “upmarket fix” at La Rinascente, which she describes as “the most beautiful department store in Rome”.



11 Oct, 2019
Michael Hapgood sells $4.4m Accent shares
Financial Review

Investors take a dim view of insider sales, and so most biting that bullet tend to do so in one big hit.

Not so Accent Group co-founder Michael Hapgood, who's filed no fewer than five seperate notices over the past month advising the market of his sales.

He first offloaded 1.2 million shares between September 5 and 9. And another 672,693 over the next four days. He sold 83,283 shares on October 16, 322,310 between September 26 to October 1, and another 530,455 between October 2 and 4.

All up, that's 2.3 million shares divested, for a total monetary gain of $4.4 million. No reason was given to the bourse for the sales, though Hapgood does still own 11.7million shares. Not that we'd put our money on him being done. He last sold shares in May, in a similar stop-start pattern ...

Accent Group, of Athlete's Foot fame, is trading near the all-time highs it achieved in 2016, having announced a record profit in August. It's largest shareholder is retail entrepreneur and board director Brett Blundy, who's been holding on to his 18 per cent stake.

11 Oct, 2019
Clothing prices to rise as trade war, weaker $A take toll
Financial Review

Clothing prices are set to rise as the trade war between the US and China pushes up retailers' sourcing costs, compounding the effect of the weaker Australian dollar.

Many Australian retailers are hoping the trade war will lead to spare capacity in China and therefore better deals from Chinese suppliers as major US companies such as Macy's, GAP and PVH Corp shift away from China to cheaper countries such as Vietnam, Bangladesh and Cambodia.

But Australian Fashion Council co-chairman John Condilis says sourcing costs are likely to rise as Chinese manufacturers close factories and increase prices in an attempt to protect their bottom line.

Mr Condilis, the co-founder of Melbourne based clothing label Nobody Denim, says Australian retailers do not have sufficient volumes to replace the loss of sales from major US chains.

"Chinese suppliers are reaching out to Australia but because of the loss of volumes from the US retailers their prices are likely to rise," Mr Condilis told The Australian Financial Review.

"It's early days but that's my long term vision of where it's going especially if the Australian dollar continues to fall.

"A lot of the factories in China are quite reliant on [large volumes] - 100,000 units per style per order - not many organisations locally can sustain that to support [Chinese manufacturers'] cost structure."

Nobody Denim is one of very few Australian clothing brands still manufacturing in Australia - most shifted sourcing to China and other parts of Asia as tariff protections were removed between 1990 and 2015.

The Australia free-trade agreement removed all tariffs on most clothing made in China, which now accounts for more than 70 per cent of clothing imports.

Falling currencies and excess capacity

Mr Condilis' company was originally a service provider for the Australian denim industry, providing stonewashing and laundry services, but when tariffs were cut in 2000 his customers started buying overseas.

Mr Condilis and his brother launched their own label in 1999, outsourcing to local manufacturers before starting to manufacture in Melbourne in 2010.

"I did a cost analysis exercise and the variation (between local and China manufacturing) was minimal, less than 10 per cent ... we decided to keep it here for stability, security and to protect our IP [intellectual property]," he said.

Australian retailers who shifted sourcing to India, Vietnam and Bangladesh in recent years as China became too expensive are now trying to assess the likely impact of the trade war and whether it's worth moving sourcing back to China.

A complicating factor is the weaker Australian dollar, which has fallen 12 per cent in two years and 4 per cent this year.

UBS analyst Ben Gilbert said retailers such as Wesfarmers, which owns Kmart and Target, Adairs, and Myer, which have large private label penetration, face higher input costs and margin pressure unless they raise prices.

"However, this may be offset by excess capacity at Chinese plants (due to the trade wars) and the lower renminbi," Mr Gilbert said.

Mark McInnes, chief executive retail of Premier Investments, which owns Smiggle, Peter Alexander, Just Jeans, Portmans and Dotti, said the trade war could be beneficial for the company.

It's a moving feast - Trump seems to change his mind every day about what he wants to do.

— Xavier Simonet, Kathmandu chief executive

"China has devalued their renminbi, that devaluation is an opportunity for us, and the fact that US companies are ordering less from China is an opportunity for us," Mr McInnes said.

"We see good opportunities in China as a result of the trade war with the US."

However, Kathmandu chief executive Xavier Simonet, who sources products from  China, Vietnam and Indonesia, said the impact of the trade war was unclear at this stage.

"It's a difficult one because it's a moving feast - [President] Trump seems to change his mind every day about what he wants to do - it's all yet to play out in terms of what impact it may or may not have," Mr Simonet said.

Best & Less chief financial officer Andrew Moore said the trade war might open up capacity for Australian retailers, but as the Australian dollar fell and retailers' hedging cover ran out, prices would have to rise.

Retailers being squeezed at the margins

"The impact of the $A means there aren't price reductions coming through and over time as hedging books run out they'll have to adjust it upwards,"' Mr Moore said.

"If there's more capacity that's better for us, but that's not started to happen yet.

"Where does the China/US trade war end is the big question - I don't believe either country can afford to let it go for too much longer."

Clothing chains aren't the only retailers facing a margin squeeze from the weaker currency and the trade war. Home improvement, hardware, electronics and sporting goods retailers are also weighing the pros and cons.

"It's something we're thinking about pretty carefully - we are noticing a lot of Chinese suppliers are moving into adjacent countries for production, they're going into South-east Asia and Vietnam to avoid the tariffs," said Anthony Heraghty, chief executive of Super Retail Group, which owns Rebel, BCF and Super Cheap Auto.

"That potentially creates some capacity in the Chinese manufacturing system that we might be able to take advantage of, but Australia is very small scale in the global manufacturing world," he said.

"Whilst we like to think at Super Retail Group we are really important we are a small part of that manufacturing economy. We might be able to squeeze out an advantage but that's yet to be seen."



7 Oct, 2019
David Jones to sell Melbourne CBD frontageDavid Jones is selling off its menswear store in Melbourne’s Bourke Street Mall and revamping its sister site across the road. The retailer’s owner, South African Woolworths Holdings, announced it would put 299 B
Inside Retail Australia

David Jones is selling off its menswear store in Melbourne’s Bourke Street Mall and revamping its sister site across the road.

The retailer’s owner, South African Woolworths Holdings, announced it would put 299 Bourke Street up for sale in the coming months.

Refurbishment of the womenswear store at 310 Bourke Street will start and be completed in 2021.

“A single-store flagship housing the best local and international brands in one world-class destination will create a more seamless and cohesive experience for our customers,” WHL Group CEO Ian Moir said in a statement on Wednesday.

Funds from the sale will be applied in part to the refurbishment project, with the remainder applied to other areas of the business.

It follows a similar move in Sydney ‘s Elizabeth Street flagship store.

In August WHL announced a $437.4 million write down in value of the David Jones business.


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