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A wave of recent transactions and a shopping frenzy as malls reopen augurs well for Australia’s large shopping centre landlords, whose shares are still trading on the stock exchange at pandemic-induced discounts.

Trade in big retail assets is resuming and that shift is starting to provide evidence that mall owners’ assets may be undervalued, giving investors hope their shares will gain ground.

Between them, heavyweight mall owners Scentre Group and Vicinity Centres dominate Australia’s retail landscape, controlling or managing high-profile shopping emporiums like the country’s largest mall, Chadstone in Melbourne, and the nationwide network of Westfield-branded centres.

Early this week, Vicinity shares were at a net tangible asset discount to pre-pandemic levels of 20.7 per cent and Scentre’s at 16.4 per cent.

Two weeks ago, Vicinity Centres swooped on a $358 million half-share of the Gold Coast factory outlet-style mall, Harbour Town – it’s first large deal since the pandemic cruelled asset sales in the sector.

Marking the occasion, Vicinity boss Grant Kelley said Harbour Town’s moving annual turnover was more than double the average of the group’s current outlet-style portfolio and “expected to grow at more than 3 per cent per annum to 2031.”

In another deal, Perron Investments, a co-investor in another Vicinity owned centre – the Runaway Bay Shopping Centre in Queensland, sold its half-stake for $120 million at a 20 per cent markup on what Vicinity lists as its $107 million book value for its share.

And after 18 months of retail upheaval, another big acquisition supports the resurgence theory.

The sale of the Roselands shopping centre in south-west Sydney to Hong Kong-based JY Group for $167 million was struck at a suggested cap rate of 5.2 per cent.

Vicinity, which owns the other half of Roselands, has a book value on the asset that also implies the deal was done at a 20 per cent premium.

“In our view, this is more evidence that demand for larger retail is coming back and that negative revaluations during the COVID pandemic may have been overdone,” Jardine investment bank analysts Lou Pirenc and Andy MacFarlane said.

“Given most mall REITs are still trading at significant discounts to net tangible assets, we see this as a positive catalyst,” they said.

Another factor working in the malls’ favour is an expected surge in rental income as the deferrals and waivers that landlords were mandated to give to tenants during the pandemic fall away.

“If we assume that we go back to an environment where there are no waivers and everyone is paying rent, we would see a swing to Scentre Group of 24 per cent,” Mr Pirenc said.

Mr Pirenc said retail malls could also benefit by increasingly playing a bigger role in the last mile delivery of goods to consumers.

“We take a slightly anti-consensus view to the popular belief that online sales will kill the malls. As retailers increasingly struggle to get products to their consumers quickly, having locations close to where consumers live will benefit the malls.”

But he stressed it was “not a rising tide for all ships” as he expects stronger malls in better locations to gain share, with weaker malls in competitive markets to struggle.

Competition tsar Rod Sims has warned consumers to start their Christmas shopping now to avoid disappointment amid a COVID-19 induced, global supply chain crunch that he says is being exacerbated by controversial hiring quotas within the powerful maritime union.

Global supply chains have been thrown into chaos by the global pandemic, creating what Australian Competition and Consumer Commission chair Sims described as “disastrous knock-on effects” for local import and export businesses. “It’s a system that really ran like clockwork, and when it gets disrupted, it has a massive cascading effect,” he told the Sydney Morning Herald and The Age.

The shipping crisis has prompted retailers to warn consumers to expect delays and shortages heading into Christmas.

But new analysis from the ACCC, to be released on Thursday, finds that Australia’s shipping issues predate the pandemic, with expensive rates and major delays and disruptions fostering a perception the nation’s ports are inefficient and “well below” international standards.

Australia’s largest two container ports of Melbourne and Sydney ranked in the bottom 15 and 10 per cent among a World Bank study of 351 global ports. Some shipping lines have already reduced or entirely withdrawn services from Australia.

Meanwhile, industrial action disputes have erupted over an “unusual” clause where the Maritime Union of Australia demands 70 per cent of the workforce be friends or family of existing employees, or chosen by the union. The industrial action left some ships unable to dock in Perth’s Fremantle, or led some shipping lines to consider Port Botany commercially unviable.

“The union’s basically trying to control 70 per cent of new hires into the ports. In no other industry I’m aware of is that request being made of them,” said Mr Sims.

Ships docking in Port Botany are spending nearly a full day in limbo, with the ACCC revealing the average amount of idle hours have nearly doubled from 11.9 hours pre-pandemic to 21.2 hours in 2020-21.

The logistical nightmare unfolding in the global supply chain has also resulted in a backlog of misplaced empty shipping containers, exacerbating congestion and further delaying delivery times.

S&P Global Platts data reveals freight rates on crucial global trade routes have ballooned seven-fold since this time last year. The ACCC has heard reports that global apparel giant Nike is now paying as much as $20,000 to ship a container of sneakers, rather than the typical $2,000, making it effectively unprofitable to sell some sneakers.

“Either consumers wear [those costs], or the importers or exporters,” Sims said. In the face of surging freight rates, smaller exporters are being priced out of the market entirely.

Freight forwarding company Think Global Logistics CEO La Chang said delays had now become the norm, not the exception.

“We are all waiting for goods that are not weeks but months late,” he said. Despite the fivefold rise in costs, market competition restricts how much can be passed onto the consumer. “We are spending more money to move a shipment and making less in the process.”

Last-minute cancellations from shipping lines have also rendered express shipping or ‘priority surcharges’ meaningless, Chang added. “Consumers have never paid more [yet] being offered less than now.”

All these factors are colliding at a time when consumer appetite for online shopping has skyrocketed.

Mr Sims said warnings from retailers for Australians to start their Christmas shopping now were “absolutely legitimate” and urged shoppers to do so as it would help alleviate the inevitable seasonal rush.

“It’s actually going to help if people start trying to buy things early and spread the purchasing over a longer period of time.”

The Maritime Union of Australia was contacted for comment. After publication, MUA assistant national secretary Jamie Newlyn denied that the Union had a 70 per cent hiring quota in place.

“This is untrue. The MUA do not have such a clause or a claim,” he told Sydney Morning Herald and The Age.

“Bargaining continues and we are confident of a resolution in the coming weeks.”

• Allbirds stock soared as much as 116% in its IPO debut on Wednesday, giving the sneaker company a valuation of about $US4 ($AU5) billion.
• Allbirds priced its upsized IPO at $US15 ($AU20) per share on Tuesday, ahead of the expected $US12 ($AU16)-$US14 ($AU19) range.
• The company sold about 20 million shares in the offering, raising about $US300 ($AU404) million.

Direct-to-consumer sneaker brand Allbirds soared as much as 116% in its IPO trading debut on Wednesday, giving the company a valuation of about $US4 ($AU5) billion.

Allbirds priced its upsized IPO at $US15 ($AU20) per share Tuesday evening, ahead of the expected $US12 ($AU16)-$US14 ($AU19) range as investor demand exceeded expectations. That pricing gave the company a valuation of about $US2.1 ($AU3) billion.

Shares trade under the ticker symbol “BIRD” and are listed on the Nasdaq. The stock hit an intraday high of $US32.44 ($AU44) in Wednesday’s session.

The company sold about 20 million shares and raised just over $US300 ($AU404) million from the offering, money that will help fund the growth of its physical storefront locations.

Allbirds was founded in 2016 and was one of the first company’s to popularize the growing trend of eliminating the middleman and marketing directly to consumers. With the company valued at $US1.7 ($AU2) billion in its last private funding round, Wednesday’s IPO represents a sizable gain for its early investors.

But Allbirds will likely need to turn profitable to delight its new public investors, which it has yet to do. According to its S-1 filing, Allbirds’ net loss ballooned to $US25.9 ($AU35) million in 2020 amid the COVID-19 pandemic from $US14 ($AU19).5 million in 2019.

Meanwhile, revenue jumped to $US219.3 ($AU295) million in 2020 from $US193.7 ($AU261) million in 2019. In the first six months of 2021, Allbirds recorded $US1.7 ($AU2).5 million in revenue. Allbirds expects future growth to come from its transition toward physical store fronts, and foresees opening hundreds of locations.

Menswear brand M.J. Bale has been named Australia’s first fully carbon-neutral fashion brand following a two-year life-cycle analysis of its manufacturing cycle which has led to the complete offsetting of its business’ emissions with green projects.

The business is now an accredited Climate Active organisation under the Australian Department of Industry, Science, Energy and Resources, and is now looking at ways to turn its carbon-neutral stance into a carbon-positive one.

“We plan to be carbon positive by next year, and are open to sharing our learnings from the sustainability journey with other like-minded industry partners,” said M.J. Bale founder and chief executive Matt Jensen.

“We are taking significant steps to cut emissions from the production of our woollen products, and have been pioneering the world’s first carbon neutrals wool farm trials in Tasmania to reduce livestock methane emissions to undetectable levels.

“We urge all Australian fashion retailers to join our lead in gaining a minimum of net zero certification. As an industry, we need to collectively work together to limit climate change.”

According to Jensen, the business is aiming to have all of its stores powered by renewable energy by the end of 2022 – currently, that figure sits at approximately half.

In order to meet this goal, M.J. Bale invested in programs, such as the Yarra Yarra Biodiversity Corridor in South Australia – a reforestation and habitat restoration project which aims to deliver environmental, economic, social and heritage benefits – as well as unnamed offshore wind projects.

Online bookstore Booktopia has launched a subscription ebook service in Australia, giving its customers access to more than 500,000 titles for $13.99 a month.

The subscription, which comes by way of the business’ partnership with Rakuten Kobo, is called Kobo Plus and allows readers to access the titles through the Booktopia App and Kobo Readers, which are sold by Booktopia.

Booktopia chief executive Tony Nash said it was a cost effective way for the business’ customers to explore a large range of titles.

“It will take someone, even a passionate reader, a long time to get through more than half a million books,” Nash said.

“eReaders are a very popular option for travellers, and…we would expect a healthy take-up of the subscription option as people emerge from lockdowns and can once again explore their travel options.”

Nash added that, as the retail industry heads into the festive season, Booktopia will continue to focus on the sale of physical books and that this new option isn’t expected to have a material impact on its core business.

“The next six weeks are the busiest time of the year for retail book sales, and with our new storage facility, combined with the improved efficiency we are achieving after our investments in automation, we are set to break all records,” Nash said.

A resumption of domestic and international travel will likely spell the end of the heightened spending enjoyed by Australia’s retail sector over the past 18 months, the head of electronics giant JB Hi-Fi has said.

Terry Smart, the company’s recently appointed chief executive officer, told The Age and The Sydney Morning Herald while he wasn’t expecting a major swing back to travel spending once borders reopening, a “normalisation” was to be expected.

“You would anticipate that at some point that the spending would normalise again,” he said. “I’m not sure how quickly that will happen, and how quickly travel will be on the agenda for people, but we anticipate it will balance out over time.”

On Thursday, Prime Minister Scott Morrison, said the country’s international border would open from Monday, allowing all fully vaccinated travellers to roam freely.

The company told investors at its annual general meeting on Thursday its sales over the September quarter fell as it weathered the extended lockdowns in Sydney and Melbourne and tried to match booming sales recorded in the year prior.

JB Hi-Fi’s Australian stores’ sales fell 7.9 per cent for the three months to the end of September. The situation was slightly better in New Zealand, where sales dropped 6.4 per cent, and at whitegoods retailer The Good Guys, which experienced a 6.1 per cent sales decline for the period.

JB Hi-Fi has long been a major beneficiary of the pandemic, due to stimulus-fuelled spending and a boom in demand for home office equipment as people were forced to work from home. However, the recent extended lockdowns across Sydney and Melbourne have forced the company to largely shut its stores, bar for click and collect and essential shopping.

The business is also comparing its sales against the same time last year when business was still booming, with JB reporting a massive 27 per cent sales growth for the first quarter of last financial year.

Over a two-year period, which compares the latest result to fiscal 2020 before the start of the pandemic, JB’s Australian sales grew 17.3 per cent and The Good Guys’ rose 22.9 per cent.

Mr Smart said momentum was beginning to improve in October, and the company was very excited for retail’s reopening in Victoria on Friday and felt in a good spot ahead of the Christmas rush.

“We’re continuing to see good sales and good results coming through, so there’s a general feeling that we’re in a good spot. Consumer confidence still seems very strong for our categories, so we’re still quietly confident we’ll continue to see some good results,” he said.

However, he did warn that he expected some price rises would flow through on certain products in the months ahead due to rising inflation over the cost of international shipping, echoing concerns from some other major retailers such as Coles and Woolworths.

Shares in the business gained 3.2 per cent to $48.39 on Thursday. The company also received a small protest vote of 17 per cent of shareholders against the issuance of $1.3 million in bonus shares to Mr Smart and $1 million to chief financial officer Nick Wells.

Former Nike executive Paul Grosmann has been named the boss of RM Williams, the iconic leather boot, clothing and accessory maker acquired by Andrew and Nicola Forrest’s investment company in October 2020 for $190 million.

Mr Grosmann last month returned from seven and a half years in China and Singapore. Latterly, he was general manager of Nike’s direct retail stores business, based in Shanghai. He has also run the footwear and clothing behemoth’s football and speciality business in China and has worked with Australian retail king Brett Blundy.

The executive said he was excited by the opportunities to expand the brand’s offering for women and clothing sales. “I would love to see apparel account for a greater share of the business,” Mr Grosmann said. International sales were another area ripe for growth, he added.

Mr Grosmann, who starts in the role on Monday, replaces acting CEO Michelle Hepworth, who will return to her position as an investment manager at Tattarang, retaining a seat on the RM Williams board. Mrs Forrest is also a director.

RM Williams employs just over 800 people in Australia, including 440 at the Adelaide workshop, where the boots are made. Demand for boots has risen sharply in the past 12 months. Ms Hepworth said last year the company produced 250,000 pairs of boots, up from 210,000 the year before.

“We cannot produce enough goods to keep up with demand,” Ms Hepworth told BOSS. She added that the rise in operating earnings had outstripped expectations.

Ms Hepworth, 29, has been running RM Williams for six months. Asked why she did not want to remain in the role permanently, Perth-based Ms Hepworth said: “I thought we could find someone better for the job, in all seriousness. I think the brand deserves somebody who can carry it through for the next five years.

“Having the opportunity for the last six months to fulfil Andrew and Nicola’s vision has been such a privilege. Ultimately, we want a CEO who is tried and tested, and I think that’s what we’ve got.”

Mr Grosmann said he was “thrilled” to be back in Australia with his family. He and his wife and three young children have moved to Sydney and the executive said he expected to divide his time between Sydney and Adelaide.

Mr Grosmann said he was approached by Tattarang in the middle of the year, after which he went through a “very long” interview process, conducted entirely over Zoom. One of his meetings was with Dr and Mrs Forrest, whom, he said, had a keen interest in the brand.

“They really want to make this a success,” he said.

Australia’s richest couple has said publicly they want to bring all production back to Australia.

Progress has been made towards this goal. About 70 per cent production by revenue is now manufactured onshore, up from about 60 per cent two and a half years ago. Apparel accounts for most of the imported product.

RM Williams footwear and apparel is sold in more than 15 countries, through 75 stores and 784 stockists.

• Australian card spending rebounded last week, the Commonwealth Bank says, with the lifting of NSW lockdown restrictions a major factor.
• Card spending in the state rose to 17% above 2019 levels as residents rushed to the hairdresser and retail stores.
• Optimism in Victoria also drove spending up, as the south-eastern states accelerate their COVID-19 restriction roadmaps.

Card spending continued to bounce back across Australia last week, the Commonwealth Bank says, driven by renewed consumer purchases across New South Wales and optimism in other locked-down jurisdictions.

CommSec reports NSW card expenditure rebounded through the week, thanks to the easing of COVID-19 lockdown restrictions and the reopening of brick-and-mortar businesses.

The state saw card spending grow to levels not seen since lockdowns kicked in through June, with expenditure winding up 17% higher than the corresponding week in 2019 — up nearly 8% from the week prior.

The bank puts much of this spending down to the reopening of hairdressers and beauty services, which flung open their doors last Monday.

Over the first four days of the week, health and beauty spas recorded sales 676% higher than the week prior.

For hairdressers and barbers, that figure was 694%, and remedial massage therapists tallied spending 735% higher than the week before.

Optimism spread to other retail sectors, too, with spending at the state’s clothing retailers rising by 336%. Spurred by the promise of renewed travel allowances, CBA says luggage retailers booked a massive 830% spending spike over the first four days of the week.

While Victoria had to wait until Sunday for the unveiling of the state’s own reopening plan, spending in the locked-down state also rose.

With the harshest lockdown measures easing from midnight Thursday, the bank said it expects card purchases to rise even higher above 2019 levels.

The bank’s data only captured one day of spending after lockdowns lifted in the Australian Capital Territory.

However, that spending alone helped lift the region’s expenditure to 1.3% above 2019 levels — compared to the -4.4% rate tallied the week before.

On a national level, card spending was 16% higher than the same week in 2019.

The data broadly mirrors the spending patterns exhibited at the tail-end of prior lockdowns, with consumers looking to stock up on goods they couldn’t obtain through widespread store closures.

The widespread adoption of COVID-19 vaccines and broad state-level pledges not to enact future lockdowns could further boost consumer confidence in the weeks leading to Christmas.

However, the Reserve Bank of Australia has long warned the infectiousness of the Delta variant and high case numbers could make the recovery efforts of 2021 different to those of 2020.

The promise of renewed freedoms comes with the likelihood of government support payments being wound back, potentially shifting some spending patterns leading into the festive season.

Wesfarmers managing director Rob Scott says the group’s discount department store chains Target and Kmart have been hit hard by the lockdowns in Sydney and Melbourne, but the Bunnings hardware chain is still producing “robust” sales as tradies and commercial customers partially offset the slowdown from DIY householders.

But he is encouraged by early signs of pent-up demand across the group in the first week of reopening in NSW.

He also said that the retail chains owned by Wesfarmers would have “adequate inventory” for the important Christmas trading period even though there are disruptions to supply chains and shipping costs have been rising sharply.

“We have seen strong sales growth across stores in affected areas that have started to reopen, including those in New South Wales last week, demonstrating a level of pent-up customer demand in these areas.”

The group’s Officeworks chain is making solid headway, with more than half of its sales coming from online channels in the first four months of 2021-22, although profit margins have been softening as shoppers shift further towards technology products and furniture in this pandemic-led work-from-home phase.

Bunnings, with a network of almost 400 stores, has been a standout for Wesfarmers during the pandemic. In the 12 months to June 30, revenue increased 12.5 per cent to $16.9 billion and earnings by 19.7 per cent to $2.18 billion, but its sales slipped 4.7 per cent over July and August as lockdowns in Australia’s two biggest cities stopped the usual brisk foot traffic into stores.

Mr Scott told the group’s annual meeting in Perth on Thursday that over the past few weeks, Bunnings had been able to produce better sales than in the first two months of 2021-22, but he was not specific.

“In Bunnings, sales results for the year have remained robust in the context of trading restrictions,” Mr Scott said.

Temporary closures

“Sales growth from commercial customers has been strong which, combined with elevated online sales, have partially offset the impact of lower consumer sales growth.”

He said that since the full-year results on August 27, sales growth had improved across Bunnings, Officeworks and the online retailer Catch. But Kmart and Target “continued to be impacted by temporary store closures”.

Mr Scott said e-commerce sales across the group had been slightly hindered by some capacity constraints, but the heavy investment over the past few years was paying off. Kmart’s online penetration had risen to 21 per cent; for Bunnings – a relatively late entrant into e-commerce – it stands at 6 per cent.

Wesfarmers chairman Michael Chaney told the meeting the company had about 28,000 suppliers across 40 countries, but it remained heavily dependent on Chinese companies in the toys category because that is where most of the manufacturing of toys occurs.

Wesfarmers is also seeking to build a new healthcare division, using Australian Pharmaceutical Industries, the owner of Priceline Pharmacy, but it is involved in a takeover battle with Sigma.

Wesfarmers swooped on a 19.3 per cent stake in API almost two weeks ago, following an options deal it entered into in July, when it launched an initial bid.

The group has signalled it is committed to its proposal to acquire API via a scheme of arrangement for $1.55 cash a share, which values it at $764 million.

Wesfarmers increased its offer on September 16, but was trumped by a rival cash and heavy scrip indicative bid by Sigma two weeks later, with an implied value of $1.57 per share.

Mr Scott is not moving to mandatory vaccinations across the business, even though discount department store rival Big W, owned by Woolworths, revealed on Thursday that it would pursue mandatory vaccinations across all of its retail operations including the supermarkets.

He said he expected the group’s workforce would be fully vaccinated by early 2022 without the need to make it compulsory.

“Our teams are getting vaccinated at pace and I expect we will have a fully vaccinated workforce in the New Year,” he said.

But any new starters will need to show proof of vaccination to secure a job.

There had been strong progress in vaccination rates through hosting information sessions, offering support and making vaccination accessible including through vaccine hubs and paid vaccination leave, he said.

Following a strong FY21, Adore Beauty has hit the grownd running with revenue growth of 25 per cent throughout the first quarter of FY22.

Off the back of a continuing shift online, revenue hit $63.8 million while the beauty and lifestyle marketplace’s active customers grew 24 per cent to approximately 874,000.

Chief executive Tennealle O’Shannessy said the influx of new and returning customers was providing a stable foundation for the business’ growth over the next year, with returning customers becoming more valuable each year they spend on the platform.

“We continue to leverage our content strategy to drive brand awareness and discovery, and we are reinvesting in the business to accelerate our growth trajectory within a large and growing $11 billion market,” O’Shannessy said.

“It’s been a pleasing start to Fy22, and we look forward to continuing to execute on the exciting initiatives that will see Adore cement our online market leadership in the beauty category.”

The business launched its loyalty program earlier this year, Adore Society, which also grew throughout the first quarter alongside its native mobile app, and range, and its efforts in the podcasting space continued to pick up steam: Adore’s Beauty IQ podcast passed three million downloads, while its new Bite-Sized Beauty podcast was launched.

“[Our] passionate and dedicated team has made excellent progress on the execution of our growth strategy, further building on our market leadership and strengthening our competitive advantages,” O’Shannessy said in the beginning of the financial year.

“[And] our continued strong returning customer rates and growth in new customers provide strong momentum to drive continued growth in FY22 and beyond.”

Greenlit Brands has agreed to sell its Plush home-furniture business to Nick Scali in a deal that values the business at $110 million.  

The transaction is scheduled to be settled next month once customary working capital conditions and conditions are met, with $7 million in cash to remain in the Plush business at handover.

Michael Ford, executive chairman and group CEO of Greenlit Brands, said the transaction realises an asset on behalf of Greenlit’s parent company, Steinhoff International, “in an orderly fashion and for a fair value”.

“For Plush, this outcome crystallises the opportunity for the business to grow to the next stage of its development, with commensurate opportunities for employees, under the ownership of a deeply experienced and high calibre retail group, Nick Scali.”

Ford conveyed confidence in the company’s ongoing commitment to its Australian businesses. “Looking ahead, Greenlit Brands remains fully committed to continuing to invest in our people, our businesses and our brands while we continue to carefully evaluate our strategic options and opportunities,” he said in a statement.

“The financial and operational strength of Greenlit Brands, underpinned by our solid balance sheet and our suite of iconic brands – all of which are profitable – puts us in a strong position to continue to build remarkable retail businesses and to create value.”

The better retailers around Australia can sense a massive spending change is coming. Airlines like Qantas are getting a similar whiff. Those Australians who have escaped the Covid-19 financial blows have been accumulating money and enjoying the house price boom. They are ready to spend, particularly as there are no returns from savings in the bank.

On the sharemarket this looming spending boost which extends to the US is helping lift share prices. But there are deep problems in China and the US bond market this week raised the warning flag — prepare for higher interest rates on the back of a boost to inflation. If the bond market warnings see bond rates rise further it means lower share and property prices.

I will discuss China and the bond warning below. First the spending boost.

As always, the retail beneficiaries of the hoarded cash (and borrowing capacity) will be those that catch the imagination of consumers. But not every retailer will fully tap the market because of three underlying hazards.

The pandemic has boosted online retailing beyond expectations but most retailers outsource their online distribution to Australia Post. Sadly, with the departure of Christine Holgate as CEO of Australia Post, the government owned enterprise now has serious delivery delay problems. It blames the quantity of goods but that was predictable. Australia Post now endangers the Christmas trade. Holgate is developing a rival parcel business by fixing the troubled former Toll operation, but that will take time.

An even bigger concern are events in China. Will China have the goods available to satisfy the Australian and international demand? And will Australians pay the much higher prices that are ahead? For those lucky enough to have a cash pile to spend, best do it now because prices are going to rise substantially and shortages are a clear risk. And those price rises and shortages will extend to food

Its important to understand the turmoil in China plus the inflationary pressures building up not just in China, but the US and Europe.

Let’s look at China through three prisms: Australians buying goods in China; Chinese citizens buying dwellings and finally via the vast numbers of Chinese who have been chasing yields by lending to Chinese property developers and second-grade financial institutions. Investors from around Asia and wider afield also chased those Chinese property developer yields.

When Australian retailers with good relations with their Chinese suppliers discuss what is taking place in China they are horrified. Energy costs have gone through the roof and there are often periodic power outages. Labour is in short supply, often because of Covid-19 restrictions. Raw materials are hard to come by and shipping costs have risen ten-fold. American demand is also gathering momentum and Americans have greater buying power than Australia. The Chinese may get their act together but, as it now stands, there will be shortages and much higher prices in coming months.

For a long time the Chinese dwelling market has been akin to Australia on steroids. Property development is around 30 per cent of the Chinese economy and provides the revenue base for local governments.

Speculators have made large sums buying off-the-plan apartments with small deposits and then on-selling. Prices have kept rising, making it harder and harder for younger Chinese to enter the dwelling market.

Suddenly the Chinese government has said it wants to reduce speculation and bring the prices back to more affordable levels. So far official values are stable but the amount of people buying apartments has been slashed and highly leveraged developers cannot find the money to complete their developments. The giant Evergrande developer is teetering on the brink of collapse and there are many more in the same position.

Unfinished apartments are selling at very low prices and the market is in considerable disarray. Markets have always assumed that China could not afford the economic dislocation that massive property developer crashes would create. But so far China has not undertaken widespread rescue operations — although it is likely, at the very least, that it will find a way to complete apartments for those Chinese residents who bought off the plan.

Given the importance of building construction in the Chinese economy, without a massive rescue, China is facing a downturn and this will impact the globe. In the past China has always pulled the rescue levers that it has available when construction looked like falling and it’s still possible that will happen.

If you are a punter and want 20-30 per cent theoretical yields then there are plenty of Chinese developers’ bonds available. But there are great fears that overseas investors in these virtually zombie companies will be left out in the cold in any rescue.

The impacts of these losses will spread around Asia and the rest of the world. In situations like this it usually takes time for the truth to come out but almost certainly there will be major groups that got caught.

The world prices of gas and oil are going through the roof. For a variety of reasons, including the availability of capital for carbon emitting industries, the world has substantially reduced exploration expenditure on oil and gas. There have been very few big oilfields discovered and, meanwhile, the large fields in the Middle East are headed towards a declining stage. Not surprisingly OPEC is reluctant to increase production too far because that hastens the reserves decline. Higher oil and gas prices are going to going to underpin inflation around the world.

Many in the sharemarket believe that while US inflation might be headed to the 6 per cent level it will be temporary because the supply chain problems in China, the oil price hikes and the shortage of skills in the US will be temporary.

I think that’s optimistic and the 10-year bond rate in the US, which fell to around 1.2 per cent some months ago, is now rising beyond the 1.5 cent benchmark — a clear danger sign because if that rate keeps advancing it will impact asset values around the world including property. Central banks are desperately trying to keep a lid on interest rates via low official rates and bond buying but the underlying trends we are seeing in the US, China, Europe and Australia are ominous. New Zealand has already faced reality and lifted official rates.

Here in Australia unions are becoming very aggressive and looking for big pay rises and/or substantial reductions in productivity via use of less casual labour.

Australian managers are not used to it and governments, particularly Labor state governments, will have great difficulty rejecting these claims.

If inflation does break out then and interest rates rise it will then it will substantially reduce consumer spending. The great fear among many economists is that we will then head to a period of inflation with stagnation: the 1970s “stagflation”.

In Australia we will need substantial rises in migration to avoid that taking place.

L’Occitane’s world-first Green Store is set to open its doors to the public in Australia this week as part of the Hong Kong-listed company’s sustainability program.

L’Occitane Green Store has been built in the space of its Westfield Bondi Junction store in Sydney in partnership with the Green Building Council of Australia (GBCA). The Refill Fountain has been added to the new boutique, allowing customers to refill their favourite products in the 100-per-cent recyclable aluminium ‘forever bottles’.

A living green wall with a fully integrated irrigation system acts as a natural air filter with the plants helping to metabolise toxins in the air, while simultaneously releasing oxygen.

“The spirit in which L’Occitane is incorporating Green Star into its retail fit-out is exemplary and testimony to how deep L’Occitane’s sustainability values run within their business,” said Davina Rooney, CEO of GBCA.

The boutique’s benchtops and icebreaker sink are manufactured by Australia-based company Betta Stone, using recycled glass collected from L’Occitane’s TerraCycle program.

“L’Occitane will be the first who has closed the loop on supplying the materials through their TerraCycle program, to see that tangible benefit of collecting consumers waste and repurposing it in-store is impressive,” said Robert Thompson, owner of Betta Stone.

The physical build of the boutique was undertaken with Site-Box Projects which ensured the materials used are supported by credible environmental certifications including the Programme for the Endorsement of Forest, the Green Building Council of Australia’s Green Tag and Good Environmental Choice Australia.

Meanwhile, the store’s current furniture will be transferred to other L’Occitane Boutiques to be reused and repurposed.

According to the company, 19 per cent of the 3000-plus buildings certified by the Green Building Council of Australia are retail, and only three retailers have achieved a Green Star rating using the interiors tool, a select group that L’Occitane is aiming to join.

• Breeze Furniture is an Australian furniture subscription service.
• Customers are able to swap, return or keep the item as part of the subscription.
• There are three-month and six-month subscriptions available.
• Monthly payments go towards owning the product at the completion of the subscritpion.

If you’re always changing your mind when it comes to homewares because you aren’t able to visualise spaces like an interior designer does, Breeze Furniture is a furniture subscription service that feels like it was created with this mentality in mind.

Founded in Australia in 2019, Breeze Furniture allows customers to keep, swap or return their furniture purchases. Founder TJ Hoon told Business Insider Australia that he created the business after getting tired of how difficult it was to create a home he loved, including things like the “painful delivery and assembly process”, the amount of money needed all at once, and the hassle of dealing with old furniture when his needs changed.

With the average metropolitan household in Australia disposing of 24 kilograms of wooden furniture annually, Breeze exclusively partners with premium furniture suppliers who are aligned with its mission to keep furniture out of landfill.

Furniture partners include bedding leaders Eva, designer favourites LaForma and Tallira, and, most recently, West Elm. The West Elm range comprises of 70+ pieces and is a huge drawcard for new and existing customers, a base that has grown thanks to lockdown redecorating.

“Lockdown has resulted in many people spending more time and home than before, and also highlighted to many around the uncertainties around the future, both of which we believe have been tailwinds for our service, which offers convenient, affordable and flexible access to premium furniture,” Hoon told Business Insider Australia.

The service works by customers picking a plan which works for them – short-term or long-term – choosing the furniture, getting it delivered and assembled, and then deciding whether they want to swap, return or keep the item.

The short-term furniture subscription plan is a 3-month minimum at $12.95 per month and the long-term plan is a 6-month minimum – with the cost of the furniture added on top for both. At the end of the term, you choose what you would like to do with the item: swap, return or keep.

If you decide to hold onto the furniture chosen, your monthly instalments will contribute to the overall cost. It’s somewhat similar to a buy-now, pay-later service but (in some cases) with a longer timeframe. And, of course, you’re not locked into the purchase if you change your mind. You can also roll over the subscription on a month-by-month basis.

If you accidentally damage the furniture, Breeze Furniture offers free accidental damage insurance of up to $100, no matter what you’ve bought. If it exceeds that $100 mark, Breeze Furniture will assess the damage case-by-case and may charge a repair fee.

I recently used the service on the short-term plan to buy the West Elm Stagger Lamp (now sold out) and Parula Dresser, and am really satisfied with the quality of the product. While I wasn’t able to have the product assembled inside my house because of COVID-19 restrictions, it is an option to have it assembled outside the front door. Soon enough, it’ll be business as usual.

Hoon also told Business Insider Australia that another furniture partnership is about to be launched, although it’s still under wraps.

• Australian shopping centre Westfield is launching an online shopping marketplace that will allow customers to purchase from multiple stores in a single order.
• It follows an explosion in e-commerce since the start of the pandemic, with 82% of households now shopping online.
• Supermarket giant Woolworths has launched a similar service, which expanded Australia-wide in September.

Westfield has launched a new shopping service that ships directly to consumers, as Australia Post continues to face weeks-long delays.

The Australian shopping centre will let customers buy online from its multiple stores in a single transaction, removing the need to buy directly from individual stores, which generally use major delivery services including Australia Post. 

Westfield Direct will be available for pick-up within one to five working days, with home delivery also available across all Westfield stores across Australia. 

The new service follows a push by retailers across the landscape to scale up digital and ecommerce capabilities following the explosion of online shopping since the start of the pandemic. 

In late September, supermarket giant Woolworths announced it was taking its online marketplace Australia-wide as part of its strategy to expand and diversify its online presence. 

The supermarket’s e-commerce sales rose 58% to $5.6 billion in 2021, with online food and grocery sales skyrocketing 75% to $3.5 billion. 

An Australia Post report showed 82% of households shopped online in 2020, with the sector seeing 57% year-on-year growth in online purchases in the first year of the pandemic. 

Westfield’s new service spans more than 100 retailers, including fashion brands Cue, General Pants, MJ Bale, Gorman, Ted Baker and Sportscraft, as well as beauty retailers Aesop and L’Occitane.

It will enable shoppers to browse curated collections and place orders for products that span multiple retailers at once. 

Phil McAveety, chief customer and business development officer for Westfield’s parent company, Scentre Group, said in a statement that Westfield Direct would offer shoppers “more convenience, flexibility and choice” in the lead up to the Christmas retail season.

“Westfield Direct provides our business partners with the opportunity to increase the productivity of their physical store networks while alleviating the time-intensive and costly process of fulfilling and delivering orders,” McAveety said. 

Additionally, the service would boost sales for smaller retailers who didn’t have their own e-commerce setups. 

The number of companies taking business online each month more than doubled from pre-pandemic levels, peaking in July 2020, according to research conducted by Mastercard around its Australian activity.

Its survey showed that 60% more merchants accepted e-commerce sales in 2020 for the first time, compared to 2019. 

“Westfield Direct presents a significant growth opportunity for our SME retail partners, many of whom only have one or two physical stores with us and no online presence,” McAveety said.

The company will also set up distribution hubs across its existing centres, facilitating inter-centre and interstate product transfers.

“Westfield handles the end-to-end experience, including order fulfilment logistics, last mile delivery and customer service,” he said.

Melanie Levis, executive director of Australian fashion brand Cue said the new service would add “convenience and flexibility” for shoppers, while increasing “our capacity to make sales and broadens our reach (and) exposure across the Westfield network”.

Westfield Direct will operate at 37 of Westfield’s shopping centres across Australia. 

Scentre Group has seen explosive growth in 2021, recording a 28% increase in profits in the first six months of the year.

The group – which owns and operates 42 Westfields in Australia and New Zealand – announced an operating profit of $460.1 million.

Ask Solomon Lew how fashion retailer Premier Investments thrived in the face of the arrival in Australia of Amazon, and he says the answer is simple.

“We develop and manufacture all our own product,” he says.

“You can’t buy our product on Amazon. There is no availability. So, if people want to buy online, and want to buy our brands, they have got to come to our online site.”

Having control of the marketing, pricing, distribution and in-store presentation of Premier’s seven fashion brands has been the key to its success in becoming the country’s best retailer.

Premier is a dazzling case study of how to take a handful of domestic brands sold through bricks and mortar outlets and beholden to shopping mall landlords and turn it into a global business with rising profit margins.

France’s Kering will stop using animal furs in all its collections, joining a growing list of luxury fashion houses to respond to customer demands for ethical and sustainable clothing and accessories.

The decision comes four years after its star label Gucci announced it would forego fur. A number of fashion houses followed suit, including Italy’s Prada, Burberry and outerwear specialist Canada Goose, which had come under fire for its use of coyote fur.

With an eye to building future generations of luxury customers, fashion labels have doubled-up efforts to burnish their sustainability credentials with younger, environmentally-conscious shoppers.

Starting from the fall 2022 collections, none of the group’s houses will use fur, the statement said.

“The time has now come to take a further step forward by ending the use of fur in all our collections. The world has changed, along with our clients, and luxury naturally needs to adapt to that,” François-Henri Pinault, chairman and CEO of Kering, pictured above, said.

While the group’s houses, which include Balenciaga, Bottega Veneta, Alexander McQueen, Brioni and Saint Laurent, have phased out fur in recent years, Friday’s company-wide ban closes the door to its use in the future, even in the event of a change in creative direction.

Larger rival LVMH leaves the decision on fur use to its creative directors.

Although coats made entirely from fur have fallen out of fashion in recent years it has continued to be used as a trim, or in luxury handbags.

Images of mass cullings of coronavirus-infected mink in Denmark at the height of the coronavirus pandemic prompted public outcry and heightened demands to ban the use of animal products in the fashion industry.

“The announcement is a significant blow to the declining fur trade and puts pressure on the few remaining fashion brands that continue to sell fur to follow suit,” said the Humane Society

The cost of shipping around the world has skyrocketed.  Until now most retailers have absorbed the costs, but with no end in sight to the shipping crisis, it’s possible the price of goods for consumers is going to rise. Some retailers have already announced they’re passing on these costs to their customers.

What caused shipping costs to surge?

In summary, a supply and demand story unfolded.

In 2019 ocean freight slumped. Then in 2020, the pandemic sparked an unprecedented surge in demand for goods resulting in a worldwide shortage of shipping containers.  Simultaneously, in Australia, the Government’s stimulus package, at a time when international travel was halted and restaurants etc closed meant that household disposable income increased (RBA). 

Spending shifted from services to goods, the demand for which is now at pre-pandemic levels.

Small retailers are disproportionately affected by the supply chain disruption. They have less ability to take mitigating action such as stockpiling inventory due to cashflow and warehousing costs. We’re hearing of large retailer’s stockpiling 8-12 months’ inventory!

Big companies lock in long term shipping contracts at agreed prices.

Retailers like Ecodownunder who are not big enough to enter long term shipping contracts have to buy the remaining space available on ships, on the spot market. It’s the cost of this space that has escalated.    The shortage of shipping containers and the inability to get empty shipping containers back to the source of the goods exacerbates the problem.

Australia imports more container ships than it exports, which means Australian retailers must often pay a surcharge just to get the ships to dock here.  This is all compounded by industrial action in local ports and a lack of passenger flights which pre-COVID carried significant quantities of freight.

Getting stock in time for Christmas is the biggest concern for many. Not only are manufacturers in Asia experiencing delays in production due to lockdowns, but products are taking more than twice as long to get here.  Ecodownunder used to receive goods 4 weeks after departing Mumbai.  It’s now taking at least 2-3 months and that’s if you can get a container! We’ve just been quoted US$9,500 for a 40-foot container, 7 times what we used to pay. Freight prices are going up weekly.

Soaring shipping costs increase the landed cost per unit of goods.  For bulky goods, the additional cost added per product is high.  We’re fortunate that our bulkier wool products, quilts and pillows etc are made in Australia and so don’t incur freight costs.  If prices continue to rise and shipping delays continue to grow, more businesses will start to look at sourcing products locally.  A win for Australian Made! We’re already seeing our competitors who import from China, looking to source from our Australian manufacturers.

Seasonality of stock has caught many retailers out with winter products arriving in Spring.   The new norm for us means planning and ordering inventory at least 6 months ahead instead of the three months that was required pre-COVID.

The RBA figures show the price for shipping containers quadrupled in the year to June 2021, reflecting the Ecodownunder experience.  With demand continuing to rise, bottlenecks in shipping are likely to persist into 2022 which will mean further price rises.  This will likely lead to tighter supply chains.  Concerns about the reliability and cost of imported goods will encourage more businesses to onshore to reduce shipping costs and time.  A win for Australian made!

And a reduction in international shipping will be a win for the environment with less carbon emissions contributing to global warming.

Ask Airlie Funds Management founder John Sevior the single best investment in his career as an institutional investor and he will name kitchen appliances group Breville.

While working at Perpetual Investments during the depths of the global financial crisis in 2008-09, Sevior waded into Breville at 65¢ a share and built a 15 per cent stake, which was the maximum Perpetual could hold under its mandate.

“I bought some shares and held them for a long time and sold them at a substantial gain,” he told a Livewire podcast earlier this month.

“There’s a lesson I guess in being brave, when the lights are flickering, which was the positive lesson.

“The other lesson, which is also positive is it could have been a lot more profitable for me. I sold those shares at a substantial gain, but they’ve since tripled.

Super Retail Group has announced that Macpac CEO Alex Brandon will step down from the role in October. 

Brandon will be replaced by current Priceline Pharmacy GM of retail operations Cathy Seaholme on October 25. 

A seasoned retail operator, Seaholme will bring seven years of experience from The Body Shop Australia, as well as 13 years at Country Road Group, to her new position at Macpac. 

The leadership transition forms part of a planned strategy, following Super Retail Group's acquisition of Macpac in 2018 for NZ$144 million. 

Super Retail Group CEO Anthony Heraghty thanked Brandon for his work and leadership of the brand. 

"During nearly a decade leading Macpac, Alex has overseen its evolution from a small wholesale business to one of the most recognisable outdoor adventure brands in our region. 

"Following the successful integration of Macpac into Super Retail Group, now is the right time for a leadership transition," Heraghty said. 

Heraghty added that the Group is excited for what Seaholme will bring to the brand. 

"In wishing Alex all the very best for the future, we acknowledge his critical role in successfully integrating Macpac with Super Retail Group and thank him for his leadership and his commitment to maintaining the heritage, quality and integrity of the Macpac brand. 

"Cathy's appointment represents the culmination of a long-planned succession strategy for the Macpac business and I am confident her deep retail experience and commitment to the customer will help drive the next phase of growth for Macpac," Heraghty said. 

Speaking on his departure, Brandon praised Macpac and what it has achieved as part of Super Retail Group. 

"It has been a privilege to lead our passionate team of dedicated team members who have contributed to the success of Macpac and grown awareness of a truly authentic and sustainable brand. 

"I am particularly proud of our track record of leading innovation without in any way diminishing our proud heritage deep-rooted in adventure," he said. 

In its FY21 results, Macpac reported a 16.3% increase in sales to $153.4 million, as a result of a 14.2% increase in like for like sales. 

The brand's online sales lifted 38% to $30 million, accounting for 21% of sales. 

Seaholme will officially take up her position on October 25 and will relocate with her family to New Zealand to operate out of Macpac's headquarters in Christchurch.