News

Home and office supplies business Officeworks expanded the scope of its services offer with the acquisition of technology solutions business Geeks2U last week.

The brand will continue to operate independently for the foreseeable future, though will be integrated into Officeworks’ store network and website over time, creating a “one stop shop” for the technology needs of Officeworks customers.

Geeks2U enables customers to book an independent IT technician to come to their home or business to solve issues with computers, tablets, phones, televisions, internet, email, data backup and recovery and other tech problems.

The acquisition, announced on Friday, March 1, complements Officeworks’ existing IT service offering, which enables businesses to pay a monthly fee to have technicians offer remote support, software, cloud storage and installation of new technology.

“If customers have a tech problem, they can call Geeks2U or request a call-back,” Officeworks managing director Sarah Hunter told IR.

“Someone from Geeks2U will discuss their needs and provide a quote, before booking in a specific appointment time and organising an expert technician.”

According to Hunter, the service covers everything from setting up a wireless home network, installing hardware or software, to repairing operating systems.

The computer repair service , which will continue to be headed up by founders David and Michael Hancock, was launched in 2005 in Sydney before expanding nationwide – serving over 300,000 customers.

“We’re thrilled to be working with Officeworks, who will be able to provide the support and scale of a successful national business that’s been around for 25 years,” David Hancock said.

KPMG nation leader of consumer and retail Trent Duvall told IR that technology remains a ‘dark art’ for many consumers, and that through understanding this Officeworks could offer solutions which may lead to increased sales down the line.

“By removing the confusion many shoppers face due to the myriad tech solutions on offer, and simplifying a consumers understanding of what tech they need and why, it is very likely that they will buy more and be a return shopper,” Duvall said.

“Moving into a known model like Geeks2U would seem a smart retail strategy to drive Officeworks sales of home technology products and solutions.”

Capital expenditure in food and grocery is expected to reach $165 million over five years, comprising $100 million on rebranding and refurbishments (with Metcash providing loans to retailers), $10 million on small-format store pilots, $25 million on logistics and $30 million on systems including automated charge through (IndieDirect), loyalty programs and new promotional platforms.

In hardware, Metcash plans to spend $90 million to accelerate its "sapphire store" refurbishment program, expand its range to cover the "whole of house" including new categories such as cement and steel, roll out Hardings Plumbing and Tait flooring across the network, and accelerate its digital rollout.

Stretched household budgets have left consumer sentiment on a knife edge, warn chief executives who worry the drawn-out election campaign and poorly considered policy promises could damage the economic outlook further.

Overall, business leaders remain optimistic about the resilience of the Australian economy, but beneath the management bravado there is a simmering undercurrent of concern.

A feature of the just-finished February reporting season was cautious outlook commentary due to the flow-on effects to consumers of falling house prices and tightened lending, and this vigilance was just as apparent in an exclusive survey of chief executives conducted through the period by The Australian Financial Review.

Outgoing Virgin Australia chief executive John Borghetti nailed the overwhelming attitude of his peers with a call for a focus on policies that support the economy.

"To me, the economy is a critical factor. So the first thing I'd put on my list is policies relating to the economy and ensuring it stays strong," he said.

London | The architect of Harvey Norman's turnaround in Ireland, Blaine Callard, is set to end his decade in Dublin and return to the retailer's head office in Australia, where he may be put to work on the more lacklustre domestic operation as it grapples with the Amazon threat.

Mr Callard, who has been an outspoken advocate for traditional bricks-and-mortar retail during a period of major online disruption – Ireland is a mature Amazon market – will reportedly take on "a strategic role" in Gerry Harvey's empire.

He has worked for Harvey Norman for more than 23 years, starting as a franchisee before running projects for Mr Harvey's executive team and then putting in shifts as managing director of both the Noble House Design and Artemis Imports subsidiaries. He was dispatched to the Slovenian operations in 2006 and shifted to Ireland in 2010.

During his time as Harvey Norman's main man in Europe, he also founded and ran a furniture import business in Slovenia, set up a music production company in Ireland, and completed an MBA at Trinity College Dublin.

The Ireland business was loss-making when Mr Callard took the helm in 2010, and haemorrhaged nearly $200 million in the years that followed. It took six years to start breaking even, but the latest half-year result, released last week, suggests Mr Callard's turnaround strategy is now bearing fruit.

In the half-year to the end of 2018, pre-tax profit at the Irish and Northern Irish businesses surged by 164.4 per cent to $10.34 million, as sales revenue climbed 21.6 per cent to $208.07 million.

The business's 15 stores have gained market share, and the chain is reported to be Ireland's top-selling retailer in most of its product categories bar furniture, where Ikea's single Irish store takes the crown.

If he has any kind of magic touch, it might be needed in Australia, where headline franchisee sales revenue fell 1 per cent in the December half, and underlying profit after tax and non-controlling interests rose just 0.1 per cent. However, the company has attributed this to a more general moderation in the Australian discretionary retail market, rather than an issue particular to Harvey Norman stores.

The company's half-year profit report said the Irish turnaround has hinged on the flagship Tallaght store, on the outskirts of Dublin, which opened about 18 months ago.

Betting on bricks and mortar

Tallaght was described as creating a "halo effect", and there was praise for Mr Callard's creation of an "in-store immersive experience".

This fits with his philosophy that visiting a shop is actually a separate category of activity to making online purchases – a distinction he says could allow bricks-and-mortar retail to see off the online threat, if the physical side plays to its strengths.

"Shopping is not the same as buying … shopping is recreational, social, tactile, experiential, exploratory and physical. And it's fun," he wrote in a LinkedIn post in 2017.

"I shop for a jacket, or a sofa, or a TV. However, I buy a sandwich at lunch, and we buy groceries. Nobody ever shopped for a sandwich … They look like the same thing. But they're not."

This means that although digital will "make or break many retailers in the years to come", and online retail is "important, powerful and growing", it isn't a substitute for physical retail – as many online-only retailers are now discovering.

"Make no mistake: pure-play online brands opening physical stories is not a clever pivot. It's a survival strategy," he wrote last year. "What many of these brands will discover is that running great shops is more difficult than writing code. At the heart of great retail is people, and people don't behave like algorithms."

Harvey Norman in Ireland has worked hard to present itself as an attractive employer in a market where unemployment is at 10-year lows.

Mr Callard says online retail can no longer just rely on undercutting shops. "In mature markets, price is now simply an online hygiene factor, it's no longer a competitive advantage. Lowest price is just a business model cul-de-sac," he has written.

And although bricks-and-mortar retailers have the apparent disadvantage of having to rent shopfronts and pay staff, online retailers have disadvantages of their own: higher delivery costs and a much higher rate of product returns. He quotes research suggesting that in the US 30 per cent of all products bought online last year were returned, compared with only 9 per cent at physical stores.

When physical retail does struggle, he puts this down mostly to poorly executed retail strategy rather than to the online threat per se.

"Many more soul-less malls will have to close as the market consolidates," he said in one LinkedIn post. "If nothing else, Amazon has certainly sharpened the sense that 'going shopping' has to be worth it. People simply won't visit boring, dull or neglected stores. Great retail will always thrive, and bad retail will always die – only now it's happening faster."

He has cited other threats that may hurt a retailer at least as much as online competition, such as parking charges, bad zoning and inappropriate shop sizes.

Adairs CEO Mark Ronan warned the June-half would be much tougher as consumers grew more cautious and the weaker Australian dollar pushed up sourcing costs.  Supplied

However, Mr Ronan warned the June-half would be much tougher as consumers grew more cautious and the weaker Australian dollar pushed up sourcing costs.

Mr Ronan reduced Adairs' forecast for earnings before interest and tax by $1.5 million to between $46 million and $50 million, compared with consensus forecasts around $48 million and EBIT of $45.3 million in 2018.

Footwear philistines would scoff in disbelief at an $18,000 price tag for a single pair of shoes, however for sneaker enthusiasts trading shoes all the time, a price of this magnitude is not only rational but one that sets a benchmark for paying even more in future.

Kevin has never spent anywhere close to $18,000 for a pair of shoes but has amassed a collection of around 120 pairs.

PUSHAS only re-sells shoes that have never been worn, known as "deadstock" shoes. Sellers send the shoes to Truong's office where they are inspected for authenticity before being put up for sale on the platform, the business takes a 15 to 20 per cent cut on each sale.

The drive to collect

Personal trainer Al Matthews has a collection of 800 pairs, which he has insured for $300,000. He once spent $5500 on shoes designed by hip hop star Kanye West for Adidas, and the decision to pay that much cash "took me about a second," he says. However, that very pair now sells for $12,000.

Design collaborations between sportspeople and musicians with footwear brands often create the most desirable shoes. The most iconic, ongoing collaboration in history has been between Nike and basketball's most celebrated player, Michael Jordan.Together they created the Air Jordan brand, which generates over $3 billion a year in revenue for Nike and has a list of 33 models of signature shoe since its inception, including one released last year.

The first Air Jordan was released in 1984 and is the most recognisable basketball shoe in history, characterised by its red and white leather panels and black Nike swoosh, colours taken from the Chicago Bulls, the team where Jordan won six championships.

It was also Matthews' first shoe. He was given a pair when he was 12 years old from his brother, who bought them for $45. He now owns five pairs.

Matthews regularly buys multiple pairs of shoes. He's already ordered 10 pairs of a re-release of the black and red Air Jordan 4, planning to keep five for himself and knowing he can sell the others to friends to make his money back.

Like most collectors of things, Matthews is driven by passion, "I just do it for myself," he says, not for an income supplement, selling shoes for a profit.

Changing shoe landscape

The resale market has changed the shoe landscape, with sought after shoes disappearing from shelves in seconds because buyers know they will instantly jump in value. It is not unusual to see long lines of young shoppers literally camped outside retail stores for days before a new shoe is released and online shoppers using bots running algorithms to buy as many shoes as they can as soon as they are made available.

A collector since the mid-2000s Kevin doesn't like paying above retail but in this kind of environment, sometimes he has no choice.

"Sometimes it's just easier to pay the resell price, and not bother with spending half a week in a tent on George Street [in Sydney's CBD]."

Kevin thinks the resale mentality can cause people to lose sight of why they started buying shoes in the first place.

"Shoes are meant to be worn, not left in a box in the hopes that they can be flipped for profit," he says. "They're just shoes, enjoy looking at them and then wear them into the ground."

Beaten-down stocks such as jewellery retailer Lovisa have emerged as the unlikely stars of the reporting season for consumer-facing companies, turning the tables on staples, which are struggling to justify their more expensive valuations.

With its fast-to-market model, it was one of the first companies to flag softer trading conditions last year, seeing its shares plunge 22 per cent in October after it warned of a "challenging start" to 2018-19.

Liu partly blames a shift in promotional spending for the very weak sales reported in the lead-up to Christmas, which had the effect of spooking the market.

"It was quiet heading into December as consumers had moved their spending around," she says. "Consumers have changed their spending patterns. They are much more skewed to promotions."

Because the challenges for companies aligned to the domestic consumer are now relatively well understood, these stocks are now priced more correctly, she believes.

"The discretionary retailers are appropriately priced now," Liu says. Companies such as JB Hi-Fi headed into reporting season on a price-to-earnings multiple of just 10 to 12 times.

But for companies that operate at the defensive end of the consumer spectrum, such as supermarkets, investors were much more positive heading into February, arriving at an earnings multiple of 22 to 23 times as they sought safety from a terrible fourth quarter.

Both Coles and Woolworths underwhelmed investors when they released results this week. Coles' net profit fell 29 per cent to $381 million after the retailer booked $146 million in supply-chain restructuring charges and earnings were below consensus. Fast-changing consumer shopping habits and margin dilution from the shift to online shopping are proving to be a challenge for the grocer.

Rival Woolworths said that net profit from continuing operations, excluding petrol, rose 2.1 per cent to $920 million, while earnings rose 1 per cent to $1.4 billion, also falling short of consensus. Woolworths shares, which have risen 11 per cent over the past 12 months, fell 5 per cent to $28.69 in response.

"With Woolworths, the expectations were relatively high and you can see that by the price-to-earnings multiples going into the results," Teh says. "Whether you are a high PE or a low PE stock you have to meet expectations."

Wesfarmers' Officeworks and Bunnings offset weaker profits within the group from department stores (Kmart and Target) and industrials, underscoring that specialised retailers are better protected from the competitive landscape.

BWX's Nourished Life online natural beauty retailer reported a recovery in the platform's daily order average from July 2018's trough to January 2019. Domestic organic growth is "robust", the company said.

"Good retailers will do well, good value propositions will do well," Liu says. "I think that ultimately this reporting season has been rational in the way share prices have responded."

Teh advocates against extrapolating the success of some retailers in countering what is indisputably a broader malaise for households. "We are in a downturn and now the market is trying to formulate a view whether the Reserve Bank of Australia is going to cut this year. If they do, it becomes a question of whether it's a shallow or a deep downturn."

One of the world’s largest consumer investors, L Catterton, has bought Australian activewear company 2XU in a deal finalised with its founders and investor John Wiley.

Mr Wiley’s Tanarra Capital held 18 per cent of the sports and compression wear company and initially bought a larger stake from its founders eight years ago.

2XU was started in Melbourne in 2005 by Clyde Davenport, Jamie Hunt and Aidan Clarke and its products are now sold in 40 countries around the world.

Its key markets have been identified as Australia, the US, the UK, Scandinavia and some parts of Asia.

DataRoom understands the company recently recorded turnover of about $100 million 
a year and has a lucrative contract to produce Fitness First branded clothing for the gym chain.

L Catterton bought a stake in 2XU in 2013 and pitched to the company’s investors late last year to take over full ownership of the business.

In Australia, it currently owns R.M Williams and Seafolly and Jones The Grocer Group.

Also in the Australian retail sector, packaging tycoon Raphael Geminder declared his $2.70 per share bid for The Reject Shop is now final and will not be extended past March 5.

The company has picked up about 4 per cent of The Reject Shop registry through its on-market buyback which was commenced late last year.

The stock is currently trading at $2.75, slightly above the current offer.

Meanwhile, Morgan Stanley veteran Steven Harker is retiring at the end of the week after a 
20-year career at the investment bank.

Mr Harker has emailed the bank’s staff yesterday afternoon announcing his intention to leave on Friday.

He had served as Morgan Stanley’s country head in the past for nearly 18 years before he was appointed vice-chairman almost two years ago. He handed over the reigns of the local operations to well-known investment banker Richard Wagner.

Prior to joining Morgan Stanley and building up its local office, Mr Harker was the global head of equities at BZW.

Earlier this month, Mr Harker was appointed a non-executive director at Westpac effective March 1.

Caltex has made a commitment to the market to deliver an earnings uplift from its convenience strategy of $120 million to $150 million by 2024. The strategy is progressing well with 58 new Foodary stores opened since 2017.

Segal tells Chanticleer that sales are up more than 40 per cent at Foodary outlets that have have operating for more than six months. "Two years ago this was just an idea on paper," he says. 

NEW YORK, United States— For decades, Vans has had what every shoe brand now desperately wants: frequent, unpaid appearances on the feet of actors, musicians, even chefs.

The 53-year-old sneaker brand got its big break when Sean Penn happened to wear Vans checkerboard slip-ons in the 1982 film “Fast Times at Ridgemont High.” Hip-hop group The Pack's viral 2009 hit “Vans” irrevocably etched its title refrain into the consciousness of listeners: "Got my Vans on, but they look like sneakers." Young and stylish NBA players Nick Young and Jordan Clarkson are frequently photographed wearing the shoes.

Turning that cultural cache into consistent profits took more deliberate engineering. The brand was acquired at a low point in 2004 by VF Corp., a Greensboro, N.C.-based conglomerate that owns more than 20 apparel brands, including Wrangler, Timberland and The North Face. With about $3 billion in revenue last year, Vans is the largest brand at the sixth-biggest US apparel company, according to Euromonitor.

Now, Vans is at the centre of plans at VF Corp. — founded in 1899 as a glove maker — to adapt to a retail landscape that has not treated other century-old apparel makers kindly. The company's fate, even as recently as a couple years ago, was linked to the fading fortunes of department stores it relied on to drive sales of brands like Nautica and 7 For All Mankind. Instead, VF Corp sold those brands, and is spinning off wholesale-dependent jeans labels Wrangler and Lee as a separate company. It’s also plowing investment into direct-to-consumer sales.

“When I ... laid out our new strategy, it began with a mea culpa,” said Steve Rendle, who was named VF Corp’s chief executive at the start of 2017 and quickly began implementing a turnaround strategy. “We were still in many ways a wholesale manufacturer of branded products in specific categories, but we had not really begun to evolve the rate the marketplace was evolving.”

The strategy in a nutshell: avoid the middle — fading department stores and anonymous brands undercut by cheap fast fashion — at all costs. That means leveraging Vans’ and North Face’s fashion moments and acquiring brands that resonate with consumers in other, more specialised categories.

The important thing for us is that everything ebbs and flows … It’s more complicated than just saying, ‘Today, it’s Old Skools and tomorrow is Slip-Ons.’

Out went Nautica, Ella Moss, Splendid and 7 For All Mankind — brands disproportionately dependent on department stores like J.C. Penney and Macy’s. The company acquired outdoor apparel brand Icebreaker, athletic wear brand Altra and the parent brand of Dickies, a workwear company. The denim spinoff is expected to be completed later this year.

VF Corp. isn’t planning to sell any other labels, though more acquisitions are likely, with an emphasis on “lifestyle” brands in fast-growing categories, chief financial officer Scott Roe said.

The company expects revenue to grow 12 percent in the year ending in March, to $13.8 billion. VF shares are up to about 65 per cent since the start of 2017.

“I think they’re doing the right things,” said Macquarie analyst Laurent Vasilescu. “They’ve really worked on honing in on the key brands ... Overall retail has been challenged, but if you look at [VF’s] main brands, their exposure to the mass market will be very small.”

To be sure, wholesale still accounts for about 65 percent of revenue, with a goal of reducing that to about 60 percent in the near future, Roe said, as VF Corp.’s relationship with wholesalers continues to change.

Chains like J.C. Penney compete on price and attract consumers through promotions, which hurts apparel sellers’ margins and damages their brands. Some retailers are more ideal in today's landscape. VF Corp. points to Zalando, a Berlin-based e-commerce company, as a new, collaborative wholesale model focused on building brand recognition together. Zalando has worked with VF Corp. brand stores to enable same-day delivery, for instance.

VF also has an advantage as a portfolio company rather than relying on a single brand. Vans and North Face, which is also seeing rapid growth and reached about $2.5 billion in sales last year, will likely determine the company’s fate in the near-term, however.

The company invests in its own digital platforms, including making better use of customer data. For instance, Vans’ new loyalty program, Vans Family, engages with super-fans by incentivising repeat purchases and feedback via surveys and polls.

“Management really understands who their core customer is, so they’ve been trying to be true to that aesthetic,” said Bernstein analyst Jamie Merriman.

The philosophy of diversification applies within Vans and its five classic models as well. In 2018, the Vans Old Skool was the best-selling model — accounting for about 25 percent of sales, Roe said. But in its most recent quarter, the Slip-On took over the top spot. Vans’ recently introduced apparel category is also posting faster growth than the overall brand.

Under our ownership ... Vans is not only a cool brand but a profitable one.

“The important thing for us is that everything ebbs and flows,” Roe said. “It’s like how Disney has released and then re-released movies. We’re emphasising certain things and then something else comes back on a cycle … It’s more complicated than just saying, ‘Today, it’s Old Skools and tomorrow is Slip-Ons.’”

The company hopes that Vans will reach $5 billion in sales by 2023 — and it's on track, having grown 25 per cent in its most recent quarter, and expanded at an average 15 percent annually over the last 15 years.

Vans is in the same ballpark as Nike and Adidas in terms of its fan base, despite being a fraction of the size of either rival. According to Tribe Dynamics, it’s the only brand out of the three to indicate growth in potency among influencers on social media, posting a 5 percent increase in earned media value in the last quarter of 2018. And among American teens, research firm Piper Jaffray found that Vans ranked as their second-favourite footwear brand after Nike last fall.

The brand has achieved this with relatively few high-profile endorsements. Under its ambassador program, spearheaded by vice president of events and promotions Steve Van Doren, son of Vans founder Paul Van Doren, Vans sponsors a number of professional skateboarders and surfers. But the vast majority of famous fans, from Justin Bieber to models like Stella Maxwell and NBA players like Young and Clarkson, are not paid. Clarkson told GQ last May that he owns 80 pairs of Vans.

Even collaborations are typically initiated by the other party, according to Vans global brand president Doug Palladini.

“When we got our collaboration with Opening Ceremony, it was because [founders] Humberto [Leon] and Carol [Lim] loved Vans and grew up with them in California. It’s not like we went in there with some big pitch about how we should be the next high fashion brand and sit next to Proenza Schouler,” he said.

Vans sponsors live events, with its growing network of House of Vans, for instance, venues that combine indoor skate space with free musical performances in Brooklyn, London, Chicago and elsewhere. For 24 years, Vans has also sponsored the Warped Tour, of which it owns a 75 percent stake, but the pop-punk festival will retire after its final run this year.

From VF’s perspective, it’s literal DNA (Steve’s sister, Cheryl Van Doren, also works for Vans) that has allowed the brand to maintain its authenticity.

“At the front end, the DNA is owned by [the family]. They’re in Southern California, and that’s the only place Vans should ever be,” Roe said. “But behind it, VF has infiltrated the organisation with financial discipline, with supply chain discipline and capital resources with a global footprint and know-how, which has enabled that brand to access parts of the market that they couldn’t have otherwise.”

“Under our ownership,” he added, “What’s changed is that Vans is not only a cool brand but a profitable one.”

Proposed Acquisition to Give PVH Full Control of its Brands in Australia

NEW YORK--(BUSINESS WIRE)--PVH Corp. [NYSE:PVH] announced that a newly formed wholly owned subsidiary has entered into a definitive agreement under which it is proposed that PVH would acquire the interests in Gazal Corporation Limited (“Gazal”) that it does not already own for A$6.00 per share. The closing is subject to customary conditions (including shareholder, court and regulatory approvals) and is expected to occur in the second quarter of 2019.

Gazal has been PVH’s long term partner in Australia. If the acquisition is consummated, PVH will acquire its joint venture with Gazal, “PVH Brands Australia Pty Limited” (“the JV”), which commenced doing business in 2014. The JV holds licenses for PVH’s CALVIN KLEIN, TOMMY HILFIGERand Van Heusen brands, as well as the Pierre Cardin, Bracks and Nancy Ganz brands in Australia, New Zealand and other parts of Oceania. The JV generated approximately A$260 million in revenues on a twelve month trailing basis as of July 2018.

The aggregate net purchase price for the approximately 78% of Gazal shares being acquired is approximately A$124 million, after taking into account the divestiture to a third party of Gazal’s owned office building and warehouse in Banksmeadow, New South Wales, which will take place shortly following the closing date of the acquisition.

The transaction is expected to result in a material increase to PVH’s 2019 earnings per share on a GAAP basis, as PVH expects to record a noncash gain to write-up its equity investments in Gazal and the JV to fair value. Excluding this noncash gain, the transaction is expected to be slightly accretive to PVH’s 2019 earnings on a non-GAAP basis. It is a condition of the transaction that key management of Gazal and the JV commit to remain in their roles for at least two years and use approximately 25% of their existing Gazal equity to subscribe for an approximate 6% stake in the PVH subsidiary that is the parent company of the acquirer.

“I’m pleased that we have agreed to acquire Gazal. PVH currently – and for many years – has had a successful business relationship with our Australian partners and would be pleased to bring them into the larger PVH family,” said Emanuel Chirico, Chairman and CEO, PVH Corp. “Gazal has enhanced the market position of our brands in Australia and New Zealand and we believe the region continues to offer significant growth over the next five years and aligns with our strategic priority to expand our direct control of businesses operated under the CALVIN KLEIN and TOMMY HILFIGER brands worldwide.”

About PVH Corp.

With a history going back over 135 years, PVH has excelled at growing brands and businesses with rich American heritages, becoming one of the largest apparel companies in the world. We have over 36,000 associates operating in over 40 countries and nearly $9 billion in annual revenues. PVH owns the iconic CALVIN KLEIN, TOMMY HILFIGER, Van Heusen, IZOD, ARROW, Speedo*, Warner’s, Olga and Geoffrey Beene brands, as well as the digital-centric True & Co. intimates brand, and markets a variety of goods under these and other nationally and internationally known owned and licensed brands.

*The Speedo brand is licensed for North America and the Caribbean in perpetuity from Speedo International Limited.

About Gazal

Based in Sydney and listed on the ASX, Gazal is a leading apparel supplier and retailer in Australasia. The Company jointly owns and manages PVH Brands Australia Pty Limited, a joint venture company with PVH Corp., one of the largest branded lifestyle apparel companies in the world. PVH Brands Australia licenses and operates PVH’s iconic lifestyle apparel brands, led by CALVIN KLEIN and TOMMY HILFIGER, as well as other licensed and Gazal-owned brand names, such as Van Heusen, Pierre Cardin, Bracks and Nancy Ganz.

PVH CORP. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements made in this press release, including, without limitation, statements relating to PVH Corp’s (the “Company”) earnings, future plans, strategies, objectives, expectations and intentions, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated, including, without limitation, (i) the Company’s plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the Company may be considered to be highly leveraged, and uses a significant portion of its cash flows to service its indebtedness, as a result of which the Company might not have sufficient funds to operate its businesses in the manner it intends or has operated in the past; (iii) the levels of sales of the Company’s apparel, footwear and related products, both to its wholesale customers and in its retail stores, the levels of sales of the Company’s licensees at wholesale and retail, and the extent of discounts and promotional pricing in which the Company and its licensees and other business partners are required to engage, all of which can be affected by weather conditions, changes in the economy, fuel prices, reductions in travel, fashion trends, consolidations, repositionings and bankruptcies in the retail industries, repositionings of brands by the Company’s licensors and other factors; (iv) the Company’s plans and results of operations will be affected by the Company’s ability to manage its growth and inventory; (v) the Company’s operations and results could be affected by quota restrictions and the imposition of safeguard controls (which, among other things, could limit the Company’s ability to produce products in cost-effective countries that have the labor and technical expertise needed), the availability and cost of raw materials, the Company’s ability to adjust timely to changes in trade regulations and the migration and development of manufacturers (which can affect where the Company’s products can best be produced), changes in available factory and shipping capacity, wage and shipping cost escalation, and civil conflict, war or terrorist acts, the threat of any of the foregoing, or political and labor instability in any of the countries where the Company’s or its licensees’ or other business partners’ products are sold, produced or are planned to be sold or produced; (vi) disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas, as well as reduced consumer traffic and purchasing, as consumers become ill or limit or cease shopping in order to avoid exposure; (vii) the failure of the Company’s licensees to market successfully licensed products or to preserve the value of the Company’s brands, or their misuse of the Company’s brands and (viii) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

Risks and uncertainties related to the acquisition include, among others: the risk that the regulatory approval required for the acquisition is not obtained or is obtained subject to conditions that are not anticipated; the risk that the other conditions to the closing of the acquisition are not satisfied; uncertainties as to the timing of the acquisition; competitive responses to the acquisition; the inability to obtain, or delays in obtaining, cost savings and synergies from the acquisition; unexpected costs, charges or expenses resulting from the acquisition; litigation relating to the acquisition; the inability to recognize the expected benefits of the acquisition; the inability to integrate the acquired business without disruption to the acquired business or existing operations; and any changes in general economic and/or industry specific conditions.

The Company does not undertake any obligation to update publicly any forward-looking statement, whether as a result of the receipt of new information, future events or otherwise.

Contacts

Dana Perlman
Treasurer and Senior Vice President, Business Development & Investor Relations
(212) 381-3502
investorrelations@pvh.com

More and more Australian women are choosing to buy cosmetics and skincare products online rather than in brick and mortar stores.

Roy Morgan Research’s latest studies showed that over 5.3 million Australian women purchase cosmetics in an average six months, up from under 4.8 million women in 2014.

Now over a quarter of women who purchase cosmetics buy health and beauty products online (26%) in an average three months, that’s up from 18% four years ago, according to the latest research from the Roy Morgan Single Source in the year to December 2018.

Michele Levine, CEO, Roy Morgan, highlighted the impact of online in the cosmetics and skincare industry in Australia with over 5.3 million Australian women buying cosmetics in an average six months increasingly turning to this platform.

“Australia’s cosmetics industry has grown significantly over the last four years with a majority of 51% of Australian women (5.3 million) now buying cosmetics in an average six months up from 49% (4.8 million) four years ago. Increasingly the place to be to capture a growing slice of this rising market is online,” said Levine.

“In 2018, over a quarter (26%) of women who buy cosmetics bought health and beauty products online including cosmetics, skincare products, fragrances, perfumes, aftershave and health products, up from 18% only four years ago in 2014.”

The shift in how Aussies purchase cosmetics and skincare affects stores carrying these products. The research showed that chemists and pharmacies such as Priceline, Chemist Warehouse and My Chemist are winning since they have click and mortar stores.

Now 42% of women who purchase cosmetics in an average six months buy from chemists and pharmacies, whether in-store or online, up a significant 9ppts from four years ago.

Over the last four years there have been slight declines in the proportion of Australian women who purchase cosmetics buying cosmetics from Supermarkets to 23% (down from 24% four years ago), for Department stores to 13% (down from 16%) and for Discount department stores to 9% (down from 12%).

“Although the market is growing quickly the increasing shift to online will catch out retailers with business models not suited to the new realities. Already this year high profile Australian make-up retailer Napoleon Perdis has entered administration with the immediate closure of half their stores as competitive pressures became too great,” said Levine.

“The entry of online retailers such as Amazon to the Australian market provides additional competitive tension but the success of Australian chemists and pharmacies in growing their online presence proves that with the right strategy there is growth to be had.

“Now 42% of women who buy cosmetics buy from a chemist or pharmacy – whether in-store or online – up 9ppts in only four years despite the increasing shift online. Over 21% of women who buy cosmetics have bought from Priceline/ Priceline Pharmacy and nearly 15% have bought from Chemist Warehouse – clearly the two market leaders. Chemist Warehouse even bills itself as ‘Australia’s Cheapest Online Pharmacy’.”

However, sales dropped off in the two weeks before Christmas as foot traffic and discretionary spending fell away.

Woolworths said Mr Thomas resigned for 'personal reasons', but later confirmed he had been under investigation following a staff discrimination complaint. He was cleared and the complaint was settled for a small sum.

The crisis deepened when two Australian non-executive directors, former bankers Gail Kelly and Patrick Allaway, resigned suddenly from the Woolworths board.

David Jones plans to "aggressively'" reduce retail space by 20.7 per cent by 2026, boost private label sales and cut costs.

If a 0.25 percentage point cut is passed on by lenders in full it would save a household with a $400,000 mortgage roughly $1000 a year in interest costs.

Westpac has also revised down its GDP growth forecasts for 2019 and 2020 from 2.6 per cent to 2.2 per cent and expects the unemployment rate to start rising in the second half of this year. It also says inflation will remain subdued.

The Australian Securities and Investments Commission said it started inquiries into the sharp share price drops of Afterpay and its rivals Zip and FlexiGroup on Wednesday night.

"There was no general announcements that proceeded this drop," ASIC commissioner Cathie Armour said.

The Senate secretariat is now expected to summon senators, staff emails and interview those close to the report to establish if there had been contempt. That process was still being determined on Thursday afternoon.

One committee member said they expected the Senate to get the investigation "finished ASAP" as regulators turn their attention to traders who may have scored out of the plunge. It was revealed on Wednesday that Afterpay, which is tracked by Goldman Sachs, Bell Potter and Morgans, dialled around analysts to remind them of the inquiry.

Committee chair Jane Hume and fellow Liberal member Amanda Stoker have ruled out any disclosure coming from their offices, as has Greens Senator Peter Whish-Wilson, who was substituted for Sarah Hanson-Young for the hearings of the Senate inquiry. Senator Hanson-Young ruled out any distribution of the market sensitive document from her or her staff.

Labor Senator Chris Ketter could not rule out an unauthorised disclosure coming from his office.

"It’s not clear what happened in this circumstance, but the Senate has well-established procedures for considering potential instances of unauthorised disclosure," Senator Ketter, the committee's deputy chair, said.

"Labor senators take the confidentiality of committee deliberations seriously."

Fellow Labor senators Kristina Keneally and Jenny McAllister have not responded to requests for comment.

Speaking at Zip's half-year results on Thursday, chief executive Larry Diamond was asked what the he thought the report recommendations would find.

Mr Diamond said after the bank royal commission “it would seem unusual that unregulated pockets would continue to exist” in the financial sector.

Zip executives said the company was “well placed” regardless of the report's outcome because it conducts credit checks on its customers.

A coalition of consumer groups including Choice, the Consumer Action Law Centre and the Financial Rights Legal Centre have all urged regulators to bring buy-now, pay-later providers under the National Credit Protection Act.

Afterpay has voluntarily instituted some of the act's requirements, including hardship and external dispute-resolution schemes, but it is resisting full banking regulation which would compel all companies to conduct formal credit and affordability checks at shop counters.

Globe's first-half net profit was up by 25 per cent to $4.3 million, with revenues up 11 per cent to $78.1 million. Globe lifted its first-half dividend to 6¢ per share, to be paid on March 22, up from 5¢ this time a year ago.

NEW YORK--(BUSINESS WIRE_--(PVH Corp.[NYSE:PVH] announced that a newly formed wholly owned subsidiary has entered into a definitive agreement under which it is proposed that PVH would acquire the interests in Gazal Corporation Limited (“Gazal”) that it does not already own for A$6.00 per share. The closing is subject to customary conditions (including shareholder, court and regulatory approvals) and is expected to occur in the second quarter of 2019.

“I’m pleased that we have agreed to acquire Gazal. PVH currently – and for many years – has had a successful business relationship with our Australian partners and would be pleased to bring them into the larger PVH family”

Gazal has been PVH’s long term partner in Australia. If the acquisition is consummated, PVH will acquire its joint venture with Gazal, “PVH Brands Australia Pty Limited” (“the JV”), which commenced doing business in 2014. The JV holds licenses for PVH’s CALVIN KLEIN, TOMMY HILFIGER and Van Heusen brands, as well as the Pierre Cardin, Bracks and Nancy Ganz brands in Australia, New Zealand and other parts of Oceania. The JV generated approximately A$260 million in revenues on a twelve month trailing basis as of July 2018.

The aggregate net purchase price for the approximately 78% of Gazal shares being acquired is approximately A$124 million, after taking into account the divestiture to a third party of Gazal’s owned office building and warehouse in Banksmeadow, New South Wales, which will take place shortly following the closing date of the acquisition.

The transaction is expected to result in a material increase to PVH’s 2019 earnings per share on a GAAP basis, as PVH expects to record a noncash gain to write-up its equity investments in Gazal and the JV to fair value. Excluding this noncash gain, the transaction is expected to be slightly accretive to PVH’s 2019 earnings on a non-GAAP basis. It is a condition of the transaction that key management of Gazal and the JV commit to remain in their roles for at least two years and use approximately 25% of their existing Gazal equity to subscribe for an approximate 6% stake in the PVH subsidiary that is the parent company of the acquirer.

“I’m pleased that we have agreed to acquire Gazal. PVH currently – and for many years – has had a successful business relationship with our Australian partners and would be pleased to bring them into the larger PVH family,” said Emanuel Chirico, Chairman and CEO, PVH Corp. “Gazal has enhanced the market position of our brands in Australia and New Zealand and we believe the region continues to offer significant growth over the next five years and aligns with our strategic priority to expand our direct control of businesses operated under the CALVIN KLEIN and TOMMY HILFIGER brands worldwide.”

About PVH Corp.

With a history going back over 135 years, PVH has excelled at growing brands and businesses with rich American heritages, becoming one of the largest apparel companies in the world. We have over 36,000 associates operating in over 40 countries and nearly $9 billion in annual revenues. PVH owns the iconic CALVIN KLEIN, TOMMY HILFIGER, Van Heusen, IZOD, ARROW, Speedo*, Warner’s, Olga and Geoffrey Beene brands, as well as the digital-centric True & Co.intimates brand, and markets a variety of goods under these and other nationally and internationally known owned and licensed brands.

*The Speedo brand is licensed for North America and the Caribbean in perpetuity from Speedo International Limited.

About Gazal

Based in Sydney and listed on the ASX, Gazal is a leading apparel supplier and retailer in Australasia. The Company jointly owns and manages PVH Brands Australia Pty Limited, a joint venture company with PVH Corp., one of the largest branded lifestyle apparel companies in the world. PVH Brands Australia licenses and operates PVH’s iconic lifestyle apparel brands, led by CALVIN KLEIN and TOMMY HILFIGER, as well as other licensed and Gazal-owned brand names, such as Van Heusen, Pierre Cardin, Bracks and Nancy Ganz.

PVH CORP. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-looking statements made in this press release, including, without limitation, statements relating to PVH Corp’s (the “Company”) earnings, future plans, strategies, objectives, expectations and intentions, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated, including, without limitation, (i) the Company’s plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the Company may be considered to be highly leveraged, and uses a significant portion of its cash flows to service its indebtedness, as a result of which the Company might not have sufficient funds to operate its businesses in the manner it intends or has operated in the past; (iii) the levels of sales of the Company’s apparel, footwear and related products, both to its wholesale customers and in its retail stores, the levels of sales of the Company’s licensees at wholesale and retail, and the extent of discounts and promotional pricing in which the Company and its licensees and other business partners are required to engage, all of which can be affected by weather conditions, changes in the economy, fuel prices, reductions in travel, fashion trends, consolidations, repositionings and bankruptcies in the retail industries, repositionings of brands by the Company’s licensors and other factors; (iv) the Company’s plans and results of operations will be affected by the Company’s ability to manage its growth and inventory; (v) the Company’s operations and results could be affected by quota restrictions and the imposition of safeguard controls (which, among other things, could limit the Company’s ability to produce products in cost-effective countries that have the labor and technical expertise needed), the availability and cost of raw materials, the Company’s ability to adjust timely to changes in trade regulations and the migration and development of manufacturers (which can affect where the Company’s products can best be produced), changes in available factory and shipping capacity, wage and shipping cost escalation, and civil conflict, war or terrorist acts, the threat of any of the foregoing, or political and labor instability in any of the countries where the Company’s or its licensees’ or other business partners’ products are sold, produced or are planned to be sold or produced; (vi) disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas, as well as reduced consumer traffic and purchasing, as consumers become ill or limit or cease shopping in order to avoid exposure; (vii) the failure of the Company’s licensees to market successfully licensed products or to preserve the value of the Company’s brands, or their misuse of the Company’s brands and (viii) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

Risks and uncertainties related to the acquisition include, among others: the risk that the regulatory approval required for the acquisition is not obtained or is obtained subject to conditions that are not anticipated; the risk that the other conditions to the closing of the acquisition are not satisfied; uncertainties as to the timing of the acquisition; competitive responses to the acquisition; the inability to obtain, or delays in obtaining, cost savings and synergies from the acquisition; unexpected costs, charges or expenses resulting from the acquisition; litigation relating to the acquisition; the inability to recognize the expected benefits of the acquisition; the inability to integrate the acquired business without disruption to the acquired business or existing operations; and any changes in general economic and/or industry specific conditions.

The Company does not undertake any obligation to update publicly any forward-looking statement, whether as a result of the receipt of new information, future events or otherwise.

Many now predict meaningful pay rise will occur when unemployment gets close to 4 per cent, a full per cent below its current level and a rate last achieved in the lead up to the Global Financial Crisis.

The group, which owns and manages some of the most profitable shopping centres across Australia and New Zealand, said a focus by its tenants on providing what customers want helped boost traffic at its malls to about 535 million people over the past 12 months.

Chief executive Peter Allen last year made it clear that the onus was on tenants, as much as the landlord, to fully understand customers' wishes and change their offerings to boost sales.

''There is a real differentiation between the quality centres across the country and the less quality [ones], and as retailer it is our job to drive foot traffic and we see demand for quality retail space increasing,'' Mr Allen said.

Calling the company's malls "living centres", Mr Allen said the new term reflected the desire of consumers who still want to visit a centre, not just to shop, but for health, beauty, food and entertainment.

To that end, Scentre will continue to look at mixed use scenarios for its centres, including an office tower at Westfield Parramatta, a residential component at Bondi Junction and co-working office space in centres across the country.

''Scentre has a high-quality portfolio with strong productivity, but its operating statistics remain broadly in line with industry averages,'' JP Morgan analysts said.

''We believe the high level of retail assets on the market will see retail cap rate soften in 2019 and we don’t believe Scentre's portfolio will be immune to this. A key near term target is selling down a 50 per cent stake in two to three assets to a joint venture partner to provide more financial flexibility.''

Scentre's securities were down 3.7 per cent to $3.86.

Woolworths chief executive Brad Banducci says Australia's largest retailer needs to turn sales growth into profit growth to deliver better returns to shareholders.  Louie Douvis

"Shareholders are waiting to see when Woolworths' heavy investment eventually delivers returns," said Alphinity Investment Management portfolio manager Bruce Smith.

Mr Banducci dismissed analyst suggestions capex was "out of control" but said it would return to more normal levels next year.

In the meantime, Woolworths plans to return up to $1.7 billion to shareholders, most likely through an off-market share buyback and a special dividend, once it has completed the sale of its fuel business to the EG Group for $1.72 billion at the end of March.

Net profit from continuing operations, excluding petrol, rose 2.1 per cent to $920 million, while earnings before interest and tax rose 1 per cent to $1.4 billion, falling short of consensus forecasts of about $1.51 billion.

Modest profit growth in Australian supermarkets offset weaker earnings at Endeavour Drinks, New Zealand supermarkets and hotels, while Big W continued to lose money.

Woolworths shares, which have risen 11 per cent over the past 12 months, fell 5 per cent to $28.69.

"Woolworths was trading at an elevated multiple and it couldn't afford to miss versus expectations — EBIT came in below market estimates in most divisions and declined in liquor and NZ food," said JPMorgan analyst Shaun Cousins.

The result showed Woolworths was not immune to subdued consumer confidence, even though more than 70 per cent of earnings came from food and groceries and 10 per cent from liquor, hotels and poker machines.

Mr Banducci said consumers were trading down to cheaper groceries and liquor as household living costs rose and house values fell, making people feel less well-off.

"We saw material trading down from champagne to sparkling wine, which flowed through the results [for Endeavour Drinks]," he said.

He was cautiously optimistic about the second half of 2019 and comparable sales in January and February have improved modestly, but consumers were expected to remain subdued for the foreseeable future and it was difficult to unpick exactly what they were most worried about, he said.

The highlight — or lowlight — of the latest result was the lack of operating leverage as Woolworths invested in its fast-growing but lower-margin online businesses and continued to cut prices.

Citigroup analyst Bryan Raymond said the result was a decent one — group sales from continuing operations rose 2.2 per cent to $30.7 billion — but margins were disappointing and consensus forecasts were likely to fall between 4 per cent and 5 per cent for the full year.

Supermarkets

In Woolworths' earnings engine room, Australian supermarkets, sales rose 2.3 per cent to $19.9 billion and EBIT by 4.0 per cent to $937 million. 

Gross margins rose only two basis points as stock losses increased, while costs of doing business fell five basis points, lifting EBIT margins from 4.6 per cent to 4.7 per cent.

Same-store food sales rose 2.7 per cent in the December quarter, beating Coles' 1.5 per cent growth. However, this was well short of analysts' forecasts of about 3.4 per cent.

Average prices declined 1 per cent in the December quarter, prompting analysts and investors to question why Woolworths did not take advantage of a weakened rival in Coles and rising commodity prices to lift shelf prices and offset rising costs.

"It's hard to see where the light is," said one shareholder, who declined to be named. "Costs are going up but they can't or won't put prices up. At some point, the providers of capital need to be rewarded."

Mr Banducci said Woolworths had fought hard to regain customer trust after raising prices in 2015 and 2016 and losing sales to Coles. However, input costs were now pushing up shelf prices in some categories, including milk, and Woolworths would evaluate prices on a case-by-case basis.

Liquor

At Endeavour Drinks, sales increased 1.8 per cent but earnings fell 6.4 per cent — dragged down by Dan Murphy's — triggering a strategy review of the category killer.

Mr Banducci said Dan Murphy's was more exposed to weaker discretionary spending than were supermarkets and was struggling to grow as consumers cut back on consumption and traded down.

Endeavour Drinks chief Steve Donohue has taken over as interim managing director of Dan Murphy's from Campbell Stott and will head the strategy review, which will focus on better curating Dan Murphys range to suit traditional customers and Millennials and responding to demand for more convenience, including on-demand deliveries.

"It's not a business that needs to be turned around but needs to be reshaped for the future," Mr Banducci said.

Big W

At Big W, losses eased from $10 million to $8 million as sales rose 2.7 per cent to $2.1 billion, but Mr Banducci said Woolworths was unhappy with the pace of the turnaround and was reviewing the store and distribution centre network, with an update expected in four to six weeks.

Big W's same-store sales rose 3.8 per cent during the half and by 5 per cent in the December quarter — benefiting from weaker sales at Wesfarmers' Kmart before Christmas — with growth in all categories, particularly toys, kids and leisure, and online channels.

Woolworths expects losses this year to be below 2018 losses of $110 million, subject to market conditions.

Woolworths increased its interim dividend 2¢ a share to 45¢, payable on April 5.