Greencross directors unanimously recommended shareholders accept the offer after independent expert Grant Thornton found the scheme of arrangement fair and reasonable and in the best interests of shareholders in the absence of a superior proposal.
Grant Thornton valued Greencross at between $5.05 and $5.67 a share compared with TPG's all-cash offer of $5.55 a share. After taking into account franking credits worth 9¢ a share the all-cash offer is worth $5.64 a share, just below the top of the independent expert's range.
Greencross appears set to join TPG Capital's stable after directors recommended shareholders accept the offer. Bruce Mercer
The board made no recommendation about TPG's cash and scrip offers, which are aimed at giving shareholders an ongoing interest in the retailer. Grant Thornton valued the cash and scrip offers at between $3.85 and $4.86 a share.
When Greencross shares went into a trading halt last month, before details of the scheme were announced, Robert Beauregard, chief investment officer of Canada-based fund manager Global Alpha Capital Management, was quoted as saying he would not accept an offer for his 10.3 per cent stake if it was less than $7 a share.
Shareholders will vote on the scheme at a meeting in Sydney on February 6.
Retailers are facing a "buy now, pay later" hangover in 2019 as they cycle a sales boost underpinned by new forms of consumer credit.
UBS analyst Ben Gilbert estimates Afterpay Touch and Zip Money accounted for at least 15 per cent of sales growth for listed discretionary retailers such as Super Retail Group, Premier Investments, Adairs, Kogan.com, Myer, Kathmandu and Wesfarmers in 2018.
This sales boost will be difficult for retailers to cycle in 2019, Mr Gilbert says, unless thousands of new customers start using short-term credit to fund purchases they would not have otherwise have made.
Myer is one of about 15,000 Australian and New Zealand retailers now offering consumers "buy now, pay later" options through Afterpay. James Alcock
According to UBS, Afterpay and Zip generated about $2.7 billion of gross transaction value (mostly retail sales) in 2018, up from $770 million in 2017, equivalent to about 60 per cent of the growth in non-food or discretionary spending in 2018.
While some of this growth was due to short-term credit taking market share from other forms of payment, particularly cash, Afterpay has estimated that about 23 per cent of its customers would not have made purchases if not for the service.
This spend was equivalent to about 15 per cent of year-on-year non-food sales growth last year, UBS said.
"We believe these models may have fuelled sales that otherwise may not have occurred in a part of the market that previously did not have access to credit," Mr Gilbert said, noting that about two-thirds of Millennials do not have a credit card.
Afterpay and Zip have achieved high customer penetration in a relatively short period of time, with more than 10 per cent of Australians estimated to be using their services.
Growing concern
Afterpay now has about 2.5 million customers and about 15,000 retailers on its books in Australia and New Zealand, while Zip has about 1.5 million local customers and more than 10,000 retailers.
Based on recent trading updates, Afterpay and Zip are on track to generate about $4 billion of gross transaction value in fiscal 2019.
Sources claimed last week that even payday lenders had started knocking back loan applications from long-term customers "up to their necks" in short-term debt.
Afterpay says it promotes responsible spending and offers customers a fundamentally different proposition to traditional credit products.
Customers pay for goods in four instalments and are not charged interest, but the company charges retailers a transaction fee (equivalent to about 4 per cent to 6 per cent of transactions) and customers who are behind on their payments also pay steep late fees.
UBS said "buy now, pay later" schemes were margin dilutive for retailers but helped boost comparable store sales.
The consumer discretionary index has fallen 14 per cent this quarter, dragged down by the likes of Lovisa, Premier Investments, JB Hi-Fi, Super Retail Group, Harvey Norman and Kogan.com.
20 Dec, 2018
Why the $6.5b beauty market is booming: it's not just the lipstick effect
L'Oreal Australia managing director Rodrigo Pizarro looks remarkably relaxed for this time of year – and it's not just due to the masks and moisturisers he tests as part of his job running Australia's leading beauty company.
While consumers are tightening their belts, the $6.5 billion beauty market is still booming after 10 years of uninterrupted growth.
It's not just the so-called lipstick effect – the small indulgences people spend money on when cash is tight.
L'Oreal Australia managing director Rodrigo Pizarro says the skin care market is booming. Christopher Pearce
All four of Pizarro's businesses – luxe cosmetics, which includes brands such as Lancome, Yves Saint Laurent and Ralph Lauren, consumer products (Garnier and Maybelline), active cosmetics (pharmacy brand La Roche Posay) and professional haircare (Kerastase and Redken) are in growth.
Pizarro took the helm in Australia four years ago and after 25 years in the industry – he started working at L'Oreal in Portugal as a 25-year-old marketing graduate – he never ceases to be amazed at its resilience.
"I've been in markets where there have been recessions and even in a recession the beauty market continues to grow," the 51-year-old father of four told The Australian Financial Review.
"I've been in countries where unemployment is high [and] you'd imagine women wouldn't have money to buy beauty products but on the other hand they have to go to work interviews or they just want to look good for their own self esteem," he said.
Australia a top five market
Australia is no exception. Despite our love for the outdoors and free and easy lifestyle Australian women spend more on skin care and make-up – particularly foundation – than those in other developed markets and a recent Euromonitor report ranked Australia in the top five markets in the world.
Skin care sales, for example, have been growing 7 or 8 per cent a year for several years, fuelled by 25 per cent to 30 per cent growth in active or dermo-cosmetics and natural brands.
"The skin care market is booming at the moment – all the products we have that are related to sensitive skin are in high demand," says Pizarro, citing La Roche-Posay, which is sold in pharmacies such as Priceline and Chemist Warehouse. "Sales have been doubling every two years."
Pizarro says new products and new players including Chemist Warehouse, Mecca Brands and Sephora, with their brand agnostic, hands-on, consumer-driven approach are helping to offset softer growth in traditional channels such as Myer and David Jones, which is opening Sephora shop-in-shops.
Sephora Australia's sales more than doubled to $149 million and Chemist Warehouse's beauty sales are said to be growing in high double digits.
"Some think the newcomers, the innovators, are just cannibalising the market – I don't believe it's true," Pizarro said. "I definitely think they've helped grow the overall market."
While the bulk of L'Oreal's business is in traditional retailers – department stores, supermarkets and pharmacies – the mix is changing fast.
L'Oreal sells Lancome and YSL products in both Sephora and Mecca, cult brand Urban Decay exclusively in Mecca and and It Cosmetics exclusively in Sephora.
'Everybody is looking for data'
Pizarro says that to retain its 16 per cent market leadership L'Oreal needs to understand how consumers are behaving and adapt quickly to those behaviours through new products, new marketing tactics and new routes to market. L'Oreal's wholesale sales rose 4.4 per cent in calendar 2017, according to ASIC records, exceeding 3.3 per cent market growth.
"Everything is happening so fast we need to be looking inside and outside to make sure if there's a new need or a new retailer proposing something new how do [we] address it," he said.
"One that's obvious is data – everybody is looking for data so we have the right brands in the right channel in the right retailer in the right mix."
L'Oreal is also moving quickly to embrace e-commerce. Online beauty sales are growing 25 per cent a year and now account for about 11 per cent of Australian beauty sales – less than half the online penetration in Asian markets such as China.
Pizarro believes e-commerce will account for 30 to 40 per cent of market growth over the next few years as bricks and mortar retailers improve their online catalogues and distribution to compete with pure-play retailers and as consumers become more comfortable buying online.
"If you take Sephora or Mecca or even the department stores, they're all overperforming online v offline," said Pizarro, who is aiming to lift L'Oreal's online sales to 20 per cent of total sales in five to 10 years.
L'Oreal Australia started selling Kiehl's, Giorgio Armani, Lancome and YSL direct to consumers through online sites earlier this year and is considering a multi-brand site, reflecting that consumers buy luxury and budget products across different brands, spending $79 for a YSL foundation stick, for example, and $9 for Garnier micellar water.
"I'm not sure it will be all our products but we might have some platform where we'll have multiple products from multiple brands and multiple categories from mass brands to more prestige brands," Pizarro said. "It makes sense from a consumer's point of view ... so it is really a possibility it will happen."
'Lots of interesting brands'
L'Oreal is also embracing augmented reality and artificial intelligence. Earlier this year it acquired Modiface, a start-up that develops augmented reality technology for beauty brands, including apps which help consumers virtually test make-up and hair styles and colours using their mobile phones, computers and digital mirrors.
L'Oreal has a history of growth through aquisitions – 32 of its 34 growing international brands were acquired – and more acquisitions are likely.
There has been recent speculation that L'Oreal might be interested in buying BWX, the owner of fast-growing natural skincare brand Sukin.
"We have systems in all countries including Australia to monitor all these emerging brands and start-ups and we have processes to understand where there is potential to approach them," Pizarro said.
"We have not made acquisitions in Australia but I'm pretty sure it will come – there are lots of interesting brands in Australia and Australians are very good at developing new brands, particularly in the skin care area."
17 Dec, 2018
Accent Group steps up offence as JD Sports closes in
"The best defence is a good offence" adage certainly rings true for Daniel Agostinelli, the chief executive of Australia's largest footwear retailer, Accent Group.
Accent, which owns the Platypus, Hype and The Athletes Foot chains, has come under attack from British-based retailer JD Sports, which is targeting sports shoe and sneaker fans by opening mega-sized stores in key locations such as Sydney's Pitt Street Mall and Melbourne Central.
Accent Group is fighting back by opening new Platypus stores in direct competition with JD Sports. A Platypus store opened in Melbourne Central last month and a Pitt Street store will open in April on the site of a former Zara Home store, almost directly opposite JD Sports.
"We are on the offence always – it's just a part of our culture," Mr Agostinelli told The Australian Financial Review.
Rather than a zero-sum game, where JD Sports takes share from Platypus or vice versa, Mr Agostinelli, hopes the step-up in competition will grow the overall market.
"We feel that sometimes when you put two big stores together you generate more interest in the products in both stores and that becomes a bit of a hub for someone who needs to buy sneakers – they maybe buy a pair from us and a pair from JD Sports," he said.
"Yes the rents are incredibly high but if you get the right team in a dynamic environment you can still make a bit of a go of it. And given our size now our customers almost expect that we should be in that sort of area."
Mr Agostinelli said JD Sports, known as the "king of trainers", had had "minimal" impact on Accent so far because its range includes sports apparel and its focus is on sports shoes, whereas Platypus focuses on casual and "lifestyle" shoes and the Hype brand premium fashion footwear.
'Hurting others'
Accent's same-store retail sales rose 2.5 per cent in the first 20 weeks of fiscal 2019 (including 88 per cent online sales growth), despite the company's strategic shift away from discounting, and the trend has continued into the pre-Christmas period, auguring well for a solid first-half result.
"I assume they're hurting others before they're hurting us," Mr Agostinelli said.
"There's definitely some crossover with us but they bring in products from other distributors. For example, we buy from Adidas Australia only and they buy from Adidas Australia and Adidas UK – so they may be bringing in some product that doesn't affect us and they may be growing the market."
JD Sports' entry into Australia, through Glue Store owner and former Top Shop Australia franchisee Hilton Seskin, has also prompted Accent to open larger stores where it can display its entire product range.
The average Platypus store is between 150 and 170 square metres but new stores will be between 300 and 400 square metres, whereas the Pitt Street and Melbourne Central superstores are about 600 square metres and will stock between 700 and 800 styles.
"The breadth of product in our stores seems to be resonating with our core customers," Mr Agostinelli said. "Ultimately our customers decide and they're spending money with us."
While other brick and mortar retailers are putting the brakes on new stores, Accent plans to open about 40 this year, taking its total network to about 485. JD Sports has 15 stores and plans to open a further 10 to 15 over the next 18 months.
"We are still finding opportunities where the landlord is prepared to somewhat de-risk the deal for us," Mr Agostinelli said, citing new stores in Rockhampton, Ballarat and Bendigo.
Accent shares have fallen 30¢ to $1.38 since September, but brokers Bell Potter and Morgans have recently increased their full-year profit forecasts, citing higher than expected new stores and stronger gross margins.
In a letter to Debenhams chief executive Sergio Bucher published by The Telegraph, Ashley said he was offering the business “a very public statement of support at a critical time for the Debenhams business”.
He added that the Debenhams board “doesn’t really seem to appreciate the position that Debenhams is currently in and their responsibility to shareholders”.
Debenhams said: “We welcome Sports Direct’s proposal as a clear demonstration of their willingness to support the company. However, as the offer came with conditions that could affect the interests of other stakeholders, while the board does not think it could accept the proposal, as presented, it has invited Sports Direct to engage as part of our broader refinancing process.”
Ashley said November was the “worst November for retailers in living memory” and pointed to speculation that Debenhams has “zero chance of survival.”
He added: “If I’m sounding extremely frustrated – well, I am. We’ve seen this before, with Blacks and House of Fraser. They didn’t want any help either. We don’t want to see Debenhams fail.
“It’s not in our interest to see it fail, but without something changing rapidly all of the shareholders risk getting wiped out.”
12 Dec, 2018
Amazon Australia set to take bigger bite of groceries with Subscribe & Save
Amazon is poised to take a bigger bite of Australia's $3 billion online food and grocery market early next year by launching Subscribe &Save, a discounted subscription service for regularly bought goods such as pet food, toilet paper and washing powder.
Amazon Australia country manager Rocco Braeuniger says Subscribe &Save is one of Amazon's most popular services overseas and the online behemoth is keen to introduce it in Australia as quickly as possible to augment its food and grocery range, which launched in October.
"It's one of our most successful programs with our customers around the world," Mr Braeuniger saidon Wednesday after Amazon announced the winner of its inaugural Local Brand fashion award.
Amazon Australia country manager Rocco Braeuniger and Amazon Fashion general manager Angela Langmann at the inaugural Local Brand fashion award. SEE CAPTION INFO
"Subscribe & Save is a program where you can subscribe to different products, especially in the consumer goods space like toilet paper, toothpaste or diapers, and you get a discount (typically 15 per cent) and we bring them all together on your [delivery] day," he said.
"This is something we're going to focus on to launch next year because we know customers around the world love it so much – it's definitely on our top-priority list."
Fast-moving consumer goods experts say subscription-based services such as Subscribe & Save threaten to undermine the "one-stop shop" model of the major supermarket chains by siphoning off volumes, especially in bulky goods such as nappies, pet food and soft drinks, and giving customers fewer reasons to shop in store.
As more goods are siphoned off, the one-stop shop becomes less important and consumers are more inclined to shop elsewhere, including independent food retailers, for meat, bread and vegetables, according to research by consultants A.T. Kearney.
Giants undercut
The imminent introduction of Subscribe & Save is likely to add to concern about Amazon's impact on the local food and grocery market following the launch of Amazon Pnarty in October.
Amazon.com.au now has more than 2500 food and grocery products on its site, ranging from packaged foods such as Carmans muesli, Kellogg's corn flakes and Mount Franklin mineral water, to Finish dishwasher tablets, Omo laundry powder, Huggies nappies and baby wipes, and Colgate toothpaste.
The imminent introduction of Subscribe & Save is likely to add to concern about Amazon's impact on the local food and grocery market following the launch of Amazon Pantry in October. AP
Amazon has been undercutting Woolworths and Coles on price by as much as 50 per cent on leading brands, prompting Woolworths to question whether the online retailer is benefiting from the favourable terms including global pricing agreements with multinational consumer goods companies.
Mr Braeuniger declined to comment on Amazon's pricing strategies and trading terms or whether it sourced cheaper stock through parallel import channels.
"We want to give customers great prices and a great delivery experience," he said. "If some other company is [unhappy] that's not our problem."
"We want to earn the customer's trust, the customer needs to know when he comes to Amazon he gets great value, a great delivery experience, fast delivery and a great price."
Amazon also stepped up pressure on local retailers this week by launching same-day deliveries in selected postcodes in Sydney and Melbourne. Customers must order before 10.45am to receive their orders the same day and delivery costs $9.99 for Amazon Prime members and $12.99 for non-members.
"Going forward we want to have many more postcodes and we want to have the cut-off or the time you have to order to get it on the same day much later," he said.
Amazon also added another popular feature, customer questions and answers (where customers who have brought products answer other customers' queries) to its Australian site this week.
"It's extremely powerful, almost if not more powerful than customer reviews," he said.
Mr Braeuniger said he was pleased with Amazon's performance in the first 12 months but there was much more to do, including adding new services and categories.
"Almost every week we roll something out – it's just one year and we're just getting started," he said. "We want to give customers the same experience we have in other local [markets]."
Amazon.com.au now sells more than 100 million products, up from 20 million a year ago, including a global store offering 20 million top-selling products from the US. Its fashion offer includes 15 million clothing, footwear and accessories products from 1000 international and Australian brands.
The winner of Amazon's Local Brand fashion award, by popular choice, was Wild Rhino, a Melbourne-based casual footwear brand.
12 Dec, 2018
Justin King joins Marks & Spencer board amid turnaround
Former Sainsbury’s chief executive Justin King is set to join the board of struggling UK department store Marks & Spencer as of January 1, 2019.
King, who was instrumental in the revival of Sainsbury’s during the decade he led the business, will take up the position of non-executive director after having left M&S 15 years ago.
“I am delighted that Justin has agreed to join us,” M&S chief executive Steve Rowe said.
“As we navigate the challenges ahead it will be enormously helpful to have his experience, wisdom and insight on the Board. Many colleagues remember his time at M&S and will warmly welcome him back.”
King is the fourth new hire in the last year, and will join the business’s nomination committee on appointment, with M&S chairman Archie Norman adding that King’s appointment completed a significant reorientation of the board over the last 12 months.
“Having worked there 15 years ago, M&S has a very special place in my affections,” King said on his appointment.
“I look forward to joining the board and supporting Steve [Rowe] in the turnaround that he is leading.”
During his initial time at M&S King pioneered the development of the business’s Simply Food convenience format, and additionally served on the leadership team responsible for the turnaround of grocer Asda.
7 Dec, 2018
Fashion a big winner in pre-Christmas sales, growing 4.8%
October trade figures are in: and there's proof retail spending is increasing in time for Christmas
The Australian Bureau of Statistics (ABS) today reported an increase of 0.3 per cent in total sales nationwide during October, seasonally adjusted – up from the 0.1 per cent result in September.
The ABS reported that clothing, footwear and personal accessory retailing recorded the strongest result, with growth of 2.6 per cent. Year-on-year, it grew a whopping 4.84%.
Household goods (0.6 per cent), the “other retailing” category (0.5 per cent), department stores (0.4 per cent) and food retailing (0.2 per cent) also enjoyed increases from September to October.
The only category to fall was cafes, restaurants and takeaway food, which was down by 0.9 per cent.
National Retail Association (NRA) deputy CEO Lindsay Carroll said while the result did not show a booming retail sector, the increase from September was encouraging as businesses geared up for Christmas.
“Retail business owners rely very heavily on the pre-Christmas and Boxing Day sales periods to sustain them during the quieter parts of the year,” Carroll said.
“This is also the time when the retail sector is able to create additional jobs or provide more hours to existing workers. That can only happen if the cash registers are ringing in the leadup to Christmas.
“So although we would ideally like to see monthly increases of 0.4 or even 0.5 per cent, we welcome the fact that these numbers are trending in the right direction as we head towards Christmas.”
Queensland and the ACT were the strongest performing jurisdictions, with increases of 1.1 per cent. Victoria, Western Australia and the Northern Territory (0.6 per cent), and South Australia and Tasmania all experienced growth. New South Wales recorded a fall in turnover of 0.4 per cent.
The Australian Retailers Association (ARA) executive director Russell Zimmerman predicted retailers can expect to see a busy Christmas.
“As we lead into Christmas, October is the third consecutive month with year-on-year growth topping 3.5%," Zimmerman said.
“Retailers across the country can expect to see an uptick in sales, with consumers rushing through stores to finalise their purchases and set their tables in preparation for Christmas.”
The Other retailing category saw the strongest year-on-year growth at 5.50%, with consumers turning to online platforms to purchase gifts for the big day.
“With the warm weather ramping up, we have noticed a considerable increase in the apparel category with shoppers purchasing fashion and accessories to wear for the warmer months ahead," Zimmerman said
6 Dec, 2018
Biggest electronics store in the world goes checkout-free
European consumer electronics retailer, MediaMarktSaturn, has announced plans to offer mobile self-checkout at a Saturn store in Hamburg, Germany, that, at 18,000sqm, is said to be the world’s biggest electronics store.
Customers can download the Saturn Smartpay app to scan and pay for products with their smartphone, rather than needing to queue or wait at the checkout. More than 100,000 products can be purchased through the self-checkout app. The technology was provided by MishiPay.
The rollout in Hamburg follows a successful trial of scan-and-go payment at a smaller electronics store in Innsbruck, Germany, which far exceeded expectations, according to the retailer.
“The very positive response from customers has encouraged us to offer mobile self-checkout across a large floorspace for the first time,” Martin Wild, chief innovation officer of the MediaMarktSaturn Retail Group, said.
“Our customers in Hamburg will benefit from an even better shopping experience and an additional innovative payment option when doing their Christmas shopping,” he said.
From Amazon Go to The Party People
MediaMarktSaturn is the latest retailer to embrace checkout-free stores following Amazon’s widely-publicised investment in Amazon Go stores, where hundreds of cameras and sophisticated weight sensors can detect when a customer picks up a product from a shelf. Items are automatically added to the customer’s online shopping basket and charged to their Amazon account when they leave the store.
What’s to stop a customer from simply pretending to scan a product, or scanning a cheaper product, which research shows is already a problem at stationery self-checkouts? Retailers could get around this by checking customers’ receipts and baskets as they exit the store, but this would seem to negate the main reason retailers give for going checkout-free: to get rid of queues.
In a statement, MediaMarktSaturn cited a recent study by Adyen, which found the European retail sector has lost €34 billion ($53 billion) in the last 12 months alone because customers were put off by long waiting times.
Mobile checkout solution providers are looking for ways around this. When The Party People rolled out its scan-and-go payment app earlier this year, it had staff manually checking customers’ receipts and baskets, but chief executive Dean Salakas said this might not be necessary in future, since Tilly, the company that developed the app, is looking to launch a new feature that would allow retailers to report problem customers.
6 Dec, 2018
Cash Converters International employ a new Chief Executive Officer
Cash Converters International (ASX:CCV) have announced a new Chief Executive Officer.
Brendan White has served as the Group Executive for Bank of Queensland (ASX:BOQ) over the past six years overseeing acquisitions and investment in startup segments.
He has also held various roles in organisations such as the Commonwealth Bank of Australia, Societe Generale and British Petroleum.
Cash Converters have a network through corporate and franchise arrangements of approximately 726 stores in 18 countries.
Shares in Cash Converters International (ASX:CCV) closed flat at $0.25 yesterday.
The Reject Shop board is in a holding pattern to see if another takeover bid comes forward, after rejecting packaging billionaire Raphael Geminder’s tilt at the company while flagging sales were falling faster than expected.
The discount retailing chain told its shareholders yesterday to reject the $2.70-a-share offer from Allensford, the bidding vehicle of Mr Geminder’s Kin Group, tabled a fortnight ago.
The company said it believed its shares were worth more. However, in its target statement it revealed that Reject Shop’s sales had sunk by almost 5 per cent in just five weeks.
It said since that between October 17, when its last trading update was delivered, and November 25 store sales were off by 4.9 per cent compared to the same time last year.
The sinking sales meant that total sales so far this financial year, compared to the prior corresponding period, were down 3.1 per cent.
It was also revealed yesterday that only Reject Shop chairman Bill Stevens and director Kevin Elkington own direct shares in the company.
Chief executive Ross Sudano and non executive directors Michele Teague and Selina Lightfoot own no stock in the company.
Mr Sudano was granted 16,100 shares as part of his performance entitlements in August and sold the stock. He still holds 221,900 performance rights, which are yet to vest.
It was highlighted last night that Malcolm Bundey, the former chief executive of Mr Geminder’s Pact Group, did not own shares in that company before he resigned in September.
Shares in the Reject Shop, which has internally referred to the takeover offer as Project Kensington, have consistently traded above the offer level over the past few weeks. The stock closed yesterday at $2.81, down 2.4 per cent. The stock has been as high as $2.88 since the offer emerged, which analysts said was an indication investors believed another bid for the company was forthcoming.
Allensford, which was advised by Flagstaff Partners and Gilbert + Tobin, has gained control of only 2.7 per cent of the company with only a few shareholders taking up its on-market offer.
Under the terms of the deal, Allensford could not buy stock on market above that level without increasing the offer for all shareholders.
Chief executive of embattled franchise operator Retail Food Group, Richard Hinson has resigned, days after pledging his commitment to its shareholders.
It comes after just seven months in the job, with executive chairman Peter George to temporarily take over his responsibilities.
It comes days after Mr Hinson stood before shareholders at the group’s annual meeting and pledged his commitment to the company’s future.
“I can’t stand before you today and promise that in the 2019 financial year we will see an immediate and drastic improvement in our financial situation. But what I can promise you, is that as the group CEO, I will do everything in my power to bring about change for the better — as soon as we possibly can,” he said in a speech at the AGM last week.
In a note to the market on Monday, the board said the exit was part of the major company restructure that had been flagged at the AGM.
The board said today management would be decentralised to concentrate resources on franchisees, with the restructure the company’s immediate priority.
“Under Richard’s leadership, relationships with franchisees have improved and a range of actions have been taken to stabilise the business and improve performance,” executive chairman Peter George told the market.
“Richard has driven positive change at RFG, and on behalf of the board, I would like to thank him for his efforts during the early stages of the turnaround and wish him well in his future endeavours.”
Mr Hinson joined the company in January to lead its review after media reports of franchise mistreatment and a string of profit warnings late in 2017, and was quickly elevated to CEO in May.
Alongside its restructure, the company says it will renew its focus on service franchise and non-franchise customers through brand promotion, product innovation and superior service.
Mr George will now assume the role of both executive chairman and CEO after he was first recruited to the company as a turnaround specialist in September.
In his address to shareholders at the AGM, Mr George said “reducing our bank borrowings and refocusing on our customers are our top priorities”.
“To reduce our bank borrowings, it is likely that we will need to sell assets, recapitalise the balance sheet and reduce our cost base by a large amount.”
In the last year the company made a statutory $306.7 million loss, with a 56.1 per cent reduction in profits to the previous year.
RFG shares closed up 6.7 per cent at 40 cents each — down from highs of $4.48 this time last year.
29 Nov, 2018
Solly Lew backs to Myer CEO as a decent jockey, but whips board
Mr Lew, who's listed retail group Premier Investments owns 11 per cent of Myer, said on Thursday there had been a rush of support from other Myer investors in his efforts to roll the department store's board at its annual general meeting on Friday.
Solomon Lew said there had been a rush of support for his attempts to roll Myer's board. CREDIT:JESSE MARLOW
"The shareholders are bitterly disappointed, particularly those shareholders that came into the listing… in 2009 at $4.10," Mr Lew said.
"They’ve now lost over 90 per cent of their money, no dividends being paid, and the directors being paid very well for non-performance."
Myer's shares have lost almost half their value over the past year and were trading at 42¢ on Thursday.
The iconic retailer suffered a first strike (a vote of 25 per cent or more against its remuneration report) at its AGM last year, and a second strike on Friday will trigger a motion to spill the board. That motion would need 50 per cent to pass.Meanwhile, Myer director Lyndsey Cattermole, who was appointed last month, could be on thin ice after influential proxy adviser Ownership Matters recommended that shareholders vote against her re-election on Friday.
Ms Cattermole founded the IT business Aspect Computing, was a director until last year at Treasury Wine Estate - which Mr Hounsell also chairs - and was a director at Foster’s Group and Tatts.
Ownership Matters told clients that Myer needed directors with recent retail experience and expertise, which Ms Cattermole did not appear to have.
Mr Lew would not be drawn on how he thought the votes would fall, but said the number of proxy votes Premier had received was "significantly increased" from last year.
Last year's 29 per cent protest vote mostly consisted of Premier and Myer's mass of small "mum and dad" retail investors, and gaining the support of larger institutional investors will be crucial if Mr Lew is to succeed.
Myer's second and third largest investors - Investors Mutual and Wilson Asset Management - have to date backed the board.
While Premier has been lobbying shareholders to kick out Myer's board, Mr Lew on Thursday said it would vote in favour of a motion to issue Myer shares to its new CEO Mr King, who took the top job in June.
"I have spent time in recent weeks with Myer CEO John King and his chief lieutenant Alan Winstanley, and we have had very productive and positive discussions," Mr Lew said following Premier's own AGM in Melbourne.
"I sincerely want them to succeed in turning Myer around - after all, Premier has the most to lose if they don’t."
He said Myer was akin to a racehorse, being ridden by a "decent" jockey but trained by the "failed Myer board".
"We need to change trainers... but none of that is John King’s fault," he said.
Myer has maintained that Premier is trying to "take control" of Myer via a boardroom coup, and said that it should launch a takeover bid if it wants to run the company. Myer has refused to give Premier board seats because of conflict of interest concerns, given Premier is both a supplier and competitor.
Premier owns the brands Peter Alexander, Smiggle, and Just Jeans, while the Lew family has interests in brands including Seed, FCUK and Nine West.
Landlord attack
Premier on Thursday also delivered a blow to the Melbourne's struggling Chapel Street shopping strip, saying it would close three stores - a Just Jeans, Dotti and a Smiggle - within months because landlords would not reduce rent to reflect market conditions and the consumer shift to online shopping.
"I think it's another sign of the times that landlords just don’t get the pace of the change in the retail market," said Premier executive director Mark McInnes.
"We will exit those stores at the end of lease, and it will be the first time in 40 years that we haven’t traded iconic brands on that street.”
Chapel Street was the birthplace of Just Jeans in the 1970s. Mr McInnes said Premier had asked their landlords for a 70 per cent discount, which had been refused.
"We’ve driven up and down Chapel Street recently and there’s about 45 for lease signs, so they might want that rent but they’re not going to get it," he said.
Mr Lew said Premier would not lose any sales by closing unprofitable shopfronts thanks to the shift to online shopping.
Premier closed 17 stores last year, including flagship Just Jeans and Portmans outlets in Melbourne's Bourke Street mall, and has shut 103 over the past three years.
At Michael Hill International's headquarters in Brisbane more than 50 master jewellers are busy at their craft, cutting and polishing stones, soldering precious metals and designing original jewellery.
These artisans don't have the public profile of Sir Michael Hill, the New Zealand jeweller who founded the company in 1979, his wife and designer Christine Hill or their son Mark, a highly acclaimed industrial sculptor who has recently turned his hand to designing jewellery for the family-controlled company.
However, the team of craftsmen is set to become Michael Hill chief executive Daniel Bracken's secret weapon.
New Michael Hill CEO Daniel Bracken: "it's a great business and yet there are all these opportunities to make it even better." James Brickwood
Mr Bracken, who took the helm earlier this month from Phil Taylor, wants to increase sales of products designed and made by the company, which currently sits at less than 20 per cent of sales, to differentiate the brand from rivals such as Goldmark, Prouds and Angus & Coote.
"We have a heritage of craftsmanship but we're not really known for that in [Australia]," Mr Bracken told The Australian Financial Review.
"The sector hasn't really evolved as other retail sectors have had to over the last 20 years and a lot of the product that is in our stores is relatively generic and you could buy in other jewellers, and that's why you end up fighting on price.
"There's a huge opportunity to change the brand's position and perception in our largest market - that's the stuff that really excites me and gets me fired up."
Differentiated brand
Michael Hill, which has sales of around $580 million and more than 300 stores in Australia, New Zealand and Canada, is attempting to move away from broad-based discounting and become a differentiated omni-channel brand selling more unique product at full price.
Emma & Roe stores were closed.
But its first attempt to cut back on price-based promotions in the first quarter of fiscal 2019 was a disaster.
Group sales fell 8.8 per cent and same-store sales plunged 11 per cent - down 12.8 per cent in Australia - while gross margin expansion fell well short of the 250-point gain the company had hoped for.
Michael Hill shares fell 27 per cent in October and analysts cut their full year profit forecasts by about 16 per cent.
"The transition from discount-led retailer to differentiated omni-channel brand has had an inauspicious start," said Macquarie Equities. "The transition is more complicated and will require more time than originally planned."
Mr Bracken, who was appointed a week before the trading update, says his first priority is to trade the business as hard as possible in the six weeks leading up to Christmas to deliver a strong second-quarter result.
After Christmas he will turn his attention to implementing the strategy unveiled by his predecessor earlier this year.
"The strategy the company has laid out is very much about being a better world class brand-led, omni-channel retailer - it's what we need to do for our business," he said. "What I will be turning my attention to is the sequence we run those change programs and the pace at which we execute them.
"Then 12 to 18 months from now, when we reach the baseline of the quality of retailer we aspire to be, that's when we'll turn our attention to the other growth strategies we might want to consider."
Growth options may include creating a new demi-fine jewellery brand to replace 30 Emma & Roe stores, which are being closed, and moving into new markets. Michael Hill closed its loss-making stores in the US earlier this year but is still doing well in Canada.
Mr Bracken says the company is determined to shift away from discounting but needs to have the right levers in place to stimulate sales, including new products, targeted promotions, instore events, and incentivising customers and staff.
New designs
Michael Hill is working with a leading US design consultant to create new designs, which will be released in calendar 2019, and strengthen its internal design capabilities.
UK-born Mr Bracken, who was part of the team that helped luxury accessories brand Burberry develop its pioneering digital strategy, also intends to make better use of data and digital to analyse customer shopping habits, communicate directly with shoppers and improve Michael Hill's website so customers can transact and research online.
"Unlike many retailers we don't have a robust loyalty program and as a result we don't have enough contact and know who our customers are or what their habits are and how we communicate with them," he said.
"That's why it's so exciting - we are a successful business today but look at all the things we're not doing that we will be doing that will make it even more successful."
Mr Bracken was CEO of Apparel Group from 2011 to 2014, during which time he acquired the Willow and Jag brands, deputy CEO at Myer from 2014 to 2017, where he acquired the Marcs and David Lawrence brands from administrators, and CEO at Specialty Fashion Group for 10 months in 2018, where he engineered a deal to sell five loss-making brands to Noni B.
As a result, the father of three has developed a reputation as a dealmaker. However, he has dismissed speculation about M&A or a potential management buyout at Michael Hill, which is 43 per cent owned by the Hill family.
"It's not been discussed between myself and the board, [which] is very committed to the strategy of making us a modern contemporary brand-led retailer - there's no inkling or whispers of that. It's a great business and yet there are all these opportunities to make it even better."
27 Nov, 2018
Sportsgirl, Suzanne Grae sitting pretty as sale process steps up
Sussan Group owner Naomi Milgrom is no doubt hoping to generate a bit more interest in her fashion empire, which includes the Sportsgirl, Sussan and Suzanne Grae chains, after sales and earnings returned to growth last year.
According to documents lodged with ASIC last week, net profits from Ms Milgrom's ARJ Group Holdings rose more than four-fold to $30 million in the 12 months ending July 2018 as sales rose 4 per cent to $473.1 million. Before foreign exchange gains, underlying pre-tax profit rose 147 per cent to $31.4 million.
ARJ's 2017 accounts were lodged earlier the same day and showed bottom line net profit rose almost threefold, to $6.6 million from $2.7 million in 2016, as sales rose 2.6 per cent.
It was a big rebound from 2016, when sales fell 3 per cent to $459 million and net profit slumped to just $2.27 million compared with $36.1 million in 2015.
As previously reported in Street Talk, Milgrom launched a fresh push to find a buyer for Sussan, Sportsgirl and Suzanne Grae in July after failing to find buyer last year.
This time around Milgrom is working with Moelis after originally hiring Deloitte and then Citigroup to scout for buyers here and overseas.
The most likely local buyer - Solomon Lew's cashed up Premier Investments - has ruled itself out (Premier has been struggling to grow sales and earnings at youth brands Dotti, Portmans and Jay Jays) , forcing Moelis to cast its net further afield.
Industry sources estimate the stable of brands is worth $300 million to $400 million, although it remains to be seen whether that is enough to tempt Milgrom, who is estimated to be worth $625 million.
27 Nov, 2018
Future of retail may see consumers dealing directly with manufacturers, predicts CEO of Intime
If one CEO’s outlook holds up, offline retailers may have a very limited future.
The consumer will deal directly with a manufacturer, potentially leaving out retailers, predicts Chen Xiaodong, CEO of Intime, an e-commerce platform run by Alibaba.
“Before, the controlling rights belonged to the retailer, but in the future it will shift to the manufacturer,” Chen told CNBC’s Arjun Kharpal. “The consumer will still be there, the manufacturer will still be there, but we need to consider who will be between these parties?”
A department store or a shopping mall will become a warehouse in the future, Chen said.
Chen was speaking at CNBC’s Each Tech West conference in the Nansha district of Guangzhou, China, where overseas and Chinese tech leaders have gathered to discuss the future of artificial intelligence, financial technology, cybersecurity, blockchain and other cutting-edge technologies.
Power shift
Chen also sees a shift in power dynamics within a company’s staff, where the importance of a CEO will give way to the staff that comes face-to-face with a customer.
“I think I will have another job as chief entertainment officer,” he said.
Chen Xiaodong, VP of Alibaba & CEO of Intime, speaks during Fireside Chat on Day 2 of CNBC East Tech West at LN Garden Hotel Nansha Guangzhou.
Dave Zhong | Getty Images
Alibaba owns a majority stake in Intime, which operates 62 stores and shopping malls across 33 cities in China. The company focuses on a mix of the online and offline experience for shoppers. Intime was the first department store chain to use Alipay in China.
Chen also predicts a change is bargaining power between sellers and buyers. “The (controlling) right will shift from the seller to the buyer, and will change the relationship between retailers and manufacturers,” he said.
Shoppers who use InTime’s app order their products online and receive them within hours from the closest store in the vicinity.
27 Nov, 2018
If one CEO’s outlook holds up, offline retailers may have a very limited future. The consumer will deal directly with a manufacturer, potentially leaving out retailers, predicts Chen Xiaodong, CEO of Intime, an e-commerce platform run by Alibaba. “Befor
With the fast-changing nature of the modern retail environment it is critical that the NRA stays in front of all emerging trends. Part of this means having both relevant and broad representation in our organization’s leadership that understands fully the key issues facing retail and how to best navigate the challenges faced by the sector.
Following the NRA’s Annual General Meeting last week, I feel that we are as well-placed as ever when it comes to the personnel leading our association. In a strong show of faith by members, the NRA Chairman and Directors were all elected unopposed.
One of the new additions to the NRA Board is Paul Greenberg, Founder and Director of NORA (National Online Retail Association). The retail sector is operating in an everchanging environment and Paul’s addition to the team demonstrates the NRA’s understanding of the need to keep up with the modern retail landscape.
Paul’s arrival means that the NRA has added direct expertise in online retail to its leadership team, supporting the existing Directors’ expertise in fast food, small business, homewares, hospitality and training.
Online was the final piece of the jigsaw when it came to representation on the Board. Every member of the NRA Board now brings a different but equally important perspective on the retail and hospitality sector, and this is something that will hold our association in good stead over the coming 12 months. Retail cannot afford to sit on its hands when it comes to the online space and multi-platform sales channels offer a real opportunity for NRA members.
Also, Chair Mark Brodie, Deputy Chair Ian Winterburn and Directors Kristine Skippington, Geoff Hogg and Tim Schaafsma will continue in their current roles. I look forward to working with the entire NRA Board over the next 12 months to achieve positive outcomes for all of our members.
Meanwhile, the first major retail events for the Christmas trade period have taken place. Late last week Aussies flocked to the shops for the Black Friday sales, while yesterday shoppers splurged on Cyber Monday online purchases.
With the NRA forecasting Australians to spend over $50 billion on retail purchases this Christmas, hopefully these two sales events have provided a solid kick-start to the festive season for retailers.
On Tuesday, Gerry Harvey will face shareholders in Sydney at the company's AGM.
We're sure there'll be fireworks. After all, from dodgy capital raises to dodgy (and expensive) dairy investments, this year's had it all. And if previous years are any guide, it doesn't take much questioning to set Harvey off.
On Monday, a little something to set the stage. Harvey Norman shares briefly touched $3.00, for the first time since 2014, before closing at $3.01. In March, Harvey flipped when the stock briefly went below $4.00, telling CNBC that was simply "mad".
"Harvey Norman shares are a good buy at $4.50, $5, [for them to] be under $4 is crazy," he said, before extolling viewers to sell their boats, cars and houses in favour of his company's stock. Bad advice, needless to say.
We can't wait to find out how he's taking the company's current share price.
23 Nov, 2018
Accent Group, Kathmandu shine through retail gloom
A trend away from traditional leather work shoes is helping footwear retailer Accent Group weather tough retail conditions, with a surprise profit upgrade sending its stock soaring on Friday.
Adventure goods retailer Kathmandu also delivered a better-than-expected trading update, sending its shares up almost 13 per cent on Friday.
Accent Group, which owns footwear chains The Athlete's Foot, Hype and Platypus, and owns the rights to shoe brands including Dr Martens, Vans, Timberland and Sketchers, said earnings before interest, tax, depreciation and amortisation in the six months to December were likely to be 15 per cent to 20 per cent ahead of the previous year.
The rise of sneakers as all-occasion footwear is helping Accent Group. Christian Kimber
Like-for-like sales in the first 20 weeks of the year rose 2.5 per cent, but margins are 300 basis points, as Accent pushed its own brands harder and grew sales of home-brand accessories, such as Hype and Platypus socks.
The group has also wound back its use of discounting, under a strategy it has labelled "no lazy retailing".
"What's going on in our segment is there is still this trend away from traditional 'brown' shoes into performance and lifestyle footwear," he told AFR Weekend.
"We think that trend still has runway. People aren't going back to wearing uncomfortable leisure shoes."
Accent said it still expected mid-single digit EBITDA growth in the second half, with analysts now likely to build in expectations that Accent's full-year 2019 underlying earnings will grow to about 12 per cent to just over $100 million.
The company's shares leapt 12.7 per cent on Friday to $1.24, and are now up 76 per cent over the past 12 months. The stock remains some way off its high of $1.95 seen back in July 2016.
However, it didn't all go Accent's way on Friday, with the company coming perilously close to a first strike against its remuneration report. A "strike" is represented by 25 per cent vote against; Accent received a vote against of just under 24 per cent.
Kathmandu also provided investors with a pleasant surprise, revealing same-store sales grew at 6.3 per cent in the first 15 full weeks to November 11. Sales rose 7.1 per cent in Australia, and 5.2 per cent in New Zealand.
Chief executive Xavier Simonet said the chain had "achieved good sales growth leading into the key Christmas trading period, and we expect first-half profit to be strongly above last year".
But he warned the first-half result is "highly dependent on the success" of the company's annual summer sale.
Sales at the company's hiking boots business, Oboz, which it acquired earlier this year, were $NZ15.7 million ($14.7 million) in the first quarter, at a gross margin of 39.8 per cent.
Kathmandu shares rose 12.9 per cent on Friday to $2.62, and have now risen 27 per cent over the past 12 months.
The results from Accent and Kathmandu will cheer investors in consumer stocks, who have been rocked in recent months by grim trading outlooks from The Reject Shop, Myer and Nick Scali.
International sporting brand Decathlon has opened its biggest store yet this week in Auburn, New South Wales.
It is the second Decathlon outlet to open in Australia.
The store opening forms part of the brand's expansion plans for Australia.
It will be opening up five new stores in Victoria within the next two years with its first two stores due to open in Melbourne in Box Hill South and Knoxfield before Christmas.
Decathlon opened its first store in Tempe late last year.
It has since sold over 60,000 items on average per month, attracted 500,000 visitors per month and sold over 600,000 items to date in total including online sales.
Originating from France, the brand is one of the world's largest sporting retailers.
It has over 1,200 stores across the globe in 30 plus countries and more than 80,000 staff worldwide.
Decathlon Australia's CEO Olivier Robinet said the brand wanted to build momentum in Australia following the success of its Tempe store.
“We are extremely pleased to open our second store in Auburn, Sydney's thriving west, and to be expanding our presence across Australia.
“Building on the success of our website and our first store in Tempe, Sydney, we want to maintain the momentum by opening further stores across Australia every year.
“The people of Australia have embraced our brand and we are excited about this.
“The opening our our Auburn store and announcement of further store openings in Victoria confirms our commitment to the Australian market and demonstrates our passion to share our wonderful brand with as many Australians as possible.
“In keeping with our generous warehouse design, the new Auburn store is our biggest store yet reaching just over 4,000 square metres in size, representing over 70 sports and carrying more than 7,000 different products, with walls and aisles lined with an endless array of unique and innovative items.”
Robinet said that the brand's launch in the Australian market filled the gap between affordability and quality.
“Australians are some of the most active people in the world, the whole country is like a playground!
“Prior to our arrival, many Australians had to spend hundreds of dollars to get a quality product. Decathlon has now changed this.
“We offer quality products at affordable prices with great service and interactive experiences in-store.
“Customers can try and test out our wonderful products in our 'active zones' and even take products home to try them for up to a week.”
He also said that with the expansion, the retailer is employing up to 100 people per store.
“We employ many local staff and our whole team is focused on assisting customers to fall in love with sport and benefit from our great products, affordable prices and wonderful service.
“In fact, our expansion means that we will be providing jobs for hundreds of Australians. Each store employs up to 100 people.
“I encourage everyone to go to our website as we are currently hiring for our new stores in Sydney and Melbourne.
“We also source services through local suppliers.”
The brand is also focused on supporting the local community.
The front of each store includes a large community sporting area where sporting clubs can showcase their sports and undertake sign up days.
An additional area also enables local sporting organisations to host BBQs and other events for fundraising.
“The people of Australia are falling love with Decathlon.
“We are all about contributing to the local community and assisting Australians to participate in sport.”
