News

Quadrant Private Equity has postponed plans to float its online auctions business Grays.com Ltd.

A Grays.com spokesperson said on Thursday morning that Quadrant and Grays management made the decision following a quick round of marketing conducted over the past fortnight.

“Having a deep understanding of the business, management and Quadrant have decided to delay an IPO having every confidence in its ability to continue to deliver expected GTV and earnings growth,” she said.

“While we have had strong local and offshore investor engagement throughout the PDIE process, we understand and respect that investors are keen to see more track record post the business transformation under Management/Quadrant ownership.”

Quadrant is expected to reconsider a float later in the year, once the business has another set of results under its belt.

Quadrant took control of Grays in 2019 and owns about a 90 per cent stake in the business. The company was formerly owned by listed leasing company Eclipx and had a short stint as a separately listed entity on the ASX-boards that ended in 2017.

Quadrant had brokers Jarden, Shaw and Partners and UBS pitch the business to Australian fund managers in the past fortnight.

A big part of the “investor education” was trying to get fund managers to take a fresh look at the business and consider changes that had occured under Quadrant’s watch.

The brokers told clients that the new Grays had been reshaped into a capital-light marketplace, that matched buyers and sellers in the same way as a Carsales.com or online real estate listings business, rather than an auction house with large inventory levels.

Investors were told Grays expected to report $132.9 million net revenue in the 2021 calendar year on a proforma basis, up from $124 million last year, and $28.8 million EBITDA.

The brokers had valued Grays at more than $300 million. Quadrant Growth Fund paid $60 million for Grays in July 2019.

A young Australian couple who started their streetwear brand from a single store on the Gold Coast have sold a majority stake in their business in a deal valuing the retailer at $600m.

Simon Beard, 36, and his 32-year-old wife Tah-nee will sell part of their Culture Kings brand to US-based online retailer a.k.a Brands, which has plans to expand the business to the huge North American market.

Brisbane-based Culture Kings, which operates an online business and eight physical stores around Australia, last month hosed down suggestions it was in talks with US investors about being acquired.

The company, founded by the Beards in 2008 on the Gold Coast, now employs 500 people with a focus on online sales.

Mr Beard, who began his retailing career selling products on Alibaba, claims to have pioneered ‘schoolies’ merchandise on the Gold Coast.

Culture Kings, which boasts Justin Bieber, Drake and Ronaldo as clients, sells a modern clothing range targeted to millennials and teenagers. Its stores feature in-house DJs and a basketball shooting competitions designed to attract the young.

Mr Beard said he would stay on as chief executive and retain a stake in the company that would remain based in Brisbane.

A.k.a, which is backed by Boston private equity firm Summit Partners, has a portfolio of online retailers that includes youth-focused brands Gold Coast-based Princess Polly, Brisbane-based Petal & Pup, and Rebdolls. Australian-born NBA star Ben Simmons is investing in a.k.a. in conjunction with the Culture Kings transaction.

A.k.a Brands chief executive Jill Ramsey said Culture Kings was one of the most sought-after streetwear retailers in the world with significant growth opportunities.

“We will work with Tah-nee and Simon to introduce and expand the Culture Kings experience in existing and new geographies,” said Ms Ramsey. ”We are thrilled to have them join our portfolio of high-growth brands.”

A.k.a did not disclose the financial terms of the deal. The company had initial talks in 2020 with potential partners about expanding in the US, but the outbreak of the COVID-19 pandemic had delayed any deal. It is understood the latest deal values Culture Kings at around $600m.

Mr Beard said the deal would allow Culture Kings to expand and become the “number one destination for streetwear across the globe” with a focus on expansion in the US with new physical stores.

“Our vision has always been to create the next global retail phenomenon,” said Mr Beard. “We couldn’t have found a better partner than a.k.a. The US market is very large.”

He said he always envisaged Culture Kings would become a global brand and credited his wife being a linchpin of the business’ success.

The couple live on the Gold Coast and last year unveiled plans to dramatically expand their mega mansion to create a giant Bali-style “pool zone”. They bought the resort-style property in May for $11.75m.

Culture Kings has successfully pivoted during the COVID-19 lockdowns with 75 per cent of its sales now transacted online.

According to the company’s latest financial statement lodged with the Australian Securities and Investments Commission (ASIC), Culture Kings reported a profit after tax of $19.4m last financial year on revenue of $183.7m.

Culture Kings is not the first Australian retail brand to be acquired by Hollywood-based a.k.a. Brands, which has been on the hunt for new digital businesses since it was founded in 2018.

Over the past two years, it has bought Princess Polly, which claims to be one of fastest growing brands in the US for women between 16 and 25, and Petal and Pup, founded in 2015 by Tiffany Henry.

Queensland Treasurer and Investment Minister Cameron Dick welcomed the investment by a.k.a. Brands which was expected to create new jobs in Queensland as Culture Kings expanded in the US market. Mr Dick said the growth would include expanding warehouse and ordering operations at its Archerfield base.

“I understand Culture Kings is likely to employ dozens more Queenslanders over the next 12 months as a result of this deal,” Mr Dick said.

Internet giant Amazon Australia has moved closer to even greater domination in the local retail sector with the largest fulfilment centre in the southern hemisphere – the size of 24 rugby league fields – at the $150 million Goodman industrial estate in Sydney’s west.

It will be the first robotics-automated centre, covering 200,000 square metres over four levels, and will employ 1500 warehouse staff. And from this week 300 additional contractors will begin to arrive on site to start the fit out, including the installation of the conveyer belt and robotics equipment.

Once completed, the mammoth centre at the Goodman/Brickworks Oakdale West industrial estate, close to the future location of the western Sydney international airport at Badgerys Creek, will house up to 11 million items and will be equipped with the most advanced Amazon robotics technology.

Goodman is the largest landlord for Amazon globally and this new centre adds to its site at Moorebank in Sydney and the centre in Lytton, Brisbane. Amazon launched in Australia in December 2017.

Amazon Australia director of operation, Craig Fuller, said the new site, due to be operational at the end of 2021, will be the fifth fulfilment centre in the country and will carry smaller goods and items that will service metropolitan Sydney, the NSW central coast and up to Brisbane.

“This $500 million investment that Amazon’s making in western Sydney is a real commitment statement about Amazon and their future in Australia,” Mr Fuller said.

The group is also looking at smaller inner-city sites, such as Alexandria in Sydney’s south to cater for localised smaller deliveries.

“We took this template from a European model. But we had to make a couple of bespoke changes to reflect some of the logistics aspects that are adapted to Australian conditions,” Mr Fuller said, on a tour of the centre on Tuesday, which is still under construction.

“Once we get this building launched towards the end of the year 2021, it is about really consolidation and stabilisation for Amazon here.”

The property will also embrace high COVID safety standards that were introduced to the plans and fit-out last year when the global pandemic hit.

Goodman’s general manager Australia, Jason Little, said development of this fulfilment centre sees Goodman continue to deliver its global strategy of providing essential infrastructure to support the digital economy, and “to meet the increasing demand for strategically located logistics space with easy access to large consumer markets”.

“Our $150 million investment in roads and infrastructure will create road capacity and better access to services, building on outer-western Sydney as a key area for logistics and transportation,” Mr Little said.

Once operational, robots work collaboratively with employees by moving the pods of inventory to them, reducing the time and effort that would otherwise be required for the employee to stow items for sale or pick them for new customer orders.

They also save space, allowing for 50 per cent more items to be stowed per square metre which in turn allows for increased product selection.

Cashless retail sales for the month of February have stayed relatively flat, according to NAB’s most recent index, rising only 0.3 per cent month on month, from 18.9 per cent to 19.1 per cent.

However, given the volatility seen in the retail industry in the last year, NAB’s chief economist Alan Oster said the result was “fairly good” – though suggests some of the outsized growth seen during 2020 is returning to more “normal” levels.

“The onset of the pandemic has seen profound changes for Australian retail, with the sector in aggregate going from the weakest sector in the NAB Monthly Business Survey to one of the strongest,” Oster said.

“But as 2021 rolls on and the prospect of some kind of post-pandemic normality comes into view via vaccination, how will consumers respond? Early signs […] suggest that household goods and other retailing are returning closer to pre-pandemic growth, while food has now fallen to essentially pre-pandemic levels.

“Meanwhile, cafes, restaurants and takeaways continue to recover.”

The fastest growth was seen in Western Australia, according to NAB, with cashless retail sales up 22 per cent. Victoria, however, saw the slowest growth – largely a result of its impromptu five-day lockdown during the month.

Online sales jumped in January after a dip in December, according to the latest NAB Online Retail Sales Index.

And it’s estimated that in the 12 months to January, Aussies spent $45.61 billion online.

The index found e-commerce rose 4 per cent during January following the 4.7 per cent fall a month prior, while year-on-year online sales grew 45.6 per cent. These figures differ slightly from the results released yesterday by the Australian Bureau of Statistics, which saw online grow 1.6 per cent and 62.8 per cent on a monthly and annual basis for the same period.

According to NAB chief economist Alan Oster, metro areas continued to outpace regional uptake of online sales, and takeaway food continued to see strong buy-in from Australian consumers.

“While [takeaway food] is still the smallest share of spend, with such high growth over the past year, its share of spend has increased from 4.1% a year ago to 5.3% in January,” Oster said.

“The largest contribution to growth for this category in January was from the two biggest sales states, NSW and VIC.”

February’s result is likely to feel the impact of the Western Australian and Victorian ‘circuit breaker’ lockdowns, which shuttered retailers for a number of days in an attempt to halt the spread of the virus.

Online marketplace Kogan has seen gross profit double to $112.9 million during the six months to 31 December, while net profit (excluding non-cash items) jumped 250 per cent to $36.5 million.

And, after months of continued growth due to the sustained shift online brought on by the Covid-19 pandemic, earnings per share tripled to 35c per share.

Active customers hit 3 million after achieving network growth of 76.8 per cent.

“We launched Kogan to change the retail industry nearly 15 years ago, and we would have been cheering if we helped 3,000 customers that year,” said founder and chief executive Ruslan Kogan.

“So even though well over three million customers used Kogan in the last 12 months, we feel like we’re just getting started.”

During the first four weeks of the second half the business saw gross sales up 45 per cent and gross profit up 102 per cent.

And, according to Kogan, the business plans to invest in its logistics network with the aim of improving speed of delivery, range, and competition across its platform, and will pay a fully-franked interim dividend of 16 cents per share – though won’t provide earnings guidance for the half ahead.

While the business has seen massive grown its active customer base, it was also fined over $300,000 in January for breaching Australian spam laws – sending those customers over 42 million marketing emails that didn’t include the ability to unsubscribe.

The online marketplace is no stranger to fines, having been forced to pay $350,000 by the ACCC in December after an investigation found it had made false and misleading marketing claims about a tax time promotion in 2018.

Global e-commerce juggernaut Amazon has broken through the billion-dollar revenue mark in Australia after its sales doubled during 2020 as the COVID-19 pandemic fuelled a surge in online buying.

Financial records posted for the business late on Friday evening revealed Amazon Australia’s retailing arm, Amazon Commercial Services, reported $1.12 billion in net sales for the 2020 calendar year, a 99.4 per cent jump from the year prior.

Of this, $511 million is directly related to sales of goods from Amazon’s online store, more than double the $218 million recorded in 2019. This shows the online retailer has also seen a similar boost in customer numbers as other major Australian e-commerce sellers such as Catch and Kogan as locked-down shoppers took their spending online.

Investment from the retailer’s US parent company, labelled as ‘related party revenue’, grew 50 per cent to $371 million. This funded things such as Amazon’s new distribution centres in Sydney, Brisbane and Melbourne along with broader expansion expenses.

However, the level of investment has dropped on last year, where related party revenues comprised half of Amazon Australia’s total revenue, showing the local business is beginning to rely less on its parent company’s income.

Revenue from third-party sellers, which refers to Amazon’s marketplace business, jumped to $126 million. The retailer has also seen a successful uptake of its Prime subscription service, which provides free shipping along with access to various TV shows and movies, with revenue nearly tripling to $90 million for the year.

However, despite the surge in sales, the business still reported a loss for the year as expenses rose in tandem with sales. Amazon Australia’s net loss for the year came in at $3.8 million, a minor improvement on 2019’s $4.7 million loss. The company paid $18.3 million in income taxes.

Amazon spent more on marketing in 2020 and also spent nearly $100 million on short-term employee benefits. The cost of professional fees paid by the business also nearly tripled to $60 million.

The company’s status as a billion-dollar company will likely ruffle the feathers of other major Australian online retailers who have been dismissive of the business’ slow start in the region.

The retailer has been slowly but steadily improving its foothold in the local retail industry, announcing last year it was building a mammoth 200,000 square metre robotic fulfilment centre in Sydney’s west, which the company said would double its fulfilment capacity in Australia.

Last year also marked the first full year at the helm for Amazon’s new country manager Matt Furlong. Total executive remuneration for the year came in at $1.8 million.

In a statement, Amazon Australia confirmed its US parent was still investing significantly in the local offshoot and noted COVID-19’s impact on the business and the broader retail environment.

“Over the past year, our focus has remained on the health and safety of our people, helping customers stay home and safe by delivering products directly to their door, and supporting local communities and selling partners during this challenging time,” a spokesperson said.

Amazon’s US parent entity recently reported its fourth-quarter sales of $US125.6 billion ($163 billion), a 44 per cent rise on the same quarter in 2019. It also announced that founder and chief executive Jeff Bezos would be stepping down, handing the reins over to long-term executive Andy Jassy.

Online marketplace Asos has picked up the Topshop, Topman, Miss Selfridge and HIIT brands from the collapsing Arcadia Group.

The £265m deal sees the business pick up the four brands, which it sees as complementary to its own brand portfolio, and will be completed on the 4th February. The cost was paid entirely from Asos’ cash reserves.

“We’re extremely proud to be the new owners of the Topshop, Topman, Miss Selfridge and HIIT brands,” said Asos chief executive Nick Beighton.

“We have been central to driving their recent growth online and, under our ownership, we will develop them further using our design, marketing, technology and logistics expertise.”

The deal allows Asos to further boost its own-brand offer with “strong labels that resonate” with their core customers of 20-somethings, while also being able to reach a different market than its current offer.

The plan, according to Asos, is to integrate the four new brands into the business quickly, transitioning 300 workers from the brands across, and review the supply chain of each to ensure they comply with their own principles.

“Beyond this, we will work to maximise the opportunity for the brands’ global distribution,” Asos said.

For example, while the four brands’ main market is in the UK, Asos sees the opportunity for more international partnerships, such as a potential partnership with Nordstrom in the US in order to accelerate the wider group’s rollout in that region.

While these opportunities exist, Asos is expecting incremental sales in FY22 to be flat to FY20 acquired brand sales, as it focuses more on driving growth on its main marketplace platform.

The business is, however, expecting a double-digit post-tax return on capital in the first full year the brands are within its wheelhouse.

The heads of online furniture and homewares retailer Temple & Webster are confident the business can maintain its high growth rates throughout 2021 after the company reported a six-fold increase in profit for the half-year.

Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 556 per cent to $14.8 million for the six months to the end of December, the company said on Tuesday, as it continues to ride a COVID-induced surge in sales.

The number of active customers shopping at the e-tailer doubled over the half to 687,000 as did sales, up 118 per cent to $161.6 million, though this signified a slowdown from earlier in the half where revenue was up as much as 160 per cent.

However, chief financial officer Mark Tayler said he could see no obvious headwinds for the business through 2021, remaining optimistic that growth rates could stay high despite a cooling of COVID shopping appetites.

“There’s not a lot in front of us at the moment that’s telling us the year’s going to be really tricky,” he said. “Housing market data and some of the restrictions around travel should mean there’s a lot of demand locally.”

The business’ selection of homewares and furniture, especially office furniture, has been popular during the pandemic as many Australians spent most of their time at home and opted to shop largely online.

Shares in the retailer have boomed nearly 300 per cent since February last year thanks to its rapid growth. However, they fell 3.4 per cent on Tuesday as investors reacted to the slightly worse-than-expected figures.

Chief executive Mark Coulter said the business was now putting a focus on turning its revenue growth into more significant earnings that would allow Temple & Webster to invest more into areas of its business such as data, technology and further marketing.

The company is also looking out for future acquisition opportunities, though Mr Coulter said the company had no immediate plans to snap up any other companies.

Temple & Webster currently ships 75 per cent of its product from international suppliers, but it is looking to expand its higher-margin private-label range, investing $13 million in the segment over the half.

“At the moment private label is 25 per cent of sales and it could get to 30 per cent,” Mr Coulter said. “But the actual percentage will be determined at a subcategory level.”

Growth at the business has continued into the new year, with January revenue up over 100 per cent. Mr Coulter said the business would look to use some of its $85 million in cash to reinvest in the business to cement the company’s gains in market share.

RBC Markets analyst Tim Piper said the overall result was slightly below market expectations but noted the business’ investment into private label products seemed sensible. “We think Temple and Webster will continue to benefit from the significant acceleration in online penetration rates in the category,” he said.

Shares were down more than 4 per cent to $10.57 in late afternoon trading.

Black Friday has once again cemented itself as the e-commerce sales holiday of the year, with retailers on multiple sides of the industry seeing sales erupt.

According to data from e-commerce business Shopify, its merchant’s trade on Black Friday this year grew by 80 per cent compared to the year prior, with 65 per cent of sales made on mobile and Australia taking the fourth spot in global sales volumes.

Australia Post said trade more widely had improved 45 per cent, and that it had delivered more than 3 million parcels since Friday Morning, and expects a further 3.1 million parcels to be delivered on Monday. If it does, it will be the biggest day in Australia Post’s history.

“We’ve made the right investments in our network and stand ready today to set a new record – the busiest day in our 210-year history – as we head towards our biggest peak in history,” said Australia Post executive general manager of deliveries Rod Barnes.

Department store Myer also saw trade explode, with chief customer officer Geoff Ikin stating the holiday was “massive” and that it had broken its own online records each hour.

And Myer isn’t alone, according to National Retail Association chief executive Dominique Lamb.

“We don’t have figures yet, but anecdotally there has certainly been quite a surge in terms of foot traffic and people taking advantage of sales,” Lamb told AFR.

Last week the NRA predicted Australians would cough up over $5 billion over the Cyber Week spending period, with online sales having been accelerated by the COvid-19 pandemic.

And, with many Australians having seen limited spending opportunities this year, Lamb is confident retail will get the strong showing the association expects.

“We’re not spending money on travel, which is typically what we do at this time of year. In Victoria, the fact that you’ve had limited time to go to bricks-and-mortar stores means it is about the experience, actually touching and feeling things, because you haven’t been able to do it for so long,“ Lamb told the AFR.