News

17 Jun, 2022
Eyewear retailer Bailey Nelson has rapid growth sharply in focus at age 10
Source: Supplied

Last week, eyewear business Bailey Nelson launched its 100th store – a milestone that coincided with the brand’s 10-year anniversary. 

The new store in Frankston, Victoria, is the first of its kind: showcasing a new layout that will be replicated in future stores, new collections and an ‘OPTOS’ machine – a state-of-the-art imaging tool that allows the business’ optometrists to view a customer’s retina at four times the resolution.

“We identified Frankston as a crucial catchment for Bailey Nelson,” said co-founder and CEO Nick Perry.

“With the busy roll-out of new stores taking place, Frankston was chosen as the 100th store to take advantage of rapid growth in business and employment in the area, and to deliver to consumers in the region who have been asking for our services locally.”

In the past decade, Bailey Nelson has gone from small-time disruptor operating almost entirely online, to one of the most popular eyewear chains across Australia, New Zealand, the UK and Canada.

Key to the business’ success, Perry said, is Bailey Nelson’s price point, and its commitment to do optometry differently than its competitors. 

“We’re around a third to half of the price of an independent, or an OPSM, so we have a really clear price advantage over our competitors,” Perry told Inside Retail. “Plus, we’re a modern retail experience, with passionate staff.”

And, while it took Bailey Nelson 10 years to get to 100 stores, it doesn’t plan on waiting another decade to get to 200: Perry expects to double the size of the business in the next three years, opening at least 25 stores a year.

In addition to store growth, Bailey Nelson is planning on ramping up its omnichannel experience by improving the customer experience across its website and social media, as well as launching a mobile commerce application that will use augmented reality and virtual try-on technology – something that has already helped drive a 600 per cent increase in sales throughout the pandemic. 

“On the product side, our model resonates with consumers of all ages. We are proud to have made buying eyewear a joyful experience that’s accessible to everyone, no matter their budget,” Perry said.

“Over the last two years, we’ve also invested in growing our technology and executive management teams in Australia and Canada. We know where we need to get to and are developing the infrastructure and people power to make that happen.

“Our goal is for a Bailey Nelson store to be in every major shopping precinct across Australia, New Zealand and Canada.”

Keeping customers in focus

Bailey Nelson’s relationship with its customers is incredibly important, Perry said. The business is rated as the ‘Best Optical Retailer’ on ProductReview.com.au, with a score of 4.8 out of 5.

“One of the most important changes we made within the first 12 months of the business was to include optometry,” Perry said“It completely changed the business, and meant that we were no longer just providing products for our customers but are actually responsible for their health. And that creates a really strong relationship.”

Compared with other parts of retail, which could experience purchases multiple times a week, customers typically need new glasses only every two years or so, as their eyesight continues to change or when their previous frames break or go missing. 

However, Perry said some customers tend to buy new frames at Bailey Nelson every nine to 10 months – around two times more often than the industry average.

Plus, the medical nature of the purchase means that while online is a strong feature of Bailey Nelson’s business, stores are still the best place to get the full experience.

“When we launched 10 years ago, the thought was, ‘Let’s try to push as many people toward buying glasses online’, but that’s not really our focus anymore,” Perry said.

“More than 95 per cent of our customers will browse our website before coming into our stores, so we’re really seeing [Bailey Nelson] as an omnichannel experience now.”

17 Jun, 2022
Minimum wage boost may push some retailers over the edge, says ARA
Source: Bigstock

Today’s 5.2 per cent increase in the minimum wage announced by the Fair Work Commission has been greeted with alarm in the retail sector.

After today’s change, the minimum wage will be $21.38 per hour or $812.60 per week from July 1, however workers in some sectors, such as aviation, tourism and hospitality, will have to wait until October.

Australian Retailers Association’s (ARA) chief Paul Zahra said the boost to the minimum wage is the highest in more than two decades as retailers continue to maneuver economic challenges.

“Whilst the ARA supported a fair and balanced increase to the minimum wage, we fear the scale of this increase could tip some businesses over the edge,” he said.

“Acute supply chain issues, staff shortages and the rising cost of energy, fuel and materials are creating unprecedented financial pressure.”

Dominique Lamb, National Retail Association CEO, also expressed concern describing the increase as “completely out of touch” with the reality of modern businesses.

“The simple fact is that when businesses don’t have enough money to cover their expenses, they need to cut costs. There is no doubt that those cuts will lead to job losses in retail and no doubt in other areas of the economy as well.”

Fair Work Commission president Iain Ross said the most ‘significant change’ since last year has been the sharp rise in the cost of living and the strengthening of the labour market.

“At the aggregate level, labour market performance has been particularly strong. The unemployment rate has fallen to 3.9 per cent, compared to 5.5 per cent in April 2021, at the time of the last review.

“Taking all the relevant considerations into account, we have decided to award an increase of $40 per week to the national minimum wage,” he said.

17 Jun, 2022
The Reject Shop names its new CEO
Reject Shop - new CEO

The Reject Shop has tapped a former senior Bunnings and Officeworks executive as its new CEO. 

Phil Bishop, who was most recently director of merchandise & marketing at Bunnings, also served as COO at Officeworks. His retail career started 30 years ago as a people greeter in a Target store.

He will take over from Andre Reich who resigned suddenly in April, leading to the interim appointment of CFO Clinton Cahn to the role. 

The Reject Shop chairman Steven Fisher described Bishop as “an experienced retail leader with a proven record of contributing to the growth and transformation of businesses through clarity of strategy, innovation and cultural change, which has delivered value for shareholders”.

He joins the business after the implementation of the initial phases of a turnaround strategy which Fisher days is now well-positioned with a lower cost base, an experienced and talented senior leadership team and a growing national store network, all supported by a strong balance sheet.

“As the company transitions into the ‘grow’ phase of the turnaround strategy, I am confident that Phil is the right person to lead the company,” he said.

Bishop said he saw “a significant opportunity to grow The Reject Shop through better understanding its customers, continuing to evolve the product offering and continuing to expand the store network. “I look forward to executing the turnaround strategy and delivering comparable sales growth and creating value for shareholders.”

17 Jun, 2022
Woolworths, Big W to phase out reusable plastic bags
SOURCE:
The Age
Woolworths and Big W will phase out reusable plastic bags by June next year.

Major supermarket Woolworths will soon no longer offer shoppers reusable plastic bags in stores, with the company announcing this morning it plans to phase them out gradually as part of a sustainability push.

Over the next 12 months, Woolworths and its sister business Big W will start to remove reusable bags from its stores. The bags are sold for 15 cents and, while made of plastic, can only be recycled at special Redcycle stations within the company’s stores.

Natalie Davis, Woolworths’ managing director of supermarkets, said the reusable bags had played their part after it dropped single-use plastic bags in 2018, but these days most shoppers brought their own bags to the store.

“We’ve seen a huge shift in shopping habits since we stopped giving out single-use plastic bags, with eight out of 10 customers now bringing their own bags from home,” she said.

“The reusable plastic bags have played their part, and now it’s time to do away with selling plastic shopping bags at our checkouts for good.”

Davis did acknowledge the end of easily available plastic bags at checkouts might be an adjustment for some customers, hence the phased removal, but noted the move will take more than 9000 tonnes of plastic out of circulation annually.

However, rival supermarket Coles is not yet following suit, with a company spokesperson telling The Age and The Sydney Morning Herald it would continue to offer reusable plastic bags in stores.

“Coles has introduced paper shopping bags for WA customers to buy ahead of a state government ban on plastic shopping bags that comes into effect on July 1. We have also trialled offering paper shopping bags in other states to provide customers with a choice,” the spokesperson said.

“Outside of WA, we are continuing to offer customers reusable Coles Better Bags made with 80 per cent recycled plastic, as well as Marine Reusable Shopping Bags made with 20 per cent marine waste plastic.” Coles’ bags can also be recycled only at Redcycle stations.

Both supermarkets have been embarking on major sustainability pushes, targeting 100 per cent renewable energy across their operations by 2025. The duo have also been focusing on removing unnecessary packaging in stores.

New local plastics laws in Western Australian stores mean both supermarkets have already removed reusable bags in the state. Woolworths said the next states in line would be South Australia and the Northern Territory, with others to follow.

The company will continue to offer paper bags for 20 cents, and plastic bags for fruit and vegetables will also be available.

3 Jun, 2022
‘Wagyu and shiraz’ out as Westpac warns on rates
Westpac CEO Peter King on Monday

Westpac chief executive Peter King says multiple official interest rate rises will contribute to a fall in GDP growth of 2 percentage points next year, as consumers rein in spending to ensure they can afford higher interest payments to banks.

Westpac’s $3.1 billion interim cash profit beat expectations and lifted its shares 3.2 per cent. But Mr King was less hopeful than rival big bank bosses. He fretted that rising rates would curtail credit growth and push house prices down next year.

He warned the Reserve Bank of Australia not to overreact to spiking prices that may be temporary. Mr King also urged that additional caution was warranted given high levels of household debt would amplify the economic impact of rate rises this cycle.

“There is a risk that rates go up too fast and that really slows growth in 2023 and 2024,” Mr King told The Australian Financial Review.

“We are entering an interesting period with rising inflation, supply chain challenges and increasing interest rates – and these dynamics will need to be managed carefully.”

Westpac expects the cash rate to rise to 1.75 per cent by the end of this calendar year, from 0.35 per cent today, and to 2.25 per cent next year. The bank also forecasts house prices in Sydney and Melbourne to fall by 9 per cent next year.

Guided by its chief economist, Bill Evans, Westpac expects the economy to expand by 4.5 per cent this year, but then to slow to 2.5 per cent next year as rate rises start to bite. This was similar to the RBA, which said on Friday that GDP would grow by 4.25 per cent this year and fall to 2 per cent next year.

Westpac forecasts credit growth rising by 5.7 per cent this year but slowing to 4.3 per cent next year, as higher interest rates reduce borrowing capacity. However, it said on Monday that it was willing to lend more to property investors to support the market.

No more ‘wagyu and shiraz’

The bank said it expected many recent borrowers to cut discretionary spending next year given they had less time to build up buffers.

Three years ago, it fought the corporate regulator in the so-called “wagyu and shiraz” case, in which the Federal Court found Westpac had not broken responsible lending laws.

The bank made its own assessments of borrowers’ loan-servicing capacity instead of following the regulator’s guidelines because borrowers could reduce their spending on luxury items.

Mr King said the big banks had originated about a quarter of all their mortgages in the past two years. He said it was this cohort who might have to curtail spending on things such as home renovations, fancy holidays, restaurant meals and entertainment as rates rise.

“More of people’s income will be spent on housing, whether that is rental or mortgages, and depending on what type of rate cycle we see, there could be less income available for other discretionary spending,” he said.

“It’s a pretty tricky balancing equation for the Reserve Bank as it goes through the next period, and we have got higher leverage – so the impact of a 25 basis point rise in the economy is bigger than it used to be.”

On a $500,000 loan, an additional 2 per cent in rates equates to $10,000 a year in after tax income paid to banks. “That is what people have to be thinking about – they have got to be getting prepared for it, and it is probably going to be the way money is spent that will change in the broader economy,” Mr King said.

Mounting uncertainty about the effect of rising rates curbed enthusiasm on the interim results of the big four banks. They reported combined cash earnings of $14.4 billion, up 5.1 per cent on the first half of 2021 after growth in business and housing lending as the economy rebounded from the pandemic. Bank profits lifted as bad debts fell even further, supported by record low levels of unemployment.

However, cost pressures and intense mortgage competition squeezed net interest margins as management took the knife to expenses to maintain profits, the latest interim reporting season revealed.

Westpac remained committed to its target of reducing overall costs to $8 billion by 2024 despite rising wage pressures, with 4000 staff cut during the half. ANZ and National Australia Bank walked away from previous cost targets, saying rising inflation had changed the game.

Across the sector, total operating expenses at the big banks decreased by only 1 per cent to $4.9 billion, KPMG found, as inflation drove up “run-the-bank” costs. Banks also continued to invest more in technology to guarantee they could compete in the digital economy by transforming legacy IT systems.

Staying the course

Justifying maintaining its cost target, Mr King said Westpac needed to move more aggressively than rivals because its overall cost base was larger. He said it had made gains selling non-core businesses, reducing office space (including offshore locations) and cutting the number of transactions done in branches as it moved more products to digital platforms.

Advisers and investors said banks faced many uncertainties that would keep them under pressure next year and in 2024, despite the resilient performance so far this year.

“The only thing that is certain is uncertainty,” said Tim Dring, who leads EY’s banking and capital markets practice in Oceania.

“Supply chains, geopolitical issues, wage pressures, and as interest rates move up to combat inflation, there’s also uncertainty around how households will cope with those higher rates.”

Bank stocks have performed well this year as the market factors in more revenue from higher interest rates, given bank net interest margins should increase as they widen the spread between the rates charged to borrowers and those paid to savers. Strong capital levels should also support more capital being returned to shareholders.

But some fund managers think the risks of rising rates could outweigh the positives. Romano Sala Tenna, a portfolio manager at Katana Asset Management, was reducing exposure to banks. He reckons bad debts must have finally hit a low point now that rates were rising, which would also reduce borrowing capacity.

“With rates going up, we are going to see lower growth in lending, and we are going to see mortgage book stress at some time,” Mr Sala Tenna said. “You are also going to see wages and other cost escalation.”

3 Jun, 2022
Woolworths to take a majority stake in MyDeal

Woolworths Group is to acquire a majority 80.2 per cent stake in online marketplace, MyDeal.

Sean Senvirtne, CEO and founder of MyDeal, and other key management will retain the balance of the shares and will continue to lead the business after the sale.

The deal – an all-cash consideration of $1.05 per share – values MyDeal at $271.8 million and is subject to customary conditions, including ACCC and court approval. Confirmation is expected during the third quarter and MyDeal will be delisted after the sale is complete.

MyDeal CEO, Sean Senvirtne, said the transaction is a highly attractive proposition to shareholders and represents a significant premium to MyDeal’s share price.

“The entire MyDeal team is looking forward to partnering with Woolworths Group, which will deliver a step-change in the growth of our retail platform by accessing sector-leading capabilities across e-commerce, supply chain, retail, loyalty and more.”

Senvirtne, has committed to selling his 47.3 per cent stake in MyDeal shares, and other shareholders Silver Globe and Aavasan (Gandel Invest), which together hold or control 28.6 per cent of the target, have committed to vote in favour of the sale, effectively confirming it unless a higher offer is made by a third party.

Woolworths Group CEO, Brad Banducci, said adding MyDeal to Woolworths Group would mark a step further towards delivering “a more holistic customer experience in food and everyday needs” and materially expands the company’s marketplace capabilities, especially in general merchandise.

3 Jun, 2022
Check it out: The “gamechanging” plus-size runway at Aus Fashion Week
The “gamechanging” plus-size runway at Aus Fashion Week

In a move that many industry professionals and consumers have been waiting on for years, Afterpay Australian Fashion Week (AAFW) finally showcased plus-size labels in a dedicated runway called The Curve Edit last week, featuring pioneer plus-size supermodel Robyn Lawley.

The Curve Edit showcased six designers that catered from sizes 12 to 26 and a bevy of local curve models from talent agency Bella Management, which organised the showcase. Brands that showed on the runway included Vagary, Harlow, Embody Women, Zaelia, 17 Sundays and Saint Somebody.

According to fashion industry expert and consultant Rosanna Iacono, The Curve Edit was “a gamechanger for size diversity” during AAFW. 

“This runway as part of the official schedule was instrumental for driving the conversation around how curvy fashion needs to be integrated with mainstream fashion, within the the key events on the industry calendar,” she told Inside Retail

“But what was also very encouraging was the fact that numerous other designers incorporated plus-size models in their shows during the week.” 

Indeed, other labels outside of The Curve Edit that featured a range of body shapes and sizes included Gary Bigeni, Nicol and Ford, Dyspnea, Mariam Seddiq and Iordanes Spyridon Gogos.

In recent years, AAFW has been criticised for its lack of size diversity, making The Curve Edit a welcome change. However, entrepreneur and curve model Blaise McCann pointed out that ideally, in the future, inclusion would be embraced across the week’s schedule and all labels. 

“Although the show was groundbreaking, there is always more that can be done to bring inclusivity into the fashion world in a more authentic capacity,” she wrote in an Inside Retail article. “Instead of settling for a separate show that requires a supermodel to garner attention, it would better serve not only the curve community, but also the Australian fashion community to normalise and include all bodies in all shows.”

Iacono expressed similar sentiments.

“Eventually, we’ll be seeing many more designers simply integrating a broader range of sizes into their sample collections, to be able to showcase them not only on the runway, but in other photographic shoots and showroom settings,” she said. 

“We need to get to the point where size diversity is simply a hygiene factor, and always to be expected. But there is still a way to go before we reach peak integration and normalisation of size diversity.”

3 Jun, 2022
ARA predicts $8.8bn mid-year spending spree as retailers quit excess stock
Australian consumers are set to spend $8.8 billion during the coming months

Australian consumers are set to spend $8.8 billion during the coming months as mid-year seasonal sales ramp up and excess stock is sold. 

The Australian Retail Association (ARA) forecasts 52 per cent of consumers shopping mid-season sales will be doing so online. Around 6.2 million Australians will spend an average amount of $1420 each. 

NSW is expected to contribute $3.2 billion followed by Victoria at $1.9 billion and Queensland at $1.7 billion.

The ARA said its research shows 83 per cent of consumers plan to spend during the mid-year sales – and they say they will spend the same or more than they did last year.

ARA CEO Paul Zahra is encouraging consumers to head into the CBD for their mid-year sales shopping and support businesses impacted by low levels of foot traffic. 

“With tax time around the corner, savvy consumers will also be on the lookout for work-related products which they can then claim from July 1, so we expect products like computers, phones and tablets to be popular purchases,” he said.

Zahra added that prices will be slashed across a range of products from fashion, shoes and accessories to electronics, bedding and homewares as retailers clear stock to make way for new season lines in the next financial year.

3 Jun, 2022
‘Party’s over’: Retailers brace for grim times as spending dries up
Analysts have warned retailers to brace for a significant fall in consumer spending

Australia’s retail sector has been warned to prepare for a tough period ahead as the compounding pressures of inflation, weak consumer confidence and worsening COVID case numbers threaten to send spending plummeting.

Most retailers enjoyed an unprecedented boom in consumer spending during the pandemic, notably online as government stimulus fuelled buying during lockdowns. However, last week market analysts cautioned their clients that the COVID-induced sugar hit appears to have well and truly worn off.

Tom Kierath, analyst for investment bank Barrenjoey, told The Age and The Sydney Morning Herald both suppliers and retailers had started to raise the alarm over worsening retail conditions. Discretionary spending has dropped 10 per cent over the past month, and conditions are unlikely to improve anytime soon.

“We’ve been predicting for a while that the retail would come off as people start to spend their money elsewhere, but feels like now it’s actually happened,” he said. “And it’s going to get tougher because the pressures on the consumer are getting worse.”

Retailers have warned shoppers and investors about rising costs over the past 12 months. However, this year has brought inflationary pressures sharply into focus, with raw material shortages, fuel price spikes and shipping cost increases all contributing to the highest level of annual inflation in the past two decades.

Compounding this are further pressures affecting shoppers’ wallets, including rising interest rates and power prices. The reopening of international travel has also prompted more spending in non-retail categories.

Retailer Mark Mezrani, who operates 50-odd Kidstuff stores around the country, agrees that any COVID-related benefits for retailers appear to have worn off, and the outlook is increasingly grim.

“There’s no doubt the Australian consumer is starting to get the message that the party’s over,” he said. “The things that were fuelling spending – government support, low interest rates, low energy prices, house prices rising – every one of those indicators have now reversed.”

“Coupled with the current labour shortages, supply disruption, and massive price increases in shipping costs, it doesn’t bode well.”

Already, international retailers have started to report signs of a marked slowdown in consumer spending, with US behemoths Walmart and Target both recently reporting weak earnings and warning of a downbeat environment to come.

These results could be a canary in the coalmine for the Australian retail sector according to Jarden analyst Ben Gilbert, who believes local retailers run around three months behind their international peers.

“While the US is a different market, we see the directional trends as relevant for Australia given similar themes with respect to inflation, down-trading and reopening are likely to play out, to an extent, in the 2023 financial year,” he said.

Gilbert views discretionary and household-related retailers as facing the most risk from this scenario, highlighting JB Hi-Fi, Harvey Norman, Premier Investments and Wesfarmers as companies that could disappoint investor expectations.

However, it’s clear that many investors are already expecting downbeat results, with most retail companies having almost entirely retraced the gains made in their share price throughout COVID. Some market darlings, such as online retail Kogan, are now trading lower than they were before the pandemic.

Mezrani says his business has “reluctantly” been forced to raise prices and is still struggling to get consistent labour in stores, saying there are precious few positives on the horizon for retailers.

“If you had to pick the settings you want for good retail spending, they’re the exact opposite of where we are now.”

3 Jun, 2022
Retail sales surged nearly 10 per cent in April
Retail sales growth hit 9.6 per cent in April

Year-on-year retail sales growth hit 9.6 per cent in April year-on-year according to data released by the Australian Bureau of Statistics.

Sales reached an estimated $33.9 billion in-store and online combined during the month, with the cafes, restaurants, and takeaway services, along with clothing and footwear sharing a 14.7 per cent increase, and the ‘other retailing’ sector 14.4 per cent. Household goods amassed a 7.4 per cent increase while food retailing registered a 6.5 per cent increase. Department-store sales recorded the slowest rise, of 5.4 per cent.

The easing of public health restrictions and removal of density limits in stores and malls boosted trade in Queensland and gave rise to a 11.8 per cent increase in retail turnover.

On a state basis, Western Australia recorded a 10.2 per cent increase, Victoria 9.9 per cent and South Australia and NSW 8.6 per cent.

Australian Retail Association CEO Paul Zahra described the month as ‘phenomenal’ for retailers overall.

“With trade boosted by the Easter long weekend, many people got away for holidays, which coincided with a relaxing of domestic border controls and Covid restrictions on businesses,” he said.

“However, we know that the record retail sales result can also be attributed to the higher prices we’re seeing across the economy – particularly in the food industries. While sales are increasing, so too are business costs, while staff shortages remain an ongoing concern.”

Ben James, director of quarterly economy wide statistics at the ABS, said strength in retail turnover is being driven by spending across the food sectors.

“High food prices have combined with increased household spending over the April holiday period as more people are travelling, dining out and holding family gatherings.”

3 Jun, 2022
Missguided, alas: UK fast-fashion label collapses owing millions
Missguided has collapsed

UK-headquartered online fast-fashion retailer Missguided has collapsed after a last-minute rescue backed by rival Boohoo – and potential bids by Shein, JD Sports and Frasers Group – all fell through.

The company has appointed Teneo Financial Advisory – the agency trying to negotiate a sale of the ailing business – as administrator. Teneo says the business will continue to trade while its future is determined, but The Guardian reported more than 80 staff were immediately made redundant with another 260 jobs at risk if the company cannot be salvaged. 

Missguided owes millions of pounds to suppliers, who lodged a winding-up petition on Monday. 

“The joint administrators will now seek to conclude a sale of the business and assets, for which there continues to be a high level of interest from a number of strategic buyers,” said Teneo senior MD Gavin Maher. “As we continue to see, the retail trading environment in the UK remains extremely challenging.”

Described by Retail Gazette as once being “an online fashion success story” Missguided had “failed to keep pace with bigger competitors Boohoo and Asos in recent years”. 

Founded online in 2009, Missguided seemed to start off well in the digital space, but a foray into brick-and-mortar retailing from 2016 appears to have ultimately sealed its fate. After closing a flagship store in Westfield London with two years of its lease left in February 2019, the company began to pursue an overseas expansion program, opening stores in markets as diverse as the UAE, Vietnam and Egypt under distribution partnerships. It had an Australian online storefront which is currently unreachable.

Late last year Alteri, an investment company that specialises in distressed businesses, took a 50 per cent stake in Missguided in return for emergency funding. When founder Nitin Passi resigned as CEO, Alteri called in Teneo to advise on long-term rescue options. 

Passi launched the company using a loan of £50,000 from her father, an Indian immigrant who made a fortune in the rag trade by setting up a high street supplier By Design in the 1960s. 

The Guardian has reported that some UK suppliers are on the brink after not being paid by Missguided, including a Leicester-based factory that is owed more than £2 million and forced to lay off 90 staff because he could no longer pay them. He claimed not to have been paid since April.

“This is completely unethical,” he told The Guardian. “I am absolutely disgusted.”

3 Jun, 2022
‘Big challenges ahead’: Jim Chalmers talks down the economy
Treasurer Jim Chalmers focused on inflation, falling real wages, rising interest rates and the cost of living at his first national accounts press conference.

Treasurer Jim Chalmers has reset the economic narrative, labelling a solid quarterly economic growth figure and booming national income as “weaker than expected”⁣ and warning of “big challenges”⁣ ahead for the economy.

Gross domestic product rose a respectable 0.8 per cent in the March quarter as the economy increased production of goods and services 3.3 per cent over the year.

Economists variously labelled the result “very strong”, “strong”, “solid” and “firm”, but Dr Chalmers used his first national accounts press conference to describe the result as “weaker” than the budget forecasts and “a snapshot of the really serious constraints and challenges that we have in our economy”.

Although he acknowledged that parts of the economy were “robust”⁣ and “resilient”⁣, including the unemployment rate at a 48-year low of 3.9 per cent, the treasurer sought to focus attention on the “big challenges”⁣ of inflation, falling real wages, rising interest rates and worsening cost of living.

He cited petrol prices – up 12 per cent since the end of April; wholesale electricity prices – up 237 per cent, and household power bills set to rocket; and gas prices – up more than 300 per cent over recent years.

3 Jun, 2022
Myer makes commitment to living wage
SOURCE:
Ragtrader
Myer has taken steps towards ensuring the payment of a living wage to garment workers

Myer has taken steps towards ensuring the payment of a living wage to garment workers.

Oxfam confirmed it has been actively engaging with Myer for five years, encouraging the brand to be more transparent as part of its 'What She Makes' campaign.

Myer has now published its factory list for its brands, including Miss Shop, Basque and Piper, and made a commitment to ensure a living wage is paid to the women who make their clothes.

A Myer spokesperson said it has been undertaking ongoing work in this area.

"We know how important ethical sourcing is to Myer customers and team members and that is why we continue to deliver against, progress and improve our established sourcing program. 

"This includes outlining our ongoing work in this area with our commitment to a living wage and factory information, ensuring an even more transparent supply chain."

Oxfam Australia’s 'What She Makes' campaign works with brands in Australia to ensure the women who make their clothes are empowered to live healthy lives through the payment of a living wage.

It has seen major brands in Australia such as Kmart, Target and Cotton On make commitments to pay a living wage.

Oxfam has stated that Just Group, which includes well-known brands such as Peter Alexander and Just Jeans, is yet to make a commitment to publicly list its factories.

Oxfam Australia is set to publish its annual Naughty or Nice list later this year.

Oxfam Australia Economic Justice Strategic Lead, Nayeem Emran commended Myer for its commitment.

“By taking this important step towards transparency, Myer has demonstrated a commitment to ensuring the payment of living wages – a universal human right for every working person around the world, including the women who make our clothes,” he said.

“Brands that fail to ensure the payment of a living wage are perpetuating a system that keeps women in poverty.

"We are proud to be building a movement that can’t be ignored and continue to work with brands and engage our supporters to improve the lives and wages of the women who make our clothes.”

3 Jun, 2022
Australians return to the malls despite a plunge in consumer confidence
Australians are returning to shopping malls as Covid fears subside

Australians are returning to shopping malls as Covid fears subside with Scentre Group reporting customer visitations up 12 per cent on 2021 levels during the first quarter. 

In an operational update filed with the ASZ, Scentre Group CEO Peter Allen said the mall operator saw “a significant increase in sales for our business partners, above pre-pandemic levels”.

Excluding CBD-located centres, mall foot traffic is up by 16 per cent. 

“We are seeing week-on-week improvement across our suburban and CBD based centres,” he said. Comparable sales of major retailers and specialty stores were up by 11.2 per cent in March compared to the same month in 2019, pre-Covid, and for the quarter were up by 7.1 per cent.

Scentre group’s figures came out on the same day as the latest consumer confidence data from Westpac shows a decline of 5.6 per cent to 90.4 points in May, which is back to lockdown levels, less than two weeks out from an election. It’s the worst figure since August 2020 when Victoria was suffering from Covid-related lockdowns. 

The confidence slump has been attributed to rising inflation caused by Covid and the war in Ukraine disrupting global supply chains, along with the Reserve Bank’s recent increase in interest rates, its first in 11 years.  

Meanwhile, Allen said Scentre Group’s portfolio occupancy remains strong at 98.7 per cent and demand from existing and new businesses looking for space was holding up. 

“We are confident about the future of our business, the sustained economic recovery across Australia and New Zealand and people’s ongoing desire to gather in our destinations, socialising with each other and interacting with businesses and brands across our platform,” said Allen.

“During the three months to March 31, the group completed 536 lease deals, including 237 new merchants, welcoming 50 new brands to the portfolio,” he said.

At the group’s Westfield Mt Druitt, a $55 million rooftop entertainment, leisure and dining precinct opened during the quarter. Over the first month of trading, customer visits and dwell time increased by 56 per cent compared to the same period last year.

Allen said the $355 million investment in Westfield Knox in Melbourne was progressing well with demolition complete and construction of the new structure underway. Pre-leasing progress was in line with expectations. 

“In light of the improving conditions and strong performance of our business, earnings are expected to grow in excess of 5.3 per cent in 2022.”

17 May, 2022
Woolworths, Wesfarmers bosses support wage rises as inflation bites
SOURCE:
The Age
Woolworths CEO Brad Banducci has backed a proposal to raise retail workers wages.

The chief executives of Australia’s two largest private employers have thrown their support behind an increase in workers’ wages amid persistently rising inflation and a tightening labour market.

Woolworths boss Brad Banducci and Wesfarmers managing director Rob Scott both made comments on Tuesday supporting wage rises, with Banducci backing calls from industry body the Australian Retailers Association for an increase in the minimum wage in line with the underlying rate of inflation.

Scott, who oversees the operation of major retailers Bunnings, Kmart and Target, told the Macquarie Australia Conference he expected to see rising wages “across the board” in the year ahead, something he welcomed in light of the rising level of inflation.

“From a Wesfarmers point of view, I see real wage growth as a very good thing. Real wage growth is a good thing for the economy, and if it’s good for the economy, it’s generally good for Wesfarmers,” he said.

Banducci, whose company employs about 200,000 Australians, was also supportive of wage rises, though noted that there was no “silver bullet” that would fix Australia’s inflation woes. The retailer said shoppers could be facing a double whammy of price rises from suppliers in the next 12 months.

“We’re very clear that while we need to deliver value for our customers, we also need to make sure that our team can have salaries and wages that keep pace with the underlying increase in the cost of living,” Banducci said.

The supermarket boss said so far around 40 per cent of the company’s supplier base had requested price increases, and the supermarket was in negotiation with an additional 20 per cent. At Woolworths’ third-quarter sales results on Tuesday, the company reported inflation across its food business of 2.7 per cent, lower than rival Coles’ 3.3 per cent.

“There are indications from some of our larger suppliers that within 12 months, they will come back for a second cost increase,” Natalie Davis, Woolworths’ head of supermarkets told analysts. “That’s really reflecting the ongoing cost pressures they’re seeing on commodity prices, manufacturing costs and international freight.”

Banducci’s remarks supporting wage rises are at odds with other retail bodies and fellow supermarket executives, with Coles’ boss Steven Cain warning last week of the danger of wages rising in tandem with inflation, as he called for an increase in immigration rates to offset rising prices.

The comments come as Woolworths reported a strong start to the new year, with sales from January to March rising 9.7 per cent across the business to $15.1 billion. This included comparable growth of 4.4 per cent at the company’s key supermarket division to $11.4 billion, ahead of analyst estimates.

Despite these strong sales results, Banducci said the quarter had been challenging, with floods, supply chain disruptions and high levels of COVID-related absenteeism hurting the supermarket’s standing with customers.

However, the company said trading had been strong so far in the fourth and final quarter of the financial year, with the business now focusing on “returning to a more stable operating rhythm.”

Costs relating to COVID-19 have continued to fall, coming in at $66 million for the quarter, with the business saying it is continuing to look at cutting additional pandemic-related costs where possible.

On Tuesday, the Reserve Bank raised interest rates by 0.25 percentage points to 0.35 per cent, the first-rate rise since 2010. Speaking ahead of the decision, Banducci would not comment on what this might mean for shoppers, saying instead the supermarket was focused on “delivering value for customers”.

Shares in Woolworths had gained 0.6 per cent on Tuesday by mid-afternoon but fell in line with the broader market following the RBA’s decision.

17 May, 2022
Temple & Webster takes fight to Bunnings with new online DIY store
SOURCE:
The Age
Home improvement is a “natural extension” for Temple & Webster, says CEO Mark Coulter

Online furniture retailer Temple & Webster is moving into the home improvement and DIY market with an online store aimed at challenging the dominance of Australia’s biggest hardware chain Bunnings.

The company plans to spend $10 million over this financial year and the next establishing The Build, an online store selling home improvement products such as ceiling fans, lighting fixtures, bathroom vanities and wallpaper. Further categories, such as tools and building equipment, will be added over the coming months, Temple & Webster told its shareholders on Wednesday morning.

The retailer announced the plans as it updated shareholders on its trading performance through the second half of the 2022 financial year so far, with sales up 23 per cent for January through to the end of April. The company expects its earnings margin to be around 3 per cent for the full year.

Investors weren’t impressed, sending the stock down 6.7 per cent to $5.04 in late afternoon trade.

The expansion into home improvement is a notable deviation for the online furniture retailer, which has established itself as a significant player in Australia’s home goods market during the pandemic, thanks to a boom in demand for home office equipment such as desks and office chairs.

Chief executive Mark Coulter said the move was a “natural extension” for the ASX-listed business as Australians were drawn to home improvement projects.

“Australia is a country of home renovators, we love our homes, and we love making them more beautiful,” he said. “We believe our expertise in ecommerce and the home will help make The Build become Australia’s first-stop shop when it comes to renovating and redecorating.”

The market for online improvement in Australia could be worth around $16 billion and the category was yet to make its mark online, with just 4 per cent of DIY shopping happening online compared to around 25 per cent in the UK, the company said.

Investors were sceptical, with RBC Capital Markets analyst Wei-Weng Chen saying the company’s sales were tracking well below estimates and that shareholders would look upon the launch of The Build with caution.

“While the total addressable market, margin opportunity and online-penetration story for the home improvement category looks attractive in the medium [and] longer term, we expect the market to approach the launch [...] with an element of caution, given the current macro headwinds facing the Australian property market,” the analyst said.

The company will also face a tough job when squaring off against Wesfarmers’ Bunnings juggernaut, which - despite only recently launching an online store - holds around 50 per cent market share for home improvement in Australia.

Perhaps in recognition of this, Temple & Webster said it doesn’t expect The Build to make a material contribution to its overall sales and earnings for the first four years. However, it expects the long-term-margins for the business will be better than its furniture and homewares category.

17 May, 2022
JB Hi-Fi boss says interest rates no concern as sales soar
SOURCE:
The Age
JB Hi-Fi chief executive Terry Smart

The boss of national retailer JB Hi-Fi has said he doesn’t believe rising interest rates will affect spending at his electronics chain as phones, laptops and tablets have become essential purchases for many consumers.

JB chief executive Terry Smart told the Macquarie Australia Conference on Wednesday that many of the products sold by the ASX-listed retailer were now “integral” to people’s lives, and that he didn’t expect consumer spending to falter even as cost of living pressures increase.

“A lot of our categories ... are becoming less discretionary. People can’t live without it, it’s such an integral part of their lives that they’re continuing to buy,” he said. “We’re still going to see that, I would like to think, during [rising interest rates].

“And if it’s really going to get tough, we’re a discount retailer. Customers trade down to where they absolutely know they’re going to get the best deal, and that’s going to be both JB and The Good Guys.”

Smart’s comments come as JB Hi-Fi reported continued strength in its sales for the first four months of the new year, with trade at its Australian business increasing 11.9 per cent from January through to the end of April.

Revenue at the Good Guys was also up, gaining 5.5 per cent for the period, and the company’s historically troubled New Zealand business also performed well, increasing sales by 4.8 per cent. Morgans analyst Alexander Mees said JB Hi-Fi’s result was the best third-quarter result out of the major retailers so far.

“The evidence from discretionary businesses like JB, Breville and Super Retail yesterday paints a more positive picture of consumer spending in the face of rising inflation than share prices would have you expect,” he said.

“It wouldn’t be the first time the stock market has underestimated the resilience of the Australian consumer.”

However, despite this, JB Hi-Fi’s shares fell 4.3 per cent to $49.95 by mid-afternoon on Wednesday, as the company also warned investors about supply chain delays and inventory availability moving into the last quarter of the financial year.

Retailers across the board have warned about the effects of rising inflation, with both heads of major supermarkets Coles and Woolworths warning that customers could expect the price of their weekly shop to increase notably.

However, this was not the case for Smart, who said while JB had seen price increases flow through from suppliers over the last six months, the hikes were largely “hidden” in consumer electronics as manufacturers roll out new models that are naturally priced higher.

“[Inflation] is not going to impact our promotional activity going forward because we buy from multiple suppliers, they all compete against one another as well,” he said.

Smart also warned that JB’s famously low cost of doing business could take a hit in the months ahead as more and more customers return to shopping in-stores, requiring the retailer to spend more on staff to ensure service levels are up to scratch.

17 May, 2022
Alquemie Group snaps up General Pants Co – and its CEO
General Pants Co has been bought by Alquemie Group

Australian casual youth apparel retailer General Pants Co has been bought by Alquemie Group, the retail investment platform of private-equity company Acta Capital. 

General Pants Co CEO Sacha Laing will take on the role of group CEO at Alquemie and current shareholders including Victor Smorgon Group, Phil Staub and Jackie Vidor, have agreed to reinvest “a significant portion of their proceeds” into Alquemie, the company said in a statement. Laing has previously held leadership roles at Colette, Country Road Group and David Jones. 

Founded in 1972, General Pants Co sells brands including Lee, Subtitled, Ksubi, and Tommy Jeans through a network of 60 stores across Australia and New Zealand. The company will join Lego Certified Stores, Ginger & Smart, SurfStitch and Pumpkin Patch in Alquemie’s rapidly growing portfolio, with further acquisitions planned. 

Acta Capital founder and CEO Richard Facioni said the acquisition gives Alquemie “significant scale and breadth of operations” as it seeks to partner with “exceptional, like-minded management teams to build great businesses”.

“General Pants Co is highly complementary to our existing portfolio and positions Alquemie for continued growth as we build a leading multi-channel retail investment business,” he said in a statement. 

Laing described it as a privilege to join Alquemie at a pivotal time and said she was looking forward to working closely with Facioni.

17 May, 2022
Big W launches toy recycling program through its entire network
Big W has partnered with recycling platform TerraCycle

Discount department store Big W has partnered with recycling platform TerraCycle to launch a toy recycling scheme in all 176 stores nationwide.

After a trial in limited stores, the retailers’ Toys for Joy program collected over 18 tonnes of old toys.

The two companies say around 26.8 million toys are discarded in Australia every year, the majority placed in normal rubbish as they are not kerbside recyclable.

Big W MD, Pejman Okhovat says the program aims to reduce the number of toys that end up in landfills.

“Toys for Joy provides parents peace of mind knowing that as they declutter, they are disposing of old toys in a manner that helps to reduce landfills,” he said.

Jean Bailliard, GM of TerraCycle Australia, has praised Big W for providing an in-store recycling solution for parents.

“The program not only saves worn-out toys from landfill, but our recycling process also takes complex materials like metal, rubber and a variety of plastics and turns them into new materials for reuse.”

The program has also received praise from the environment minister, Sussan Ley. She said initiatives like Big W’s will change the national conversation around recycling.

Big W customers are encouraged to drop their pre-loved toys in the Toys for Joy chest placed in front of all Big W stores. Books, stationery, paintbrushes, playdough, board games, batteries, or oversized and wooden toys are not accepted.

17 May, 2022
Adidas lowers 2022 expectations amid China lockdowns
Adidas lowered expectations for 2022

Adidas lowered expectations for 2022 after a first-quarter slump as renewed Covid-19-related lockdowns in Greater China continue to hit the German sportswear company.

First-quarter currency-adjusted sales shrank by 3 percent worldwide, to 5.3 billion euros ($5.58 billion), while profit from continuing operations fell 38 percent, to 310 million euros, it said on Friday.

In Greater China, sales collapsed by 35 percent in the first quarter; for the year, revenue is expected to fall significantly due to store closures and strong traffic declines.

The company now expects to come in at the lower end of its 2022 forecast for an 11-13 percent increase in currency-neutral sales as well as for net income from continuing operations of between 1.8 and 1.9 billion euros.

Adidas also cut its operating margin forecast, saying it will remain at the previous year’s level of 9.4 percent instead of increasing to 11 percent.

“In this environment, characterized by severe external challenges, it is imperative to stay focused on our strategic objectives,” said Chief Executive Kasper Rorsted.

“While we will remain agile, we will not jeopardize our long-term growth opportunity for short-term profit optimization.”

The company expects a return to growth in the second quarter despite the continued sales decline in Greater China and a 200-million-euro negative impact from supply chain constraints.

In the second half of 2022, net sales are expected to grow over 20 percent, driven, among other things, by unconstrained supply, strong momentum in Western markets and major sports events.

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