News

Priceline Pharmacy owner API has reported a 4.1 per cent increase in Group revenue to $4.0 billion, as the flagship health and beauty retailer saw like-for-like sales return to growth. 

API reported net profit after tax of $56.6 million, up 17.4 per cent on the prior corresponding period, as its businesses reported growth in market share.

Priceline Pharmacy, Consumer Brands and Clear Skincare all reported growth in market share and contribution while its Pharmacy Distribution business had solid cash generation and stable market share. 

“Our core business performed to expectations, with Priceline Pharmacy reporting improving like-for-like sales growth throughout the year and Pharmacy Distribution holding market share in a competitive environment,” API CEO and managing director Richard Vincent said in the results announcement on Thursday. 

The Group’s net debt levels however increased from $55.9 million to $199.1 million over the year to August 31 due to the costs of purchasing a 12.95 per cent stake in Sigma Healthcare, an investment in Consumer Brands inventory and investing in Clear Skincare clinics. 

Since the acquisition of Clear Skincare, API has expanded the network to 52 clinics. 

Priceline Pharmacy’s total network sales for the period were up 2.4 per cent to $2.2 billion. 

Vincent said a lot of focus has been put on the timing and attractiveness of Priceline’s promotional offers, alongside major product launches and category development initiatives which proved popular with customers and drove increased footfall.

The store network grew by a net 13 stores during the year to 488 in total. While the franchise network grew, the number of company-owned stores reduced by seven during the year where the company believed high rental prices were not justified.

Vincent said the Group remains focused on delivering its core strategy.

“While we have demonstrated our ability to return to positive retail sales, consumer confidence is expected to remain soft and we continue to adjust our cost base accordingly to deliver profit growth,” Vincent said.

He expects performance during the year will initially be determined by the sales over the Christmas trading period and said the resolution of the 7th Community Pharmacy Agreement negotiations remain important.

Kogan Mobile active customers rose 14.4 per cent – compared with 24.4 per cent growth in the previous three months and 103 per cent growth in the September quarter last year –  boosting mobile revenue more than 20 per cent.

Kogan Internet customers rose 347.5 per cent after 273 per cent growth in the June quarter and Kogan Insurance customers rose more than 20 per cent.

Gross sales on Kogan Marketplace, which was launched  in March, surged to about $23 million, up from $12 million in the June quarter.

Australian brands Barney Cools and Platypus Shoes have teamed up to launch Barney Cools' first range of sneakers exclusively through the footwear retailer.

The new sneaker collection from the apparel brand reflects its laid-back, summer style and comes in both low-cut and hi-top styles, with the Barney Cools website calling the collection: Poolside Sneakers. 

Key features of the line include extra sole thickness, lightly waxed laces and a cotton canvas outer. 

The range will also be complemented by a selection of especially designed Barney Cools accessories including a hat, socks and a side bag. The accessories will also be exclusively sold at Platypus. 

Platypus head of marketing Tia Paterson said Platypus is thrilled to bring Barney Cools' first sneaker collection to consumers. 

"We’re so excited to bring Barney Cools’ first footwear range exclusively to Platypus Shoes customers. 

"There is a natural synergy between our two brands, and we are confident this will be the first of many Barney Cools collections," she said. 

The Barney Cools sneaker collection comes in a range of colours: White, Black, Summer Yellow, Seagrass, Pink and Indigo, and will retail for $99 a pair in select Platypus Shoes across Australia.

Bedding, linen and homewares group Adairs is the latest retailer to complain of a slowdown in trading over the first quarter, although the company is clinging to its forecasts for 2020.

The outlook emerged as the company recorded protest votes at its annual meeting over the re-election of directors and the awarding of executive options.

Chief executive Mark Ronen told the AGM there were a number of pressures on the retailer, such as currency movements, but that it was planning for the key Christmas period and managing its supplier networks to safeguard margins.

However the company had recorded a slowing of like-for-like sales growth since July.

“Turning now to the new financial year. Trading for the first 16 weeks of fiscal 2020 has delivered like-for-like sales growth of plus 3.3 per cent with stores sales plus 0.8 per cent and online sales up 16.6 per cent,” Mr Ronen said in his CEO address.

“Whilst this represents a slight slowing in like-for-like sales growth, our clear focus in the current environment, particularly against a backdrop of continued AUD/USD weakness, has been on growing our like-for-like gross margin dollars.

“We are pleased to report that by working with our product suppliers and managing our discounting and promotional activity levels we are making good progress on this.”

In 2019 Adairs recorded like-for-like store sales growth of 7.25 per cent.

At this stage Adairs is sticking to earnings guidance.

“Our key sale periods, including Christmas, lie ahead of us and we are well placed in terms of planning and inventory to deliver our customers with the product and experience that they have come to expect from us during these important periods.

“Given this, and having regard to the year to date performance, the board remains comfortable that the fiscal 2020 guidance previously provided remains appropriate.”

For 2020 the company has forecast sales of $360 million to $375 million and earnings of $43 million to $46 million.

Friday’s AGM saw some investor angst over the re-election of Adairs directors and the allocation of long term incentive options to a key executive.

Of the four Adairs directors up for re-election, three scored a “no” vote of 19 per cent and the fourth had 20 per cent of lodged proxy votes voted against them. There was also a 20 per cent vote against the awarding of executive options.

Meanwhile investors remain nervous as the AGM season plays out and retailers provide updates on trading for the first quarter.

Earlier this month furniture group Nick Scali’s shares were crunched by almost 20 per cent after it warned of a slowdown in sales for the quarter.

While there may not have been a loss in the Myer case because the market consensus was markedly lower than the company's guidance, typically market consensus closely follows profit projections provided by companies.

The landmark case is the first time a shareholder class action has gone all the way to judgment.

On Thursday, during a call with reporters, Amazon executives declined to answer any questions concerning regulation.

"I have nothing to report on that," chief financial officer Brian Olsavsky said.

Revenue for the quarter beat expectations, rising 24 per cent to $70 billion. The third quarter included Amazon's made-up sales holiday "Prime Day", which has become one of the company's biggest shopping events of the year.

Amazon has also increased its staff numbers. It had 750,000 worldwide employees at the end of September, up nearly 100,000 from the previous three months. Besides adding workers in its warehouses to pack and ship boxes, the company has been hiring more software engineers and salespeople for its cloud business. Amazon is the second-biggest US-based private employer, just behind rival Walmart.

For the current quarter, which includes the holiday shopping season, Amazon expects revenues between $US80 billion and $US86.5 billion. That's below the $US87.4 billion analysts were forecasting.

Demand also picked up in New Zealand, with same-store sales rising 3.8 per cent in the first quarter after falling 0.3 per cent in July and rising 1.9 per cent in the June quarter.

Momentum also improved at The Good Guys, despite sluggish demand for appliances, with same-store sales down 1.8 per cent in the first quarter after falling 3.4 per cent in July.

The trading update came as a relief to investors following profit warnings last week from Nick Scali and radio network owner Southern Cross. JB Hi-Fi shares rose 6 per cent to $36.22, taking gains this year to  68 per cent.

"We have all our ducks in a row to make sure we execute Christmas well."

— Richard Murray

Mr Murray reaffirmed guidance for total sales to grow 2.2 per cent to about $7.25 billion this year – $4.84 billion from JB Hi-Fi's Australian stores, $240 million from New Zealand and $2.18 billion from The Good Guys.

This follows a 3.5 per cent increase in sales to $7.09 billion and a 7.1 per cent rise in net profit to $249.8 in 2019.

Mr Murray gave no profit guidance, saying the company preferred to trade through Christmas before giving earnings guidance.

"[The first quarter] is nice but the Christmas quarter is mission critical – we have all our ducks in a row to make sure we execute Christmas well," he said.

"In JB Hi-Fi and The Good Guys, we believe we have two unique and relevant brands, particularly in the eyes of our customers.

"With a customer-focused business model built on a diverse product offering, deep relationships with our suppliers, a high-quality multi-channel offer and exceptional customer service, we are confident we will maintain our market leading competitive position."

The retailer avoided a first strike against its remuneration report, even though proxy advisory firm ISS Governance Services and the Australian Shareholders' Association recommended shareholders vote against it, citing "inferior" disclosure and lack of performance conditions for a new "variable reward" incentive scheme.

About 17.3 per cent of shares voted were against the remuneration report – just short of the 25 per cent needed to record a first strike – after a 21.7 per cent protest vote in 2018.

About 17 per cent of shares were voted against the issue of  51,723 restricted shares to Mr Murray under the variable reward plan, which combines long and short-term incentives in an attempt to simplify remuneration.

Mr Murray said the board was comfortable the variable reward program was "fit for purpose" but would take on board shareholder feedback.

Shares in Temple & Webster, once known as the worst float of 2016, rose 3.8 per cent to a record $2.03, taking gains this year to 103 per cent.

Tommy Hilfiger has announced the appointment of Michael Scheiner as CMO of Tommy Hilfiger Global.

The appointment comes as founder Tommy Hilfiger prepares to head down under for a press visit, with a conference planned on November 14.

Scheiner has amassed over 15 years of experience at global brands and joins Tommy Hilfiger from Hollister Co.

During his time in the marketing team, his work helped to move Hollister into the top five brands among teens in Piper Jaffray’s Fall 2019 Taking Stock survey.

Scheiner, who also helped position the brand as a top omnichannel retailer, will aim to do the same at Tommy Hilfiger in the field of digital and experiential platforms.

Tommy Hilfiger CEO Daniel Grieder said new initiatives are vital to stay ahead.

“We are thrilled to have Michael join our world class marketing organisation and believe he will help fuel our ongoing digital transformation, enable us to respond strategically to new disruptions, and position Tommy Hilfiger as a leader amongst its competitors.”

Scheiner will relocate to the Tommy Hilfiger global headquarters in Amsterdam, the Netherlands with his family.

“It is an honor to join such an iconic global brand,” he said “The innovation and leadership Tommy Hilfiger has shown from its earliest beginnings is inspiring. I am excited to work closely with Tommy, Daniel and the company’s talented marketing teams around the world to write the next chapter as Tommy Hilfiger celebrates its 35th anniversary next year.”

Respected retail strategist Danny Lattouf has left VMLY&R to join The General Store as partner and chief strategy officer. 

Started by Matt Newell in 2012, The General Store is a specialist retail innovation agency that advises The Iconic, Freedom, Supercheap Auto and Marley Spoon, and recently signed Jaycar, Shoes & Sox, Burger Urge, Salvos Stores and Amber Tile.

Lattouf brings nearly 20 years’ retail experience to the role, having served as managing director of Ideaworks and regional head of retail in ANZ at VMLY&R for the last five years and head of retail marketing at Microsoft prior to that. 

While at VMLY&R, he worked on several award-winning store design and experience projects, including Myer’s ‘Wonderland’ and Rebel’s ‘Accelerate’ concepts. He joins The General Store as the Sydney-based agency gains momentum. 

“Danny’s got an infectious passion for retail and a unique ability to lead teams across multi-disciplinary projects,” said Newell, The General Store’s CEO, about the appointment. 

“He’s exactly the kind of talent that future-focused retailers are looking for.”

With Lattouf onboard, The General Store has its sights set on major transformation projects, such as the ones that Kmart and Supercheap Auto recently have undergone. 

“Retail is a tough market at the moment but there are some fantastic retailers out there stitching together really inspiring and holistic customer experiences and getting great results – like The Iconic, Supercheap Auto and Harris Farm,” Newell told Inside Retail. 

Other retailers are responding to the challenges in commercially creative ways, by forming partnerships with unrelated brands, for instance, or delivering products and services that customers didn’t dream of, let alone need or want. 

“The testing and trialing of such things is what is exciting for me personally,” Lattouf told Inside Retail, “beyond nice press statements, getting the right ones to land and stick will be where the true impact will be.”

Both Newell and Lattouf agree that a successful retail experience today is as much an art as it is a science, and customer research can only get you so far. 

“We use research as a critical tool but too much of it can create circular processes that deliver very predictable outcomes,” Newell said. 

“There comes a time where retail executives have to take a leap of faith and just innovate. That’s the art of retail.”

Lattouf added: “One thing I’d love to be discussed more is empathy. Beyond customer centricity, empathy isn’t just about getting out of the customer’s way and making things easy, it’s about true understanding – beyond research. 

“When empathy is applied, we can start talking (and acting) more confidently when it comes to culture and creating some friction for our brands…we have to be careful not to get so customer centric that we disappear into a sea of other brands.” 

Lattouf’s departure from VMLY&R, which was formed earlier this year through the merger of VML and Y&R, is just the latest in a string of high-profile exits from the agency, which is part of WPP AUNZ.

Sixty years after helping launch the first Westfield shopping centre in Blacktown, Frank Lowy has sold off his shares in Scentre Group, finalising his exit from the Australian retail market. 

The Lowy family’s 206.1 million shares sold for approximately $815 million to investment bank UBS, which went on to offer the shares for a 1.3 per cent discount on Wednesday’s closing price of $4.01, according the AFR.

Shares in Scentre Group fell 2.5 per cent on Thursday morning, sitting at $3.91 a share at the time of publication. 

The 87-year-old founder retired as chairman of Scentre Group in 2015, and from the role of chairman of Westfield Corporation in 2018, stating the decision was both frightening and a great relief. 

“All my life from a young man I have worked very hard and I enjoyed it very much, [but] I was really afraid with what I would do when I no longer had the responsibility,” Lowy said at a business conference in Sydney.

“And then the day came and I felt great relief instead of all those fears that I had – they all disappeared.

“It’s time to retire for me – if there is such a thing.”

Scentre Group and UBS have been contacted for comment. 

The property group also announced on Wednesday that chief operating officer Greg Miles would retire in 2020 after 23 years in the business. 

As a response, Scentre Group stated it would flatten its management structure. 

“Greg has been an invaluable member of the Scentre Group and Westfield executive teams for a significant period, the last four as Scentre Group’s chief operating officer where he has helped to shape a new organisation, brand and culture,” Scentre Group chief executive Peter Allen said. 

“We have been fortunate to have benefitted from Greg’s unparalleled experience, insight and judgement.”

Troubled department store giant Myer may break its unwanted streak of investor strikes at its annual general meeting (AGM) later this month, with some of the country's largest proxy advisory firms endorsing the pay packets of top executives including CEO John King.

Both ISS Governance and Glass Lewis have green-lighted the company's remuneration report, which outlines the pay deals for top executives. The Age and The Herald have also been told by well placed sources that prominent advisory firm Ownership Matters has also advised its clients to vote for all resolutions at the Myer meeting.'

These three firms also approved the company's remuneration report at Myer's fiery 2018 meeting which saw the retailer face a rare board spill after shareholders voted against the pay deal. But company sources are hopeful this year's AGM will be more subdued with the retailer recently returning to profitability.

At its AGM last year, 37.49 per cent of shareholders issued a protest vote against the company's report, instigated by majority shareholder and Premier Investments Chairman Solomon Lew.

This followed a similar vote in 2017, where Mr Lew convinced 29.3 per cent of shareholders to vote against the report.

Under federal laws if over 25 per cent of shareholders vote against a company's remuneration report for two straight years a spill vote is held to reelect the entire board.

Despite Myer receiving a rare second strike last year, the subsequent spill motion at its last AGM failed to reach the 50 per cent benchmark. The motion was backed by 35.90 per cent of shareholders as other major investors Investors Mutual and Wilson Asset Management continued to support the board.

Mr Lew has been a prominent critic of Myer ever since he acquired a majority stake in the retailer for $101 million at $1.15 a share in early 2017, an investment which has since halved in value.

He has been pushing to appoint new directors to Myer's board, which he believes are "an absolute disgrace" and "clueless", though has likened current chief executive John King to a decent jockey riding a poorly trained horse.

ISS and Glass Lewis both pointed to the efforts made by the Myer board to restructure its remuneration as a sign the company has listened to shareholders' demands.

These changes include a re-jigging of short-term incentives to be share-based rather than in cash, and a switch up of the comparison group of companies Myer uses to judge its long-term incentive hurdles.

Retailers such as JB Hi-Fi, Coles, Wesfarmers, Woolworths and Mr Lew's own Premier Investments are now included in the group.

"We have listened to shareholders and have made a number of changes to our remuneration structure during 2019 to better align the remuneration of our executives with the interest of our shareholders," chairman Garry Hounsell said last month.

Myer also posted its first profit growth in nine years at its 2019 financial year results, with underlying profit before one-off costs up 2.2 per cent to $33.2 million, a vast improvement on last year's $494 million loss.

This was despite a continued fall in sales, with much of the profit coming from significant cost-cutting. Regardless, shareholders were buoyed by the news, with shares soaring over 15 per cent.

Mr Lew himself has been uncharacteristically quiet on Myer, not engaging with questions about the retailer at Premier's own end-of-year results other than to say he could see some "green shoots" emerging.

Yet while ISS and Glass Lewis both recommended shareholders vote for the remuneration report, they both raised questions over Mr King's high level of fixed remuneration, which sits at $1.2 million.

Glass Lewis warned this was 104 per cent higher than fixed pay for comparable retail chief executives, but Myer defended King's salary, saying the company was competing for talent in a "very small pool" and the high salary package was necessary to attract and retain strong talent.

"While some shareholders may question the substantial quantum of the MD/CEO's fixed remuneration, in our view, the company has given an adequate explanation of its level," Glass Lewis said.

"We understand the need to attract highly capable executives in the face of challenging market conditions and the turnaround period that the company is undergoing."

P.E Nation will make half of its range more sustainable by the first quarter of 2020.

Dubbed 'The Conscious Nation', the intiative will see the brand implement a range of environmental strategies across production, packaging and delivery. 

It will follow the release of its first ever recycled athleisure set tomorrow. 

P.E Nation is set to drop an additional seven sustainable pieces in October 2019 as part of the Q4 launch.

This next instalment will consist of the ‘Flex It’ set, along with two new sports bras and three leggings, incorporating sustainable and recycled materials.

In addition to fabric-based improvements, P.E Nation is transitioning all packaging to be fully recyclable by the end of 2019.

Already using compostable envelopes and satchels, the brand will also use recyclable cardboard boxes and drawstring bags made from rPET (material made using recycled PET plastic) to further reduce their environmental impact.

The brand has re-designed all swing tags and labelling, which will come into effect by late 2019.

Recycled cardboards and post-consumer waste plastics (rPET) will be introduced for all swing tags, while woven and care labels will be comprised of 100% recycled polyester yarns.

Heat press printing will be introduced by Q1 2020 to further reduce environmental impact.

P.E Nation’s patches also will be made from recycled materials, appearing on the sleeves of jackets and sweats throughout the range.

P.E Nation is part of a group that is an AB member of SEDEX - an organisation dedicated to driving improvements in ethical and responsible business practices in global supply chain and Amfori Bepi - which provides a range of services that enable companies to drive focused, environmental improvements in their supply chain, and to trade with purpose.

Tomorrow, the brand will launch its first ever recycled athleisure set.

The 'Strike Set' is made from sustainable techno-fabric, ‘Vita Power by Carvico’. 

In addition to performance fabric attributes, Vita Power by Carvico is made of econyl regenerated nylon.

Econyl uses synthetic waste such as fishing nets to generate a new nylon yarn. 

It is not the brand's first initiative in this space, having launched a range of organic cotton tanks and tees in July 2019.

Co-founder Pip Edwards said this is a longstanding commitment. 

“As a brand, we are deeply committed to our people and the planet. The ongoing development of our social and environmental strategy is of great importance. 

"Our goal is to implement social and environmental practices across the whole business to ensure that we are delivering conscious fashion all the way from the supply chain directly to the customer.” 

Tim Reed, the former long-time boss of tech firm MYOB, is set to become the president of the Business Council of Australia, highlighting the growing influence of the modern economy on the nation’s big firms.

Mr Reed has been unanimously recommended by the BCA’s board to replace Grant King, who is stepping down after three years in the role, and as such is expected to be endorsed at the BCA’s AGM on November 20.

Mr Reed said he is “honoured and privileged” for this opportunity, having joined the board of the peak group for large businesses in 2017.

“The key thing for the BCA is to continue to prosecute the case that a competitive economy is what allows all Australians to prosper,” Mr Reed told reporters ahead Friday’s formal announcement.

He believes the top three challenges facing business and the BCA are skills shortages, regulation and the tax system.

He said state and federal governments must have the right policies in place for skills both in terms of migration and the education system.

Regulation must also help Australia to be competitive and not be stifled by red tape, while the tax system must encourage investment, particularly business investment.

He said it is important that company taxes continue to be examined, but acknowledged the government won’t return to the issue of reducing the 30 per cent tax rate for big business in this term.

However, he said in a majority of Australia’s 28 years of uninterrupted economic growth the company tax rate was below the OECD average but is now in the top quartile.

“I think believing we are going to have decades of economic growth while our company tax rate sits in the top quartile is naive,” Mr Reed said.

“We intend to make sure it remains on the agenda.”

However, Mr Reed does not believe the federal government should jump in with a round of stimulus measures in the face of a slowing economy.

“You have got monetary policy, you have fiscal policy and then you have regulation. We think the focus should be on the third of those,” he said.

He said the government has worked hard to get a surplus and won an election promising one and should be allowed to prosecute those policies it took to that poll.

But he is not impressed by the government’s so-called ‘big stick’ legislation that would force energy firms to be broken up if they fail to deliver cheaper energy prices.

He said the BCA has already spoken openly against forced divestments, believing it won’t bring down power prices while creating sovereign risk.

“We also acknowledge the government took that policy to the electorate. Therefore we are trying to ensure that the legislation is framed in a way that it does the least harm that it possibly can,” Mr Reed said.

Retail landlords face the prospect of more tenants going to the wall as online sales grow faster than many retailers can reconfigure their sites to respond, rendering stores unprofitable and making them likely to close, consultancy EY warns.

Online will account for 19 per cent of Australia's retail sales by 2021, up from 7 per cent in 2016. But the greatest pressure for retailers and the landlords who accommodate them will come from demands for shorter delivery, said Martin Conneally, EY's global and Asia-Pacific logistics and fulfilment capability leader.

"While delivery times of seven and ten days may be seen as OK for some products, over the next year or two, next day is going to be the minimum acceptable offer for most retailers," Mr Conneally said in an interview.

“But real competitive advantage will come with same day delivery, or even better, delivery under two to four hours.”

The disruption of traditional retail was made starkly apparent this week with the purchase by Dexus of the 25,770 square metre large-format Homemaker Prospect retail centre near Blacktown in Sydney. It plans to turn the retail facility into an industrial property.

The scenario of changing retail demands painted by Mr Conneally suggests suburban Australia could see a similar level of disruption if traditional sites cannot meet changing demands.

The changing environment was already forcing retailers to reconfigure stores in strategic catchment areas of large cities – such as Geelong, Brighton, Brighton, Clayton and Musgrave in Melbourne, and Sydney's northern beaches, Alexandria, and Homebush – to reduce the front-of-store space available to displace stock for browsing customers and expand the back-of-store space to make it a logistical centre to enable fast local delivery, he said.

The country's largest supermarkets were already doing it, he said.

"It’s what we call a mini-fulfilment centre," Mr Conneally said.

"Woolworths have come out calling them 'micro-fulfilment centres'. Coles describes them as ‘dark stores’ based on the Tesco model."

But such a change in space configuration - which will be forced rapidly as online delivery expectations rise - would reduce the volume of walk-in sales for many retailers, he said.

"It needs an agility that most businesses cannot deal with," Mr Conneally said.

In most retail chains between 7 per cent to 15 per cent of stores were already unprofitable, but were kept open for strategic reasons or even basic ones such as being unable to get out of the lease. If those stores lost more of their retail footprint for the purposes of online fulfilment, they would become even more unprofitable and some stores that were profitable would also become unprofitable, he said.

"We’re on the brink of quite a few more retailers going through this administration process," he said.

"A lot of them. They’re reflective of stores becoming more unprofitable as they deal with competitive cannibalisation, whether dilution of store profit or through having to be servicing online orders through distribution centres."

Glassons will open its first vintage concept store at Robina Town Centre (QLD) today.

The site will include a Curated Vintage section, featuring items sourced from pre-loved markets globally, including vintage Levi's.

It comes amid a growing second-hand clothing market boom. 

Gumtree's 2018 Second Hand Economy Report revealed that 1.3 million Australians joined the $34 billion second hand sub-industry last year.

Glassons 300sqm store will also feature its full range of fashion, footwear and accessories as well as tech-first additions. These include digital jukebox CrowdDJ and click and collect.

Glassons operates 65 stores in Australia and New Zealand.

The Reject Shop has announced a 0.3 per cent year-on-year increase in same-store sales for the first 15 weeks of FY20, its best Q1 comparable sales performance in four years.

“While only in the early stages of our turnaround, I’m pleased to communicate a return to positive comparable sales,” Dani Aquila, the discount retailer’s acting CEO, said in a trading update on Wednesday. 

The uplift comes after a 2.5 per cent decline in same-store sales in the second half of FY19. The retailer ultimately posted a full-year loss of $16.9 million including a $15.4 million write-down on the value of its assets and goodwill.

The Reject Shop attributed the poor performance to its decision to deviate from low-priced everyday items, which led to a drop-off in footfall and transaction values. Full-year sales were down 0.8 per cent at $793.7 million, despite a net increase of six stores. 

The business also has faced a leadership gap, with CEO Rob Sudano departing in May. Since taking over as acting CEO, Aquila has focused on returning The Reject Shop to its core focus as a discount variety retailer.

“We need to continue to focus on established discount categories. Going forward, this means a substantial investment in non-discretionary and low-priced accessory based categories that provide easy solutions for customers,” Aquila said at the AGM on Wednesday.

“A further tactic will be to promote increased deals that offer our customers substantial discounts on well-known and established brands. 

“This will naturally combine with reinforcing our value proposition through product placement, pricing and promotions.”

Aquila said the business would focus on lower and simpler prices, increase its investment into popular selling categories and expand its range to appeal to a younger demographic for the rest of FY20. 

Chairman Steven Fisher, who took over from former chairman Bill Stevens who stepped down in August, said the company also would take a more aggressive approach to occupancy costs.

“It is not sustainable that rental increases are running at between 2 and 3 time the CPI index, in an environment of low wage growth and record low interest rates,” he said at the AGM.

“The company will have no hesitation in exiting leases where the occupancy costs do not meet our rent to sales criteria. This approach may see further store closures, and in some cases relocation to more affordable opportunities.”

The retailer said on Wednesday that the selection process for the next CEO is well advanced and that it expected to make an announcement in the next six to eight weeks.

Investors in stocks exposed to discretionary spending are bracing for a series of profit warnings amid growing evidence record low interest rates and tax cuts have failed to convince shoppers to pry open their wallets.

The consumer malaise struck furniture retailer Nick Scali and radio network owner Southern Cross, which both suffered large share price falls on the back of profit warnings.

The first downgrade since reporting season came from furniture retailer Nick Scali, which warned on Tuesday net profits could fall as much as 32 per cent in the December half following a sharp slump in sales over the past few months.

Chief executive Anthony Scali said monthly store sales were down by 10 to 15 per cent between July and October, dragging same-store sales down by 8 per cent. Same-store sales grew 2 per cent in the first quarter 2019 but fell in the fourth quarter.

As a result, the company expects net profit for the six months ending December to fall by between 24 per cent and 32 per cent to between $17 million and $19 million.

Shares in the former market darling fell by as much as 21.6 per cent to $5.64 before closing down 14 per cent at $6.21.

The shares are now trading well below the level at which Nick Scali's largest shareholder and major supplier, Chinese furniture company Jason Furniture (Hangzhou) Co Ltd, sold its entire 13 per cent stake in a block trade last month.

Jason, better known as KUKA, sold its shares through UBS at $6.85 a share to institutional investors including  Perpetual Investments and Airlie Funds Management (now Magellan).

Mr Scali sold KUKA half his 27 per cent stake for $7 a share in March 2018, saying the strategic stake would help the retailer realise its growth strategies.

He  blamed the fall in sales over the past few months on slowing housing sales, weaker renovation activity and a generally cautious consumer attitude.

"With lower interest rates and signs of improvement in the number of housing transactions recently, Nick Scali believes this may translate to a lift in sales in the second half," he said.

The profit warning dented demand for other consumer stocks, with Harvey Norman shares falling 6 per cent to $3.97, JB Hi-Fi by 4.5 per cent to $33.06 and Super Retail Group by 3 per cent to $9.02.

Lighting retailer Beacon appears to have fared slightly better, telling shareholders at its annual meeting on Tuesday that sales momentum in its core business had improved in August and September after same-store sales fell 2.3 per cent in 2019. However, Beacon shares slipped 2 per cent to $1.13.

"Beacon Lighting remains closely aligned to the housing sector and anticipates improved housing sales volumes and renovation expenditure in the future to support sales and profit growth in the core business," CEO Glen Robinson said.

Southern Cross Media shares fell 23 per cent to their lowest level since 2014 after the  company blamed the weak advertising market for an 8.5 per cent hit to revenue.

Southern Cross, which owns Australia's largest radio network and operates the Hit and Triple M radio stations, said ad spend had missed expectations for the first quarter and the weakness was felt across  radio and television.

Ad bookings slowed

"We're seeing weaker ad markets across first quarter, which seems to be linked to a lower desire to invest and spend in advertising," said chief financial officer Nick McKechnie.

"We're seeing it as being broad in the market. SMI data is showing all sectors were back about 9 per cent. We think it's kind of broad based, linked to the level of consumer and business sentiment in the economy."

The company had predicted in August that ad spend would pick up in September and October, based on a higher number of earlier bookings than the previous year. Instead, the number of ad bookings slowed down.

The company said it was managing its cost base with "extra discipline" to minimise the impact on earnings.

"That means asking: if someone leaves business, does that role get replaced immediately? Or can we wait a few months? Do we need to spend [the] same amount on travel and other discretionary costs?" Mr McKechnie said.

Nevertheless, UBS analysts cut their 2020 earnings (EBITDA) forecasts by about 7 per cent and earnings per share forecasts by 11 per cent.

Direct-to-consumer luggage brand July has received $10.5 million from investors, including $8 million from Strandbags’ owner Michael Lewis, to take on luggage giant Samsonite. 

The online retailer, which opened its first bricks-and-mortar store in Melbourne Emporium in August, says it will use some of the capital to launch in Singapore by the end of the year. It also plans to launch in New Zealand in the next six months and further Asia Pacific markets in 2020. 

“We’re not just opening stores [in these markets],” Athan Didaskalou, July’s co-founder, told Inside Retail. “We’re setting up warehousing and local teams.” 

According to Didaskalou, Australian brands that operate in Asian markets remotely are “arrogant”. 

“They think they can do everything from Australia,” he said. “It’s not just about [providing] local delivery and customer service, it’s about understanding the mindset of the country you’re in.” 

The elephant in the room

The retailer, which currently offers three sizes of hard-shell suitcase – carry-on, checked and ‘plus’ – is investing the rest of the capital into product development. Didaskalou declined to provide specific details about forthcoming products, but said they would “shock” market leader Samsonite when released next March.

“Samsonite is known for being ‘strong and light’. We’ll be tackling them on that ground,” he said.

Didaskalou said the company is more focused on taking market share from Samsonite than competing with US-based direct-to-consumer rival Away, which entered the Australian market via a Sydney pop-up earlier this year.

“Everyone wants to either talk about Away or Horizn Studios,” he said, referring to a Berlin-based brand in the same vein as July and Away, which was valued at more than US$1.4 billion this year.

“The elephant in the room is the 90 per cent market share-holder, which is Samsonite,” he said.

“They own something between 10 and 15 brands and absolutely dominate the market, especially in Asia Pacific. These are the people we’re going after.” 

July has another trick up its sleeve. The brand has developed a new method of monogramming its suitcases using ultraviolet light, which will enable the retailer to offer new fonts and designs from artists and personalise products at scale. It currently takes about an hour to hand paint each design.

The new system will launch in three weeks, and Didaskalou anticipates being able to personalise every suitcase it sells in 2020.

Working towards profitability

Didaskalou said he and fellow July co-founder Richard Li, who also co-founded online furniture brand Brosa, have received “phenomenal” insights and advice on the luggage business from Felicity McGahan,
Strandbags’ managing director, and Lewis, its owner.

“I wouldn’t say it was a formal part of the deal for them to mentor us, it was more that they really know the space and wanted to help support [us],” he said. 

Strandbags currently is undergoing a digital transformation, and July is providing the bricks-and-mortar retailer with feedback on how it could operate better online and what today’s customers want in terms of delivery and e-commerce, according to Didaskalou.

July is on track to reach $5 million in sales this year, its first full-year in business, and working towards profitability. The company is in the process of opening new stores in Melbourne, Sydney and Singapore, and employs 24 people. It will continue to sell its products exclusively through its own channels. 

Mars Wrigley Australia has revealed plans for a state-of-the-art  
warehouse in  
Truganina,  
West Melbourne, which will house all of the confectionery giant’s products under one roof. 

The 44,000 sqm temperature-controlled facility, which is expected to be up and running late next year, will have the capacity to house up to 49,000 pallets of products such as Mars, M&M’s, Snickers Skittles and Extra.

Automation is a key feature of the technologically-advanced facility, with Automated Guide Vehicles (AGVs) to assist workers with moving pallets around the warehouse.

“It’s an exciting project for our business and one that’s been several years in the making. This will be one of the most advanced warehouses in Australia, with Automated Guide Vehicles assisting our workers to increase warehouse flow, improve racking, and reduce handling – creating a safer working environment,” Marius Vermeulen, supply chain director at Mars Wrigley Australia said. 

“We’re looking forward to realising the benefits this new facility will deliver to our customers, our business and consumers through an enhanced customer service offering that will allow us to continue to share our much-loved brands with Aussie consumers today, tomorrow, and into the future.”

Mars Wrigley has partnered with Toll Group and Charter Hall on the construction of the new facility.