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Retail spending climbed 2.4 per cent in June, as Australians returned to once-shuttered cafes and restaurants and fashion retailers.

Turnover rose 8.2 per cent when compared to the same period last year. 

NRA chief executive Dominique Lamb said that spending increases in hospitality and fashion retail were expected, but that the sectors still ultimately fell short of this time last year.

The increase in spending at cafes, restaurants and takeaway services exceeded 20 per cent, but remain below the levels seen in 2019. Clothing, footwear and personal accessories rose by around 19 per cent, but also remained below levels seen last year. 

“It was the first full month that restaurants and clothing stores had been allowed to trade, with many being forced to close in April and May,” said NRA CEO Dominique Lamb.

And, though June showed some signs of recovery after a number of lockdown measures were eased, the return to lockdown in Victoria and a spike in cases elsewhere in the nation are likely to impact sales and confidence in July, ARA chief executive Paul Zahra said.

“The preliminary June data provides a glimpse of what demand may look like once COVID-19 restrictions are permanently lifted, and it’s a healthier picture with a good appetite for spending,” said Zahra. 

“However, not everyone is experiencing growth. We currently have a two-speed retail economy, with retailers in Victoria and those in CBD and tourist-dependent locations the hardest hit.”

Looking forward, the upcoming October to December quarter could be a “make or break” moment for many retailers, with a wind-back of government stimulus and months of less-than-average retail sales since the bushfires likely to impact a potentially slower Christmas quarter. 

“Ultimately, the outlook for retail is positive, but we won’t see that for some time. The road to recovery remains challenging,” Zahra said.

Lamb, aswell, remains cautious about the next few months in the industry – with the recent months of volatility demonstrating retail is “far from out of the woods”.

“We can’t accurately assess how retail is travelling by looking at one month in isolation. In the last four months’ turnover has fluctuated wildly due to panic-buying, lockdown restrictions and economic uncertainty,” Lamb said.

“The second-wave of COVID-19 infections in Victoria, along with the subsequent reimposition of restrictions, underlines that the future is far from certain.”

E-commerce picks up some slack

And although June saw Australians return to the streets and enjoy bricks-and-mortar retailing, the return to a period of Covid-19 uncertainty has seen e-commerce once again boom, according to eStore Logistics chief executive Leigh Williams.

“So far in July, ecommerce activity dropped significantly in the first few weeks as consumers enjoyed their time out of lockdown and slowed down on purchases,” Williams said. 

“However, since Victoria’s lockdown, we have again seen record levels of online purchases, despite consumers having already purchased necessary working-from-home office or leisure items.”

Long-term, Williams warned, retailers should expect that industry segments such as health and beauty are unlikely to return fully to pre-Covid habits of buying in bricks-and-mortar. 

"While it is too early to fully understand the impacts to retail during the second wave, we are engaging with our tenants in a proactive and considered way so that both we and our tenants emerge from the pandemic in a position to grow our respective businesses," they said.

A spokesperson for Vicinity said the company would also continue to help retailers through the lockdown. Scentre did not comment.

Country Road Group closed its stores at Highpoint and Watergardens shopping centres, and Apple will close its five stores from Thursday out of an "abundance of caution".

However, some major retailers were still yet to decide if they would follow suit, with department store Myer continuing to trade at its 11 stores in the region, despite the retailer closing those stores during the initial lockdown in April.

Retail and real estate stocks took a battering on Wednesday, with the consumer discretionary sector falling 2.4 per cent and REITs falling 2.5 per cent.

Similar rules will be in place for electronics and furniture chain Harvey Norman, however, a spokesperson said the policy would extend to customers and staff in all of the company's Victorian stores.

Exceptions will be made for shoppers with medical issues or children under 12.

However, shoppers will still be able to shop at Woolworths without a mask, with a spokesperson confirming the business would not refuse service to non-mask wearers due to there being a "range of personal circumstances where masks aren’t recommended".

Coles did not specify if customers would have to wear masks, saying it would take the advice of the state government. Both Coles and Woolworths employees will be required to wear a mask from Thursday onwards, the supermarkets said.

Major retailers have said they will also supply employees with face masks to wear while working, a move welcomed by Australia's largest retail union, the Shop, Distributive and Allied Employees Association (SDA)."Consistent with current health advice, the SDA encourages staff to wear a face mask which should be provided by the employer," a spokesperson said. 

Age readers share their images of mask wearing during the latest coronavirus lockdown.

The union has also called on employers to have processes in place to allow staff to change face masks during shifts and to safely dispose of potentially contaminated masks.

Paul Zahra, the head of the Australian Retailers Association (ARA), also encouraged retailers to provide staff with masks and make sure they wear them during shifts. The ARA has also said that service should be denied for customers who do not wear a mask.

"Retailers should be enforcing the law and that means that staff can only work if they're wearing a mask and customers can shop if they're wearing masks," he said.

However, both the SDA and ARA said they have raised concerns with retailers over any potential backlash from customers regarding masks, with the union currently consulting with employers over their plans if staff face threats or "acts of violence" over incidents involving masks.

Josh Cullinan, the national secretary for the Retail and Fast Food Workers Union (RAFFWU), said it should not be incumbent on employees to enforce mask policies, calling on employers to implement in-store security or to leave enforcement to management.

"That responsibility falls fairly and squarely on the employer, not to staff," he said. "Security and police should be provided, if need be, to make sure the safety of workers is protected."

Mr Zahra said retailers should call centre security or police if any violent behaviour occurs.

Baby Bunting expects EBITDA to be between $33 million and $34 million in FY20, a 22-25 per cent increase on the previous year, thanks to an increase in total sales and a higher gross profit margin despite the impact of bushfires and Covid-19 in the second half.

In a release of the specialty retailer’s unaudited full-year results on Wednesday, CEO Matt Spencer said they were “very positive”.

Unlike many retailers, Baby Bunting was less impacted by the drop in discretionary spending amid the global coronavirus pandemic, which drove unemployment to record highs and consumer sentiment to record lows in recent months.

Its target customer – expectant parents – still needed to buy car seats, cots, clothes and other baby supplies, even if they were no longer going out to eat in restaurants or going to the gym.

Baby Bunting kept its stores open throughout the lockdown, but adapted the way it operated, according to Spencer.

One area where this is visible is in online sales, which grew 39 per cent in FY20, faster than total sales at 12 per cent, according to the retailer’s unaudited results. Online sales including click and collect made up 14.5 per cent of total sales in the year, up from 11.8 per cent in FY19.

Total sales for the year are expected to be approximately $405 million, with comparable store sales growth of 4.9 per cent. Comp sales growth was 10.5 per cent in the second half. For bricks-and-mortar stores alone, comp sales growth was 2.5 per cent for the year and 7.6 per cent in the second half.

Gross profit margin is expected to be 36.2 per cent, an increase of 120 basis points against the prior corresponding period.

Net profit after tax is expected to be between $18.5 million and $19.5 million, an increase of 29-35 per cent.

Both the NPAT and EBITDA figures exclude certain costs, such as the non-cash impact of employee equity incentives, significant transformation project expenses and the impairment of the carrying value of the company’s investment in digital commerce technologies. The EBITDA figure also excludes the impact of AASB 16 lease accounting.

Statutory NPAT is expected to be between $9.5 million and $10.5 million.

Baby Bunting finished the year with zero debt and $13 million in cash.

While the recent return to lockdown in Melbourne suggests uncertainty will continue in FY21, trading has been positive so far, according to Spencer.

“We have seen the business continue to grow in FY20 and I am confident that growth will continue in FY21,” he said.

Baby Bunting recently started shipping to New Zealand, while continuing to grow its store network in Australia. A new store is set to open at Westfield Knox in Melbourne, with more stores planned for NSW.

The retailer is also working on a new distribution centre in Dandenong South, which will double its capacity. This is expected to be operational in Q4.

David Bortolussi: "We can't bring our reusable masks in fast enough at the moment." Josh Robenstone

He hoped the spike in mask sales would be only temporary but suspected Australia would mirror overseas countries in the rapid take-up of masks.

"If we look to international experience we are seeing that around the world,'' he said. "I hope it's only temporary, but unfortunately I expect it will be with us for some time.''

The demand is huge across businesses large and small. Online retailer The Iconic says searches for face masks have jumped tenfold since July 18. A spokeswoman for The Iconic said the most popular styles are ''simple, chic styles in black''.

Mr Bortolussi said the Australian arm had been utilising the expertise of the global Hanes group in developing the new range of masks. Hanes has already supplied 450 million cloth face coverings to the United States government.

The iconic Chesty Bond image had been famous throughout Australian advertising and the Bonds brand had built up a large amount of trust.

"I think the credentials that we've built up over a long time in areas such as baby clothing does give customers extra confidence in the quality of our product,'' Mr Bortolussi said.

Wave of jobs

The washable masks, selling for $24.95 for a three-pack, were treated with "Viroblock'' to enhance their performance and are a two-ply cotton mask.

Melbourne fashion house White Story, owned by Fiona Myer from the Myer retailing family, has also been busy gearing up for production of fashionable face masks at its Cremorne base in inner Melbourne, a historic epicentre of the rag trade.

“We have diverted our makers to masks, handcrafted in Melbourne and cut from organic linen,'' Ms Myer said.

"While a small gesture in the greater context, our collection of linen masks are one way we imagine Australians may merge form and function."

For every mask sold, White Story will donate one to Melbourne's homeless.

Chantelle Ford, owner and designer of Ford Millinery based in Sydney's Tempe, said on Monday the group was working frantically to keep up with supply.

She faced delays of up to 10 business days after a flood of new orders for masks after the Victorian government made mask-wearing mandatory. That has triggered a flood of orders from other parts of Australia too. "It was absolutely instantaneous,'' Ms Ford said.

She has more than quadrupled staff numbers as Ford Millinery steps up its output. The company had previously been focused on designing headwear and fashionable visors and had quickly shifted to fashionable face masks.

Ms Ford said a gratifying part of the sharp step up in production had come from being able to employ people from other fashion outlets who had lost their jobs.

Two years ago, the brand launched socks in the same way it had made its shoes: by throwing out the rule book and creating something entirely new. Like the sneakers, the socks are almost glove-like: made of wool, in a single weave, without seams.

Its socks are made with a new yarn, developed by the brand, called Trino, which combines Tree material (also known as Tencell Lyocell, a fabric the brand developed using eucalyptus pulp, which uses 95 per cent less water than cotton in farming) and super fine merino wool. The result is a sock that is cooling, breathable and wicks away sweat (in other words, all the things a sock should do).

In just six years, Allbirds opened 18 retail stores, developed its first running shoe, collaborated with Adidas and called out Amazon on copycat claims.

“It quickly became clear that Trino would make incredible underwear,” says Brown. “The majority of the underwear category relies on cheap, chemical-laden materials and we saw an opportunity to bring these incredible natural materials where they’re most needed. The result is what we think is a wonderfully comfortable, breathable product that’s better for you and the planet.”

The underwear is free of logos and patterns, just as the shoes are. And although the shoes (and undies, and socks) are packed with eco-bona fides, the price point is refreshingly accessible, starting from $140 for a pair of sneakers.

It’s a good example, says Brown, of financial incentives aligning with environmental values. “Hopefully it proves that small companies can show the larger footwear industry new ways to tackle the challenge of making products more sustainably.”

For all its success – and press – Allbirds is still a little fish in a very big pond. Even with a valuation of more than $US1 billion, it pales alongside Nike, which is valued at $US34 billion, and Adidas, at $US16.6 billion. But despite its youth – just six years old compared with Nike’s 56-year history and Adidas’ 71 – Allbirds is growing at an impressive rate.

Last year, the company launched into China, the world’s biggest e-commerce market, on Singles Day (similar to Black Friday, which usually sets sales records for the year). It was the first time Allbirds handed its distribution model over to a third party (in this case, Alibaba; Allbirds is sold on Tmall). Although sustainability messaging has been slower to reach China than other markets, Brown is optimistic about the opportunity.

Our goal is to emit no carbon ... This is a race we are all running together. It trumps the day-to-day competition of individual companies.

— Tim Brown, Allbirds co-founder

“Although the environmental movement in China is growing quickly, sustainability in the fashion industry wasn’t yet a major focus for consumers, so we had to do more education out of the gate,” says Brown.

To assist, the brand opened four retail stores in China last year, hoping that the ability to touch the products and interact with staff will help sales. “There are still significant challenges, especially in the aftermath of the COVID-19 pandemic,” says Brown. “But we’re optimistic with where the market is headed.”

Ah, yes. COVID-19. How does a brand, which sources wool from New Zealand, manufactures in Italy, and has headquarters in San Francisco, survive the pandemic?

“We did have a period of a few weeks where our New Zealand and Australian businesses were offline due to nationwide lockdown, but we’re now fully operational once again,” says Brown.

Despite the upstart brand's youth, Allbirds is growing at an impressive rate. 

Mercifully, production has not slowed, though he admits “the long-term economic impact has been profound”. Still, he says, there are reasons enough to feel optimistic.

“Firstly, we’ve seen our global community come together to fight a collective problem that hasn’t respected traditional borders. As the global economy has been put on pause, we’ve seen the environment fight back with coyotes [near] the Golden Gate bridge in San Francisco and air quality improving in many cities around the world. All of which gives us hope as we look forward to the next crisis we must all tackle: climate change.”

Allbirds' next step is to go carbon free: emitting zero carbon emissions through the manufacturing process.  

And that, of course, is what Brown – and Allbirds – returns to, time and again as we speak. Of the Dasher, Allbirds’ first running shoe, he says, “it is just the beginning of proving that sustainability and performance are not mutually exclusive”.

As for the partnership with Adidas, Brown explains that Allbirds is “relentlessly committed to driving the conversation on sustainability”. Coupling with a bigger company such as Adidas, which has already created shoes from ocean plastic and collaborated with Stella McCartney on vegan leather, made sense: Adidas gives Allbirds reach, as well as serious clout.

But it is more than just street cred: Allbirds recently began numbering each of its products with a carbon score, and measures its own footprint down to the way employees commute to the office each morning. This is more than platitudes: it is business.

The next step, says Brown, is to go carbon-free: emitting zero carbon emissions through the manufacturing process.

“Though we already neutralise the carbon footprint of our entire business through carbon offsets, our ultimate goal is to emit no carbon in the first place.” The company isn’t in a place to do this yet, but Brown believes it’s a goal for its near future, and will rely on collaboration with other brands.

“This is a race that we are all running together as a planet,” he says. “It trumps the day-to-day competition of individual companies.”

Country Road will return to its local roots, the result of a 12 month brand re-alignment.

Country Road MD Elle Roseby said the retailer, which has an extensive sustainability and ethical sourcing program, will now extend this to community-based initiatives.

This means major global sporting partnerships such as the Australian Open, which the retailer has been Official Lifestyle Fashion Partner for, have been revised. 

Instead, the retailer has put the focus to driving change, become a presenting partner for the National Indigenous Fashion Awards, part of the Darwin Aboriginal Art Fair Foundation.

“We’re moving away from big corporate sponsorships,” Roseby told ragtrader.com.au. 

“The last 12 months have been a year of reflection and a driver of change and we’ve asked how we can support local; local farmers, local sporting clubs, Indigenous communities?

“In 2019, we ran cultural awareness training on how to work with indigenous partners with respect and sensitivity.

“Then we met with the Darwin Aboriginal Art Fair Foundation and from that conversation, we became presenting partner.”

Roseby revealed the retailer will also be a presenting partner for the Country to Couture runway event in late 2020.

“We’re also about to launch a campaign going into NSW bushfire areas and talking to local heroes and local indigenous communities about their stories,” Roseby said.

This will extend on a localised execution in 2018, when Country Road supported local farmers via its traceable wool collection.

Country Road marketing channels manager Paul Conti said social media is no longer just a “big, global space” to tell these stories.

“After the devastating bushfires earlier this year and I guess the economic impact on COVID19, there’s been a macro shift towards supporting local businesses and local suppliers.

“We’ve seen things like support local stickers online on Instagram and even as a big national retailer, we’ve seen this shift towards our local community stores as we slowly started to reopen.

“We’ve had incredible success for our campaigns supporting local farmers including verified Australian merino and cotton.”

Moving forward, Roseby acknowledged the challenge of operating stores amid varying state restrictions during COVID-19.

“Western Australia and Queensland is different to Victoria for example and it’s a complex process.

“But we absolutely believe in the power of our stores and we are continuing to invest both in our stores and online.

“We have new store openings and new refurbishments planned throughout this year, including Kotara, Canberra and Southland.”

The National Indigenous Fashion Awards will be broadcast digitally on NITV on August 5.

Premier Investments is the first major retail business to confirm the closure of stores in parts of Victoria where stage 3 restrictions went back into effect on Wednesday, July 8.

The private company, which owns and operates Smiggle, Peter Alexander, Just Jeans, Jay Jays, Dotti and Jacqui E, issued a statement yesterday, saying its brands are “clearly not an essential service” and closing stores was the “right thing” to do.

“The Premier [Daniel Andrews] has made clear that the livelihoods of all Victorians relies on everyone doing the right thing,” the company said in its statement. “As loved as our brands are by our customers, they are clearly not an essential service.”

The company has closed stores in 36 shopping centres and seven strip malls in metropolitan Melbourne, one of two areas in Victoria that are back in lockdown, for the foreseeable future.

The distribution centre and support office remain open, and customers can continue to shop online across all brands.

However, all metropolitan Melbourne store staff who are eligible for JobKeeper have been stood down, with access to leave entitlements, and the company does not intend to pay rent for the affected stores for the duration of the lockdown.

Same approach for some

This mirrors the approach Premier Investments took nationwide during the first lockdown in April and early May, alongside hundreds of other retailers, including Myer, Accent Group and Kathmandu.

But few on that long list of retailers that closed three months ago have followed Premier’s lead in closing stores for the second lockdown in Melbourne.

Myer, Accent Group and Kathmandu have not made any public statements about store closures in the affected areas, and did not reply to requests for comment.

Country Road, which closed during the first lockdown, has closed one store at GPT’s Highpoint shopping centre, but appears to be keeping other stores open.

Roughly 50 per cent of stores at Highpoint, which is located in one of the “hot spot” postcodes that went into lockdown a week before metropolitan Melbourne, are understood to be closed, including Sephora, Zara and Apple.

“The level of distress among retailers is real, and while most are allowed to open under the current lockdown rules, none of the fundamentals for bricks-and-mortar work when you haven’t got foot traffic, and you have reluctance of staff in being in store if they think they are at risk,” said Brendan Britten, managing partner at advisory services firm Pitcher Partner.

Why they closed

Innisfree, a South Korean beauty retailer, which operates 10 bricks-and-mortar stores in Australia, including one at Highpoint, made the decision to close its Melbourne stores “to help support the community and as a safety precaution for their customers, staff and the broader community”, according to a company spokesperson. The retailer closed all stores during the first lockdown.

That’s also the case for Melbourne bookstore chain Readings, which has closed stores to the public again, except for a location at Westfield Doncaster, which will remain open with limited trading hours.

“Staff are still not comfortable having a lot of contact with people, and we appreciate that,” Mark Rubbo, Readings’ managing director, told Inside Retail.

In making the decision to shut down, Rubbo said he was “very conscious that things actually seem to be worse than when we locked down last time”.

What stage 3 means

Stage 3 restrictions mean there are only four reasons for people to leave their home: to buy food and other essential items, provide care or receive medical treatment, exercise and work or study if unable to do so remotely.

The restrictions apply to metropolitan Melbourne and Mitchell Shire, an area north of Melbourne, and will remain in place for at least the next six weeks.

Many businesses that had just reopened, including restaurants, cafes, pubs, beauty salons, gyms and cinemas, have either had to close or return to takeaway and delivery only.

Jewelry retailer Lovisa saw its online business more than triple during Q4, up 256 per cent compared to the same period of 2019, though trading conditions across many of its bricks-and-mortar stores fell short due to Covid-19 restrictions.

Comparable store sales fell 32.5 per cent on the prior year, and while performance has been strongest in Australia and New Zealand, the overall disruption to trade caused FY20 sales revenue to fall to $237 million from $249 million in FY19. 

And although the business had progressively reopened its stores to the point it now trades across 434 locations, Lovisa will use this opportunity to exit Spain, with stores across the country to remain shuttered.  

“As previously announced, the store rollout in Spain was put on hold some time ago as a result of performance below our expectations,” the business said in a release to the ASX on Friday. 

“Whilst we saw some improvement in performance prior to the Covid-19 shut-down, Lovisa was disappointed in the lack of support from our landlords in Spain. Hence, due to this lack of support the board has regretfully made the decision not to re-open these stores and to exit the Spanish market.”

The exit will cost Lovisa $3.3 million in impairment charges and associated provisions in FY20. 

Lovisa is continuing discussions with landlords in other countries in order to receive rent subsidies or abatements for its current portfolio of stores, as many of the wage subsidy programs it has utilised are no longer available to its team.

That said, the business’ cash position is relatively strong, having almost doubled over the last financial year to $21 million. 

“This combined with undrawn financing facilities of $44 million, leaves the business well placed to invest in future growth opportunities as the global economy emerges from the current situation,” the business said. 

Australian department store David Jones is poised to launch the sales process for its $1bn property portfolio, with promotional material being sent out to the market next week.

On offer are the flagship David Jones properties in the heart of Sydney and Melbourne, through investment bank UBS, with further details of the offering to be revealed in a flyer document received by interested buyers in the coming days.

Typically, at the top of the list of likely acquirers are high profile listed shopping centre landlords such as Scentre Group, Vicinity Centres, Dexus Property, Mirvac, AMP Capital or Stockland.

However, given the current challenges such landlords are facing, where tenants are demanding rent reductions due to COVID-19, the thinking is that wealthy investors will step up to the plate, given the properties are considered top quality.

In particular, wealthy individuals like Morry Schwartz could have an interest, drawn to the assets because of the option to transform the properties into exclusive hotels should the retail sector stage a further demise.

Retail property billionaire John Gandel may also have interest, as could the interests of retail billionaire Solomon Lew.

However, institutional investors and pension funds are also not to be discounted as prospective buyers, given that many remain flush with cash despite challenging conditions related to COVID-19.

The sites will no doubt be highly sought after, but the ability for an alternative use will be at the forefront of the minds of many, as David Jones — like department stores globally — battle for survival due to the growing online shopping trend.

David Jones is selling its two most prized assets as it searches for ways to drive down debt while grappling with declining sales.

The department store has already offloaded properties to free up cash, selling its Market Street building in Sydney’s CBD to Westfield owner Scentre Group and Cbus Property for $360m in 2016.

Both UBS and restructuring firm KordaMentha are now assisting the department store owned by Woolworths in South Africa on a range of fronts.

The stores that will be placed on the market are located in Elizabeth Street in Sydney and Bourke Street in Melbourne.

In May, Woolworth South Africa’s Australian operations, which include DJs and the Country Road Group, won a waiver from its lenders on its debt covenants and secured a $75m loan from its parent company, as it remained in negotiations with landlords to secure lower rents.

Sales fell 35 per cent during COVID-19 when shoppers were forced into home isolation, although DJs kept its stores open during the worst of the pandemic and online sales were strong.

"Convenience is the place to be," the Macquarie analysts wrote.

"Footfall in neighbourhood and sub-regional assets has not deteriorated as much as more destinational assets.

"Footfall has declined the most for CBD assets impacted by tourism, lower current CBD workforce and is yet to see a material improvement. This is a headwind for portfolios with relatively larger exposures to this category."

Quarterly sales updates show sales at Stockland-held centres have held up better than those run by Vicinity and Westfield-operator Scentre. That is likely to be a result of the smaller size of the Stockland malls, according to Macquarie.

"The data suggests footfall at more convenience-based assets has been more resilient compared to larger assets," the Macquarie analysts wrote.

"We believe they [the data sets] reinforce our view that smaller and more convenience-based assets will have relatively more
resilient cashflows over coming months."

Metcash is looking to increase its presence in the hardware market after seeing sales in this part of the business return to positive growth in the second half of FY20, thanks to a spike in DIY during COVID-19.

The wholesale distributor said on Monday that it is in the final stage of negotiations to acquire 70 per cent of Total Tools, a national franchise targeting tradespeople, for approximately $57 million.

Under the proposal, Metcash would provide Total Tools with a $35 million debt facility to support its growth plans and the potential future acquisition of interests in a select number of stores. Over time, Metcash would look to have a mix of store ownership, including both independently owned and joint-venture retail stores.

The deal, which is for Total Tools’ franchisor operations and one company-owned store, would give Metcash a clear pathway to acquire the remaining 30 per cent stake in Total Tools within the next three years.

Metcash said the acquisition is in alignment with its strategy to be the leading supplier to independents in all three areas in which it operates – food, liquor and hardware – and supports Total Tools’vision to remain a leading professional tool retail network.

Metcash’s hardware arm, which includes the Mitre 10 and Home Timber & Hardware chains, currently accounts for 14 per cent of group sales revenue. Food, including the IGA supermarket network, accounts for 61 per cent, and liquor for 25 per cent.

Total Tools has been operating for over 30 years and currently has 81 bannered stores nationwide. In the 2019 calendar year, it had sales of approximately $555 million.

The acquisition is subject to negotiation of final binding transaction documentation, which will be undertaken under a period of exclusivity, and approval by the competition watchdog, which recently gave the green light to Bunnings’ acquisition of tradie chain, Adelaide Tools.

$14.9 billion in revenue in FY20

Metcash also announced its FY20 results on Monday, including a 2.9 per cent year-on-year increase in group revenue to $13 billion. After taking charge-through sales into account, revenue totalled $14.9 billion.

Food and liquor sales both saw positive growth in FY20, despite the liquor category being adversely impacted by COVID-19 restrictions in March and April.

Food sales, including charge-through sales, increased 3.5 per cent to $9.1 billion, with supermarket sales increasing 3.8 per cent to $7.5 billion. This figure excludes Drakes sales, which Metcash stopped supplying from October 1, 2019. Convenience sales increased 2 per cent, mainly due to tobacco sales.

Total supermarket sales for the 10 months to February, which excludes the COVID-19-related bump in March and April, were up 0.2 per cent on the prior year. The IGA network saw 5.6 per cent like-for-like sales growth, with one net new store opening in the year.

Liquor sales increased 0.3 per cent to $3.7 billion. For the 10 months to February, liquor sales increased by 2.2 per cent.

Hardware sales decreased by 1.3 per cent year on year to $2.1 billion, due to a slowdown in construction activity which impacted trade sales and the loss of a large HTH customer in the first half of FY19.

Sales were down 2.8 per cent for the 10 months to February, but turned around in March and April thanks to a surge in demand for DIY products, such as paint.

The group reported a statutory loss after tax of $56.8 million, which includes the impact of the AASB16 leasing standard and a $242.4 million impairment to goodwill and other assets declared in the first half.

Underlying EBIT for the group, not including the new leasing standard, the impact of the loss of the Drakes business and lower contribution from lease resolutions, was $324.2 million, a roughly $12 million improvement from FY19.

The wholesale distributor said it is in a strong financial position after a recent equity raising and has seen continue sales growth in the first seven weeks of trading in FY21.

All of the major Australian fashion sites saw growth for the first five months of this year compared to 2019, according to exclusive data analysis conducted for Ragtrader.com.au.

As eCommerce sales continue to grow during COVID-19, SEMRush has revealed there are clear winners in the Australian market.

Global marketing director Olga Andrienko said the data indicated a trend towards local brand support.

Country Road led at 49.3% growth, followed by Decjuba which saw an increase of 35.9%, Bonds at 32.3%, Portmans at 19.5% and Witchery, which achieved 19.5% growth since the time last year.

In terms of growth from April to May 2020, the best performer was Portmans at 41.4%, followed by Decjuba at 30.2% growth and then The Iconic at 11.9%, Country Road at 9.8% and Bonds at 9.7%.

“None of the Australian brands saw negative growth in any of the periods our online fashion study compared, so this could mean there has been a trend towards Australians being more loyal to their local brands,” Andrienko said.

In May, The Iconic zoomed ahead with over 7 million visits. 

For a full data breakdown, including Australian uptake of global brands, see our July edition.

The PM might have promised a tradie-led recovery, but right now it looks like the service sector is doing the heavy lifting.

On Tuesday, the economy bounced back into expansion after a months-long contraction, according to the Commonwealth Bank’s Flash PMI sector.

With a score of 50 denoting stagnation on the prior month, Australia tipped back into positive territory with a 52.6, indicating modest growth as businesses began reopening in May.

The recovery was led by the service industry, which reported growing business activity for the first time in five months. Meanwhile, manufacturing production and exports both continue to fall, albeit at slower rates.

Head of Australian economics Gareth Aird noted that while growth was still soft, he believed Australia had passed a “low point” with some encouraging signs emerging.

“Confidence has improved in both the manufacturing and services sectors and the lift in both input and output prices is welcome as it suggests we are more likely to be in a period of disinflation rather than deflation,” he said in the research issued to Business Insider Australia.

That’s despite companies reporting they were still reducing their workforces for the fifth month running, as they continue to operate below normal capacity.

“The further decline in employment was disappointing, but given the lagging relationship between employment and output, it is not surprising. We should see headcount lift from here,” Aird said.

The view appears to be shared by Australian businesses. Taking a 12-month view, sentiment hit its highest level in nine months – long before the term COVID-19 was even coined.

It comes as Australians begin loosening the old purse strings. Separate CBA analysis shows spending last week was again on the rise. In fact, the country is actually spending more than normal, as Australians find a newfound appreciation for some businesses that were shut during March and April.

Compared to this time last year, the country is spending 13% more on personal care services like beauty, hair and massage parlours.

Meanwhile, the country is still splurging nearly 20% more on food, 24% on groceries, and 9% at cafes and restaurants. To wash it down, there’s been a 19% surge in spending on alcohol – although that’s been unsurprisingly concentrated at bottle shops, while pubs and clubs continue to decline.

While recreation and transport spending has followed it downward, Australians are spending 42% more on household items like furnishings and 7% more on clothes.

Is it enough to rescue the economy? Hardly, with Australia still headed for a sharp recession and unemployment continuing to rise.

But it’s an indicator things are beginning to slowly turn around.

Months after falling into voluntary administration, putting the fate of 450 jobs and up to 65 stores on the line, shareholders in stationery business Kikki K have voted to sell the business. 

In a creditors meeting on Zoom on Thursday, June 25, shareholders voted in favour of a deed of company arrangement, administrator J.P. Downey & Co. confirmed to Inside Retail.

The new owner E.C. Designs LLC, which trades as Erin Condren Designs, is based in Austin, Texas, and primarily sells personalised and customised organisation and lifestyle products.

Out of 245 votes cast, 244 voted in favour, with only one voting against – leaving the final figure at 98.85 per cent in favour, and 1.15 per cent against. Creditors are likely to get around 1-2 cents per dollar.

According to J.P. Downey & Co., the decision will save the majority of Kikki K jobs, keep a majority of stores open, and keep landlords with tenants.

“Against the economic woes that we are facing, this is a great result,” the spokesperson said.

It’s expected the Kikki K business will continue to trade in Australia and potentially beyond, though the spokepserson couldn’t confirm if Kikki K’s New Zealand business was part of the DOCA yet.

During the receivership period a number of stores were shuttered due to the economic conditions, the COVID-19 pandemic, and the government-mandated closure in New Zealand. 

New Zealand stores have already been closed and all staff positions terminated according to BDO, Kikki K’s receiver in New Zealand.

A BDO spokesperson told Stuff that the potential buyer of the Australian operations had also expressed interest in the New Zealand business, and provided information regarding local landlords in order to facilitate the sale.

The fate of many retailers that enter voluntary administration can often be hard to judge, though Kikki K was of great interest to potential buyers almost immediately, with emails seen by Inside Retail confirming nine potential partners had approached the business within 24 hours of its initial administration. 

Additionally, store sales went up 94 per cent and according to the brand, and a few days later the week ended 50 per cent above target Australia-wide. Online revenue rose by 470 per cent at one stage.

The coronavirus pandemic is taking a heavy toll on shopping centre landlords as some of the world’s largest companies refuse to pay rent or demand cuts, forcing landlords to lower the value of their retail property holdings.

The Australian can reveal that companies including 7-Eleven and McDonald‘s have joined Hungry Jack’s in seeking changes to rent deals or in stopping payments as the crisis peaked.

Solomon Lew‘s listed Premier Investments and Sussan Group are also negotiating to not pay rent for periods when they were shut down and to pay rent as a proportion of sales turnover when they reopen.

The fraught negotiations over shopping centre leases have dragged in some of the country‘s largest landlords, with senior sources saying there was a stand-off between mall owners and key tenants.

The problems are hurting listed portfolios, with property investor Mirvac flagging a near $300m hit to the value of its retail portfolio, while both its office and logistics portfolio bumped up in value.

Rival company Dexus said its towers and parks had virtually held their values.

In a sign of the growing split between the real estate sectors, the office powerhouse also sold off a $530m tower in the heart of the Sydney CBD for more than it was valued at last year.

It sold the tower to Singaporean company Peakstone, via CBRE.

Its overall valuations showed a dip of about $200m, as prime office towers retain their value.

“Our high-quality property portfolios were in a strong position as we entered into a period of uncertainty driven by the onset of the COVID-19 pandemic, with their high occupancy levels, diversified tenant base, and limited new supply coming online in our key office markets,” Dexus chief executive Darren Steinberg said.

He said the valuations showed the resilience of high-quality portfolios in the uncertain environment. “The office portfolio experienced a circa 1.5 per cent decline on prior book values as a result of the softer assumptions relating to rental growth, downtime and incentives over the next 12 months,” Mr Steinberg said.

The sharpest rental disputes between landlord and tenants are emerging in the stressed retail sector.

In a letter to landlords as virus concerns peaked, 7-Eleven said that should the impact on its sales continue, it would have to “carefully consider” cost-control methods, and it cited temporary lease commitment relief as a measure to ensure the ongoing viability of each of its stores.

The chain, which has more than 700 stores, said that it intended to stay open unless directed to shut by government.

But it said that the unprecedented impact on consumer confidence had already been reflected in the sales performance at a number of stores in its network.

McDonald’s told landlords that restrictions on trade were having a significant and direct ­impact on its business and in particular, its local operators.

In March, as food courts were closing, it laid out its position to shopping centre landlords.

“Despite changes in operating hours or closure of stores our exposure at this time to occupancy costs is unsustainable and is an area of considerable concern.

“Due to this fundamental change in our ability to trade as intended, we seek the immediate cessation of financial obligations under the lease (to be reviewed on a monthly basis),” the letter said.

A McDonald’s spokesman said that since that time the company had provided significant support to its franchisees in freestanding stores around Australia and it was in talks with shopping centre landlords where it traded.

These were occurring on a store-by-store basis and reflected the conditions in which they were operating.

Rival chain Hungry Jack’s sought to push back rents until virus-related restrictions are lifted.

The fast food chain initially proposed to defer gross rental payments for three months, or until the restrictions are lifted and trading patterns show signs of returning to normal.

The Jack Cowin-owned chain later told landlords that rents would be deferred for three months.

In contrast, some local companies are sticking to their leases.

United Petroleum fully paid its rent for April and May. After first writing to landlords saying it did not know how it would be affected, United paid half of the first month‘s rent and then followed up with daily trading updates to landlords.

Even though profits were down, the company decided to fully pay rent rather than seeking relief under the Morrison government‘s leasing code.

One landlord told The Australian that the implementation of the code across different states had made it inconsistent and difficult to apply.

Mirvac on Wednesday revealed it would cut the value of its mall portfolio by 9.9 per cent and similar writedowns have been flagged by Vicinity Centres, co-owner of Melbourne icon Chadstone. Westfield owner Scentre is also likely to be hit.

“COVID-19 has transformed the world in the space of a few short months. No sector has been untouched by the health and economic crises that have developed. These are unprecedented times and Mirvac is taking necessary measures to address these challenges, including appropriate capital management,“ Mirvac chief executive Susan Lloyd-Hurwitz said.

Mirvac‘s sharp devaluations cut about $306m off its portfolio.

Dexus announced that 107 of its 118 assets, comprising 42 offices and 65 industrial complexes, had been externally valued, resulting in a total estimated decrease of about $195m, or 1.2 per cent on prior book values.

Homewares retailer Adairs also reported a 27 per cent rise in sales since the start of the calendar year that was propelled by an almost 100 per cent rise in online sales.

The Zip Weekly Spending Index, along with the Australian Bureau of Statistics' new payroll data index, feature in the Financial Review's data page tracking the economic recovery and the virus spread.

These economic indicators, along with the more traditional ABS labour force data, will provide an up-to-date insight into the state of the economy.

The increase in real-time economic data provides information about actual behaviour, as opposed to surveys that ask people how they think they will behave and their view.

Joseph Lattouf, a co-founder of Hairhouse Warehouse, passed away on the 17 of June, 2020, after a one-year battle with cancer. He was 53.

Melbourne brothers Tony and Joseph Lattouf established the hair business in 1992 with a store in Knox City. Joseph brought his hairdressing experience, Tony his retail and business knowhow.

Today the multi-award winning one-stop hair and beauty store business counts more than 130 outlets across the country, and has grown to a portfolio which includes Australian Skin Clinics.

Last year the iconic Aussie brand rebranded to Hairhouse.

Joseph Lattouf once said “Evolution is everything. We’ve got to keep changing, we’ve got to keep things happening.  I’m very proud on behalf of all my partners – you are all my partners.”

Vale Joseph Lattouf

The Hairhouse directors have issued a statement, expressing their “deep sadness”.

“We have lost a visionary and leader, and our community has lost an inspiring human being, a dear friend and mentor. 

“For all of us at Hairhouse, Joseph doesn’t just leave behind a company, but a legacy. Through this business, Joseph (and his brother Tony) redefined the landscape of the Australian hair industry.

“What began in 1992 with one store (and a big dream), has become an iconic hair and beauty business,  and a household name in Australia.  Spanning an unprecedented  30 year period, Joseph’s genuine dedication and passion for Hairhouse remained energetic and inspiring. 

“His entire team will continue to honour his memory by working creatively, connectively, and progressively within the business that he loved so much.

“Joseph’s spirit will forever be the foundation of Hairhouse.”

National furniture chain Nick Scali says the easing of government restrictions in recent weeks has led to a significant rebound in customer activity, and it now expects orders for the months of May and June to be up 54 per cent on the prior corresponding period.

Given the nature of its business model, Nick Scali expects these orders to translate to a 30 per cent increase in revenue in the first quarter of FY21 and profit growth for the first half of FY21.

Off the back of this, the board has decided to bring forward the 25c interim dividend payment that it had previously deferred to October 2, 2020, to June 29, 2020.

Like many bricks-and-mortar retailers, Nick Scali was impacted by temporary store closures and weak consumer sentiment during the coronavirus outbreak in March and April.

The retailer temporarily closed all stores in Australia and New Zealand in March, and gradually reopened in Australia during April. Stores in New Zealand only recently reopened at the beginning of June.

Nick Scali says the closures meant it was unable to record approximately $9-11 million of sales in the current financial year, but that the implementation of cost-cutting measures across marketing, employment and property and government support have led to a 15-20 per cent increase in second-half profit in FY20 compared to FY19.

Written sales orders in the H2 period to June 14, 2020, grew by 7 per cent, according to a trading update released on Friday, and written sales orders in the Q4 period to June 14, 2020, grew by 20.4 per cent.

Still, revenue for FY20 overall is expected to be slightly down from FY19, at between $260-263 million, compared to $268 million. And underlying net profit after tax (NPAT) is expected be in the range of $39-40 million for FY20, slightly down from the $42 million recorded in FY19. This figure excludes the impact of the gain on sale of property and the adoption of AASB 16.

Notably, Nick Scali launched a digital sales channel while stores were closed and plans to invest in it further.

The retailer’s management and board thanked staff for their support and attributed the company’s strong performance to their hard work and commitment.