News

Investors take a dim view of insider sales, and so most biting that bullet tend to do so in one big hit.

Not so Accent Group co-founder Michael Hapgood, who's filed no fewer than five seperate notices over the past month advising the market of his sales.

He first offloaded 1.2 million shares between September 5 and 9. And another 672,693 over the next four days. He sold 83,283 shares on October 16, 322,310 between September 26 to October 1, and another 530,455 between October 2 and 4.

All up, that's 2.3 million shares divested, for a total monetary gain of $4.4 million. No reason was given to the bourse for the sales, though Hapgood does still own 11.7million shares. Not that we'd put our money on him being done. He last sold shares in May, in a similar stop-start pattern ...

Accent Group, of Athlete's Foot fame, is trading near the all-time highs it achieved in 2016, having announced a record profit in August. It's largest shareholder is retail entrepreneur and board director Brett Blundy, who's been holding on to his 18 per cent stake.

Clothing prices are set to rise as the trade war between the US and China pushes up retailers' sourcing costs, compounding the effect of the weaker Australian dollar.

Many Australian retailers are hoping the trade war will lead to spare capacity in China and therefore better deals from Chinese suppliers as major US companies such as Macy's, GAP and PVH Corp shift away from China to cheaper countries such as Vietnam, Bangladesh and Cambodia.

But Australian Fashion Council co-chairman John Condilis says sourcing costs are likely to rise as Chinese manufacturers close factories and increase prices in an attempt to protect their bottom line.

Mr Condilis, the co-founder of Melbourne based clothing label Nobody Denim, says Australian retailers do not have sufficient volumes to replace the loss of sales from major US chains.

"Chinese suppliers are reaching out to Australia but because of the loss of volumes from the US retailers their prices are likely to rise," Mr Condilis told The Australian Financial Review.

"It's early days but that's my long term vision of where it's going especially if the Australian dollar continues to fall.

"A lot of the factories in China are quite reliant on [large volumes] - 100,000 units per style per order - not many organisations locally can sustain that to support [Chinese manufacturers'] cost structure."

Nobody Denim is one of very few Australian clothing brands still manufacturing in Australia - most shifted sourcing to China and other parts of Asia as tariff protections were removed between 1990 and 2015.

The Australia free-trade agreement removed all tariffs on most clothing made in China, which now accounts for more than 70 per cent of clothing imports.

Falling currencies and excess capacity

Mr Condilis' company was originally a service provider for the Australian denim industry, providing stonewashing and laundry services, but when tariffs were cut in 2000 his customers started buying overseas.

Mr Condilis and his brother launched their own label in 1999, outsourcing to local manufacturers before starting to manufacture in Melbourne in 2010.

"I did a cost analysis exercise and the variation (between local and China manufacturing) was minimal, less than 10 per cent ... we decided to keep it here for stability, security and to protect our IP [intellectual property]," he said.

Australian retailers who shifted sourcing to India, Vietnam and Bangladesh in recent years as China became too expensive are now trying to assess the likely impact of the trade war and whether it's worth moving sourcing back to China.

A complicating factor is the weaker Australian dollar, which has fallen 12 per cent in two years and 4 per cent this year.

UBS analyst Ben Gilbert said retailers such as Wesfarmers, which owns Kmart and Target, Adairs, and Myer, which have large private label penetration, face higher input costs and margin pressure unless they raise prices.

"However, this may be offset by excess capacity at Chinese plants (due to the trade wars) and the lower renminbi," Mr Gilbert said.

Mark McInnes, chief executive retail of Premier Investments, which owns Smiggle, Peter Alexander, Just Jeans, Portmans and Dotti, said the trade war could be beneficial for the company.

It's a moving feast - Trump seems to change his mind every day about what he wants to do.

— Xavier Simonet, Kathmandu chief executive

"China has devalued their renminbi, that devaluation is an opportunity for us, and the fact that US companies are ordering less from China is an opportunity for us," Mr McInnes said.

"We see good opportunities in China as a result of the trade war with the US."

However, Kathmandu chief executive Xavier Simonet, who sources products from  China, Vietnam and Indonesia, said the impact of the trade war was unclear at this stage.

"It's a difficult one because it's a moving feast - [President] Trump seems to change his mind every day about what he wants to do - it's all yet to play out in terms of what impact it may or may not have," Mr Simonet said.

Best & Less chief financial officer Andrew Moore said the trade war might open up capacity for Australian retailers, but as the Australian dollar fell and retailers' hedging cover ran out, prices would have to rise.

Retailers being squeezed at the margins

"The impact of the $A means there aren't price reductions coming through and over time as hedging books run out they'll have to adjust it upwards,"' Mr Moore said.

"If there's more capacity that's better for us, but that's not started to happen yet.

"Where does the China/US trade war end is the big question - I don't believe either country can afford to let it go for too much longer."

Clothing chains aren't the only retailers facing a margin squeeze from the weaker currency and the trade war. Home improvement, hardware, electronics and sporting goods retailers are also weighing the pros and cons.

European investor Rocket Internet, which helped build The Iconic in online fashion retailing and HelloFresh in home meal deliveries, has turned its sights on  Australia's $5 billion vitamin industry.

Rocket Internet has injected extra funds into Australian start-up Vitable after robust early success in a new model of selling personalised packs of vitamin pills direct to busy consumers.

Vitable co-founder Larah Loutati said the company, which began operations in March, had ''cut out the middle man'' with its e-commerce model and was also tapping into the increasing focus on health and well-being.

Vitable uses an algorithm built by nutritional experts to tailor personalised sachets of vitamins and supplements for customers. They are delivered direct to households by Australia Post, in a market dominated by big brands like Blackmores and Swisse.

She said Vitable was pitched at the premium end of the market, and by stripping out the retail margins was able to keep costs down.

"In terms of price we're on par or under where Blackmores and Swisse would generally be,'' she said.

The company's vitamins are made under contract by fully accredited manufacturers in Australia, and the orders are packed at a pharmacy in New South Wales.

Ms Loutati founded the business with Ilyas Anane. Mr Anane said across the $5 billion vitamin market, about 75 per cent of consumers bought their products ''off the shelf'' from retailers like Chemist Warehouse without having tailored advice for their own particular needs.

Rocket Internet provided some seed funding originally, and then injected further funds into the business as it gained momentum. Sales had been tripling each month, albeit off a low base.

Rocket moves fast

Ms Loutati declined to specify the size of the stake which Rocket Internet had obtained.

But having Rocket Internet's funds and expertise was invaluable because they weren't afraid of expanding businesses quickly.

"It's definitely the speed at which they operate. We really like the way they move fast,'' she said.

Rocket Internet was a strong backer of The Iconic, which has grown to become one of the best known online fashion retailers in Australia. The Iconic is now part of the Global Fashion Group, which listed on the Frankfurt Stock Exchange in June in a $1.8 billion float.

Global Fashion Group also owns online retailers Zalora, Dafiti and Lamoda.

The Iconic’s revenues climbed by 38 per cent to $371 million in the year ended December, and revenues have risen fivefold since 2014.

Rocket earlier this year sold out of global home meal kits group HelloFresh, which in Australia is in a fierce battle with rival Marley Spoon. Supermarket giant Woolworths in June took a stake in Marley Spoon.

HelloFresh stint

Ms Loutati worked at HelloFresh in Australia, and for three years from the end of 2015 was the Head of Product Development and Consumer Experience for that firm.

She said the main customer base for Vitable was largely between the 25 to 45 age group. When the business was in the planning phase, the co-founders thought it would be the tech-savvy Millennials who might form the core customer base.

"Actually the customer segment is a little older than we thought,'' she said.

The Vitable expansion comes as big global players increasingly look to personalised nutrition as a growth industry. The health science arm of global food giant Nestle in late August acquired vitamin subscription service Persona in the United States.

Vitable wants to build its brand locally to give it extra clout in the eyes of Asian consumers before expanding into Asia.

"Expanding to Asia Pacific is definitely in our planning,'' she said.

It only takes a quick scroll and some clicks to buy online and for Australians the dollars are adding up with more than $16 billion spent on shopping via social media each year. 

Research from ING released on Wednesday revealed over a third of Australians (34 per cent) admit shopping through social media has led to unplanned purchases.

On average Australians are spending an extra $860 annually, with 20 per cent revealing they consider buying something on social media every time they scroll through their feed.

ING’s head of retail Melanie Evans said close to a quarter of respondents admitted to not keeping track of their online spending. 

“Online shopping is undoubtedly very convenient and the recent emergence of shopping via social media has made it easier than ever to get what we want, but it’s also easy to unintentionally overspend,” Evans said. 

Targeted advertising also adds to the temptation, with 36 per cent finding that social media buying opportunities are very targeted to their interests.

“It’s a good idea to be aware of the highly targeted advertising often employed by social media platforms, which can increase temptation to buy things we otherwise wouldn’t have considered,” she said. 

“If you are focused on saving, try and avoid those impulse purchases and the buyer’s remorse that can come with them. Spontaneous dips into our hard-earned savings all add up.”

The most popular platform to shop on was Facebook with 22 per cent, followed by Instagram nine per cent, YouTube nine per cent, Snapchat four per cent and Pinterest four per cent.

David Jones is selling off its menswear store in Melbourne’s Bourke Street Mall and revamping its sister site across the road.

The retailer’s owner, South African Woolworths Holdings, announced it would put 299 Bourke Street up for sale in the coming months.

Refurbishment of the womenswear store at 310 Bourke Street will start and be completed in 2021.

“A single-store flagship housing the best local and international brands in one world-class destination will create a more seamless and cohesive experience for our customers,” WHL Group CEO Ian Moir said in a statement on Wednesday.

Funds from the sale will be applied in part to the refurbishment project, with the remainder applied to other areas of the business.

It follows a similar move in Sydney ‘s Elizabeth Street flagship store.

In August WHL announced a $437.4 million write down in value of the David Jones business.

The Reserve Bank on Tuesday cut the official interest rates to a new record low of 0.75 per cent in a bid to drive up wage growth and reduce unemployment.

The new record low of 0.75 per cent is the third cut this year, and the first time rates have dipped below 1 per cent, but AMP chief economist Shane Oliver said the Reserve Bank’s work isn’t done yet.

“They want to get the economy humming faster, I don’t think this will be enough – it will help (though),” he told Sky News.

He predicted rates will drop again to 0.5 per cent on Melbourne Cup Day, and down to 0.25 per cent early in 2020.

Executive director of the Australian Retailers’ Association Russell Zimmerman said he was hopeful the decision to further cut interest rates would boost retail sales by easing pressure on household budgets.

“We haven’t seen the jump in retail sales we were hoping for, and we are still waiting to see the flow-on effects of earlier rate cuts, tax cuts, and increases to the minimum wage,” Zimmerman said.

“Retail trade figures in recent months have continued to lag but we keenly await the release of August retail trade figures to see whether the other stimulatory measures have kicked in,” he added.

Divide over how to boost economy

Treasurer Josh Frydenberg said the RBA cut rates to bring Australia into line with other low-rate economies, as well as to pursue its goals of cutting unemployment and lifting wage growth.

“The board has made clear in its statement today the domestic economy has reached a gentle turning point and they positively referred to the benefits that are flowing from the tax cuts, which are the most substantial in more than two decades,” he told reporters in Sydney.

But Labor shadow treasurer Jim Chalmers said the government was pretending it had no options to lift the flagging economy.

“If they were so good at managing the economy the Reserve Bank wouldn’t have had to cut rates again today,” he told reporters in Brisbane.

Deloitte Access Economics partner Chris Richardson says there are downsides to cutting rates so low.

“There is a risk that we’re spending down our recession insurance,” Richardson told Sky News before the cut was announced.

Frydenberg said the best way to avoid recession in a future global downturn was to pay down debt, giving the government more capacity to spend through it.

Banks urged to pass on rate cut in full

The Australian Chamber of Commerce and Industry urged the banks to pass on the rate cut in full to lift spending on retail.

“Small businesses have been doing it tough over the past year. This has particularly affected discretionary spending in small retail businesses, including cafes and restaurants,” chief executive James Pearson said.

The Commonwealth Bank was the first of the big four banks to trim its interest rates in response to the RBA’s move.

However, while CBA cut its standard variable rate for home loan customers by between 0.13 and 0.25 per cent it did not match the RBA’s cut completely.

The other big banks are expected to follow CBA’s lead in the coming days.

Vicinity Centres unveiled new details about the upcoming hotel offer at its Chadstone Sopping Centre in Melbourne, revealing a 250 room capacity, two restaurants, as well as a wellness retreat and day spa.

The 12 storey hotel, which will cost $130 million and open to guests on Friday 1 November, will be connected to Chadstone Shopping Centre and provide the centre’s domestic and international visitors a place to stay.

“Demonstrating our commitment to continually evolve Chadstone, the hotel will capitalise upon and enhance Chadstone’s proven international and domestic appeal which sees 24 million people visit us each year, including more than half a million international visitors,” Chadstone Director Fiona Mackenzie said. 

“Hotel Chadstone will offer visitors and guests luxurious and exceptional experiences.”

Melbourne’s tourism industry has seen significant growth in the last few years, attracting approximately 90 million visitors and $30 billion in the year to March 2019, according to Victorian Minister for tourism Martin Pakula. 

Chadstone Shopping Centre is located 17kms from Melbourne’s CBD, and has traditionally attracted international visitors through its doors with its luxury fashion offering, as well as a free tourist shuttle bus service that ferries visitors directly to the centre from the city.

The centre also houses a tourist lounge and facilitates group tours of the centre, which features exclusive offers for tour-goers in participation with its tenant retailers, such as monogramming specials, makeovers, product experiences and masterclasses. 

IBISWorld senior industry analyst Kim Do said these international visitors have become a significant market for many Australian retailers in the past few years.

“The trends in Australian tourism have amplified the disparity in the performance of the various segments in the retail market,” Do previously told Inside Retail.

“For example, despite weak growth for mid-market retailers, luxury retailers have performed exceptionally well in recent years, as they are able to take advantage of expenditure by tourists, which make up approximately 30 per cent of the luxury retailing industry.

“There is an opportunity for retailers to capitalise on this.”

How do they do it? Shares in Premier Investments were up another 5.8 per cent on Monday. It followed a share price jump of more than 20 per cent and a record dividend. And all from fashion and discretionary retail largely in Australia and Britain in the last 12 months, two markets plagued by the political uncertainty of an election and Brexit, never mind the retail doldrums.

The answer, in a word, is landlords. For all the retailing brilliance of Solomon Lew and his CEO Mark McInnes, it is the reshaping of leases, and reweighting of bricks and mortar against other ways to sell product, which stands out. Active management may be failing the financial investment markets, but it is the imperative for cash flow at Premier Investments, which owns Smiggle, Peter Alexander and fashion brands such as Just Jeans and Dotti.

“First, we manage our business very well,” says Lew, with careful emphasis before continuing. “The stores that are not profitable or stores that the landlords will not play ball with us in terms of what the market rental should be, we take pretty drastic action.

“This year alone we closed over 35 stores and we have closed 138 stores over the past six years. And you’ve seen our sales grow, so notwithstanding the fact that we can close stores, we grow our business year upon year.”

Both men beam as they explain how a brand like Just Jeans can grow in same-store sales under this strategy. Now together for eight years, they are immaculately turned out (as always), with ties and pocket squares carefully selected for their well-fitted suits. If anything, the soft retail market seems to have given them more leverage in their message to landlords — we want a constantly reviewed deal, or we may well close up shop.

“If you went to Chapel Street today”, says McInnes, “there is a Dotti store where we said to the landlord ‘give us a percentage of sales or we will close’. The landlord said no, and we said ‘fine’. We have closed. It is still vacant some six months on, so that landlord has lost all their income. And there are plenty of examples of that around the country.”

McInnes hastens to add they do not actually have a strategy of closing stores. This is a response to “unrealistic landlords”. He says: “What we’re seeking is the same capital and rental deal that they are offering to international companies that are coming into this country, like H&M and Zara and Uniqlo. If their centres are trading down 5 per cent, 10 per cent, or 15 per cent, we want rental discounts in line with the way those centres are trading. If landlords are offering our competitor 20 per cent, 30 per cent, 40 per cent discounts to renew leases, well we want those same deals.

“We have all the detail and all the data, we can talk to you by store or shopping centre and you need to be offering us the same types of deals that you’re offering other people. We will walk away from unprofitable stores and we have a viable, very profitable online channel that can pick up those sales at a much higher EBIT ­margin.”

Online is no idle threat and has delivered new leverage for Premier. As many other businesses struggle to grow online from a low base, Premier’s online sales were $148m in the last financial year, up almost a third. They now make up over 13 per cent of group sales.

The Premier strategy is even clearer in its newer international markets for Smiggle — both in rental negotiation and, as McInnes argues, in the new capital-lite model. “In September 2018 we announced four pathways to accelerated global growth: the launch of wholesale, a growth in concession, a growth in online and then — where the metrics made sense, and landlords took most of the risk — continued store rollout.

“We are now in 180 doors with six iconic retail partners in seven countries. All those strategies are capital-lite and are being delivered at far higher EBIT margins than our group average. That has led to a significant increase in our cash flow which enabled Sol and the board to consider a higher dividend.”

The capital-lite options have brought new negotiating power when combined with Premier’s clever positioning on leases. In 2014, the board deliberately secured opt-outs with British landlords. “We took a strategic view that we would want a break clause in our leases,” explains Lew. “So if there was a 10-year lease the majority of our leases have a five-year break clause, which allow us to renegotiate or move out of the store at very little cost.”

This year in Brexit Britain, consultant Cantor warns that discounting in retail is no longer an effective tool to encourage more shoppers. Forty per cent of all retail spend is now on discounted items, as compared with 30 per cent during the last recession. Premier has cut its cloth to suit the times, taking a $26m one-off hit to allow Smiggle to break leases. It is now agitating for new deals that match local retailers, which Lew argues are receiving massive concessions. “You name it, House of Fraser, Debenhams, Top Shop, Accessorize, Monsoon, Paper Chase, it goes on and on.

“Obviously, the UK is suffering as a result of Brexit, but there are players out there going into a type of administration called CVA, in America it is called Chapter 11. They can go into semi-administration and pay no rent or half rent, or percentage rent. All we are looking for down the line is to be able to get into those reductions in the rentals.”

Treasurer Josh Frydenberg has told shopping centre landlords to “take it easy on those retailers” as the sector goes through structural change and major tenants push to secure better rental deals.

"Clearly it is a challenging economic environment, but also this age of disruption, particularly with the online developments are really affecting retail," Mr Frydenberg said at the Australian Financial Review Property Summit in Sydney on Thursday.

However, he said the recent tax cuts from the federal government would have a positive impact on spending.

"But it is a challenging time for the retail sector and hopefully they will ride it through as they are a big employer and they're important and I think they can manage this technological disruption."

However,Susan Lloyd-Hurtwitz, the chief executive of one of the country's biggest landlords Mirvac, said she had not seen the cash come through the register yet.

"No one needs to go to a shop anymore," Ms Lloyd-Hurtwitz said at the summit.

"People are in an environment where they are insecure about employment, don't make big financial decisions and they rein in spending, so we are not seeing the tax cuts and rates cuts in their expenditure," she said.

"There is a more profound force going on and that's the shift in retail from a necessity to choice. No one ever needs to go to a shop for anything ever again if they desire."

Some economists have said Australia is in a retail recession. Australian Bureau of Statistics July trade data showed retail sales for the month were down 0.1 per cent, following a 0.4 per cent drop in June.

Big retailers such as Premier Investments, Myer and David Jones have recently taken action against mall landlords such as Scentre Group and Vicinity over unfair and "unrealistic" lease terms due to the retail slump.

Scentre Group and Vicinity said at the summit while "pledging" to take it easy on their tenants, said it was their business to "curate the retail mix" to entice shoppers.

Scentre's chief operating office, Greg Miles, said if the landlord didn't offer the right mix of tenants, "then the business won't grow".

"It's negative to call them malls, they are living centres," Mr Miles said.

"We are all very cognisant to have the best offer and we are clearly focused on having a vibrant offer for our customers."

Vicinity Centre chief executive Grant Kelley, which co-owns and manages the country's biggest shopping centre at Chadstone in Melbourne's south east, said malls need to have a twist and some "sizzle" to keep consumers coming back.

"We have a responsibility to the community as malls are the community hub of the suburbs."

Chief executive of landlord Dexus Darren Steinberg said another issue facing the sector was over-supply.

"We have obviously built too much retail space," Mr Steinberg said.

"People are doing a lot of their spending online today and undoubtedly there will be more. We need to be careful about the future development of retail space, we need to develop less space and we need to develop in the right locations."

Australian womenswear brand Forever New has launched a standalone e-commerce site in the US, catering to increased demand from local customers with around 50 new products dropping online every week.

The website marks an expansion of the brand's presence in the US, where it currently sells through Nordstrom.com, as well as through concessions in Bloomingdales and Neiman Marcus.

“We are excited to be expanding in North America and a branded US website was the next step on our journey,” Carolyn Mackenzie, Forever New’s managing director, said in a statement.

“We have had a lot of demand for our product in the US so we are happy to give our US customers one more way to shop with us.”

Launching on Thursday, the US website features a range of styles currently available in North America, with about 50 new items being added to the site each month. It is branded under Forever New’s North American trading name, Ever New.

This is just the latest step in the Forever New’s global digital expansion, which sees the brand selling on Asos and Next in the UK, Zalora in Singapore and Zalando in Europe, and through its own recently relaunched global e-commerce site.

At the same time, Forever New continues to expand its global bricks-and-mortar presence. The fashion brand has more than 200 stores in Canada, Singapore, China, India, South Africa and New Zealand, and concessions in the US, Singapore and the Middle East. and plans to open a new store in November in Vancouver, Canada.

According to a story in the AFR in June, revenue from overseas operations accounted for 40 per cent of Forever New’s sales of around $300 million in 2018.

Mackenzie previously told Inside Retail that standalone stores in the US are not out of the question.

“[B]eing an agile and fast-moving business means there is always the possibility…” she said.

Broader transformation underway

The ramp-up overseas is just part of the multi-faceted transformation currently underway at Forever New.

Already this year, the retailer has unveiled two first-to-market digital initiatives – a reserve-in-store option and visually-similar product recommendation tool – and launched a “connected change room” pilot in its store in Highpoint Shopping Centre.

The retailer has also rolled out a plus-size range called Forever New Curve and a new high-end store concept designed by Hecker Guthrie, featuring terrazzo tiled floors, brushed brass detailing and fluted glass panels.

Luggage retailer Rimowa has opened its first pop-up in Australia, at Melbourne’s Chadstone shopping centre.

The 147sqm pop-up features the brand’s updated luggage collections, which include the original collection, the classic collection, the essential collection and the hybrid collection.

According to the luggage brand, its updated product line caters to contemporary travel’s most essential sizes and includes four collections with four cabin sizes, two check-in sizes, and three trunk sizes with updated features.

The new store will also showcase Rimowa’s new seasonal colour palette of sage, coral and slate for its essential collection.

Rimowa said the coral tone is inspired by Pink Lake in Western Australia; slate takes its hues from the chalky, gradient grey hues of Indonesian mines; sage reflects the green shades of the Lake District in northeast England.

Over its 182-year history, US luxury jeweller Tiffany & Co has become known for a series of icons connected to its storied name: its eponymous blue colour, for one, the film Breakfast at Tiffany’s and its signature engagement ring setting. But one thing the brand hasn’t been known for – until now – is catering to men.

Debuting on October 1 worldwide, Tiffany’s first comprehensive men’s collection will encompass everything from the watches, tie bars and cufflinks you might expect, to a made-to-order trophy ring inspired by the many sporting trophies the jeweller has made over the years.

There are also designs that build on artistic director Reed Krakoff’s Everyday Objects collection, such as a sterling silver shoe horn, ice tongs, a Swiss Army-style knife and a paper weight. The pièce de résistance here is a handcrafted solid sterling silver and 24-carat vermeil chess set (price available on request).

Over time, the company will add to Tiffany Men’s – the collection includes almost 100 items, ranging in price from about $295 to $22,000.

While it’s not the first time men’s jewellery has been available at Tiffany, it represents the first significant push for the brand into this area. It is one of a series of bold new moves from the veteran retailer, which this year opened the Blue Box Cafe in New York (and a facsimile pop-up in Los Angeles); a new flagship in Sydney and an exhibition in Shanghai, titled Vision & Virtuosity.

The company – like many luxury brands – is betting big on China and South Asia generally, with upgrades to 35 Chinese stores, and a major renovation to its Shanghai boutique, which will reopen in December to become the brand’s second-largest store after the New York flagship.

Tiffany & Co. is also opening its first stores in India, with a Delhi flagship launching later this year and Mumbai to follow in 2020. The drive for men’s jewellery is also seen as a way for the house to capitalise on this market.

New Zealand’s outdoor retailer Kathmandu has bought a piece of Australian surf legacy with the acquisition of iconic brand Rip Curl for $350 million.

The label was famously founded in 1969 on the Great Ocean Road at Torquay in Victoria where it had been privately owned until the announcement on Tuesday morning.

The brand was established by Brian Singer and Doug Warbrick and the headquarters will remain near Bells Beach.

Kathmandu offers outdoor clothing and camping gear to cater to the travel and adventure segment with specialty stores across Australia, Britain and New Zealand.

Rip Curl has a wide-reaching global footprint with a presence across Australia, Europe, New Zealand, Brazil, South East Asia and North America, producing clothing, highly technical wet suits and general swimwear.

“This is a fantastic opportunity for Kathmandu to grow and diversify,” the company’s chief executive Xavier Simonet said in a statement released to the ASX.

“The acquisition of Rip Curl transforms Kathmandu into a $NZ1 billion ($A930 million) outdoor and action sports company, anchored by two iconic global Australasian brands.”

He said the purchase of the iconic surf brand will allow the company to expand into new markets.

“Importantly, there is also strong cultural alignment between the two brands, underpinned by a shared focus on quality, innovation and sustainability,” Mr Simonet said.

Michael Daly will continue in his role as Rip Curl’s chief executive, who said he intends for the label to grow under the Kathmandu ownership.

“We are excited about the opportunity to partner with another iconic Australasian brand that shares our vision of creating high-quality functional products for outdoor and action enthusiasts,” he said.

Mr Simonet said he was pleased the surf label’s team will stay together and retain operational ownership.

“We wish to acknowledge the role that Rip Curl’s founders have played in building the iconic status of the Rip Curl brand internationally as well as its unique cultural identity,” he said.

How do they do it? Shares in Premier Investments were up another 5.8 per cent on Monday. It followed a share price jump of more than 20 per cent and a record dividend. And all from fashion and discretionary retail largely in Australia and Britain in the last 12 months, two markets plagued by the political uncertainty of an election and Brexit, never mind the retail doldrums.

The answer, in a word, is landlords. For all the retailing brilliance of Solomon Lew and his CEO Mark McInnes, it is the reshaping of leases, and reweighting of bricks and mortar against other ways to sell product, which stands out. Active management may be failing the financial investment markets, but it is the imperative for cash flow at Premier Investments, which owns Smiggle, Peter Alexander and fashion brands such as Just Jeans and Dotti.

“First, we manage our business very well,” says Lew, with careful emphasis before continuing. “The stores that are not profitable or stores that the landlords will not play ball with us in terms of what the market rental should be, we take pretty drastic action.

“This year alone we closed over 35 stores and we have closed 138 stores over the past six years. And you’ve seen our sales grow, so notwithstanding the fact that we can close stores, we grow our business year upon year.”

Both men beam as they explain how a brand like Just Jeans can grow in same-store sales under this strategy. Now together for eight years, they are immaculately turned out (as always), with ties and pocket squares carefully selected for their well-fitted suits. If anything, the soft retail market seems to have given them more leverage in their message to landlords — we want a constantly reviewed deal, or we may well close up shop.

“If you went to Chapel Street today”, says McInnes, “there is a Dotti store where we said to the landlord ‘give us a percentage of sales or we will close’. The landlord said no, and we said ‘fine’. We have closed. It is still vacant some six months on, so that landlord has lost all their income. And there are plenty of examples of that around the country.”

McInnes hastens to add they do not actually have a strategy of closing stores. This is a response to “unrealistic landlords”. He says: “What we’re seeking is the same capital and rental deal that they are offering to international companies that are coming into this country, like H&M and Zara and Uniqlo. If their centres are trading down 5 per cent, 10 per cent, or 15 per cent, we want rental discounts in line with the way those centres are trading. If landlords are offering our competitor 20 per cent, 30 per cent, 40 per cent discounts to renew leases, well we want those same deals.

“We have all the detail and all the data, we can talk to you by store or shopping centre and you need to be offering us the same types of deals that you’re offering other people. We will walk away from unprofitable stores and we have a viable, very profitable online channel that can pick up those sales at a much higher EBIT ­margin.”

Online is no idle threat and has delivered new leverage for Premier. As many other businesses struggle to grow online from a low base, Premier’s online sales were $148m in the last financial year, up almost a third. They now make up over 13 per cent of group sales.

The Premier strategy is even clearer in its newer international markets for Smiggle — both in rental negotiation and, as McInnes argues, in the new capital-lite model. “In September 2018 we announced four pathways to accelerated global growth: the launch of wholesale, a growth in concession, a growth in online and then — where the metrics made sense, and landlords took most of the risk — continued store rollout.

“We are now in 180 doors with six iconic retail partners in seven countries. All those strategies are capital-lite and are being delivered at far higher EBIT margins than our group average. That has led to a significant increase in our cash flow which enabled Sol and the board to consider a higher dividend.”

The capital-lite options have brought new negotiating power when combined with Premier’s clever positioning on leases. In 2014, the board deliberately secured opt-outs with British landlords. “We took a strategic view that we would want a break clause in our leases,” explains Lew. “So if there was a 10-year lease the majority of our leases have a five-year break clause, which allow us to renegotiate or move out of the store at very little cost.”

This year in Brexit Britain, consultant Cantor warns that discounting in retail is no longer an effective tool to encourage more shoppers. Forty per cent of all retail spend is now on discounted items, as compared with 30 per cent during the last recession. Premier has cut its cloth to suit the times, taking a $26m one-off hit to allow Smiggle to break leases. It is now agitating for new deals that match local retailers, which Lew argues are receiving massive concessions. “You name it, House of Fraser, Debenhams, Top Shop, Accessorize, Monsoon, Paper Chase, it goes on and on.

“Obviously, the UK is suffering as a result of Brexit, but there are players out there going into a type of administration called CVA, in America it is called Chapter 11. They can go into semi-administration and pay no rent or half rent, or percentage rent. All we are looking for down the line is to be able to get into those reductions in the rentals.”

Retail veterans Solomon Lew and Mark McInnes have put to bed doubts about Premier Investments' strategic shift for its valuable Smiggle brand, flagging a surge in sales this year as Smiggle lunchboxes and pencil cases start selling in 180 more stores overseas.

Premier shares posted their strongest gains for more than 12 years, rising as much as 23 per cent to a 12-month high of $19.30 on Friday, after Mr Lew and Mr McInnes said Smiggle's "capital-light" global expansion plan, unveiled last September, was beating their expectations and was likely to be more profitable than the previous strategy of opening hundreds of standalone stores.

Premier is setting up Smiggle concessions in United Kingdom and European department stores such as Selfridges and Harrods, selling Smiggle products on websites such as Amazon in Europe, and selling a wholesale range to retailers in Canada, South Korea, Thailand, Indonesia, the Philippines and the United Arab Emirates.

While Smiggle sales rose only 4.6 per cent to $306.5 million in 2019, a fraction of the growth in past years, Premier said $17 million of recent wholesale orders from retail partners in these six countries would boost sales as much as 25 per cent in the first half of next year and there was scope to double the number of wholesale outlets from 180 to 350 in one to two years.

Smiggle sales in the first six weeks of the new financial year rose 5.2 per cent, up from 4.4 per cent in the July half, despite Brexit chaos in the UK and tough retail conditions in Australia.

Premier remains confident the new strategy will lift Smiggle sales to $450 million in calendar 2021 or calendar 2022.

"Smart investors really understand this wholesale business and the value that can be created," Mr McInnes told the Weekend AFR after unveiling a better-than-expected 11.5 per cent increase in underlying retail earnings to $167.3 million for the year ending July.

"They know the EBIT margin for wholesale sales is greater than the EBIT margin of [retail sales] ... we've kept the brand and [the retail partners] have taken all the distribution risk," he said.

"When you add that to a record Peter Alexander result and record apparel result and add the fact we've been negotiating well with landlords –  it's all those things, not one," he said.

While most clothing retailers are struggling to maintain sales, Premier's clothing brands posted 7.8 per cent same-store sales growth, offsetting the effect of 35 store closures to lift retail sales by 7.5 per cent to $1.27 billion.

"[There's] a lot to like in this result with Peter Alexander, the core brands, and online sales outperforming," said Airlie Funds Management portfolio manager Matt Williams.

"Smiggle sales consolidated in Australia and the UK but growth from Asia was fantastic [and] management seem very excited about the Smiggle wholesale strategy, and if the longer term sales target is met then I think Premier will continue to be a very good investment," he said.

Mr McInnes said the results reflected better products, strong cost control and marketing rather than a recovery in consumer spending in Australia, where recent stimulus in the form of tax and interest rate cuts had yet to boost sales.

"Macro conditions are still quite difficult – it doesn't feel there's buoyancy," he said.

"But you'd have to say at some point in time people will stop saving and start spending – we haven't seen that yet but hopefully that will be a future tailwind for us."

One of Premier's strongest performers was Peter Alexander, where sales rose 13.3 per cent, bolstered by nine new stores and expanded plus-size and children's sleepwear ranges. The sleepwear chain plans to open between 20 and 30 stores in the next two years.

At 49-year-old denim chain Just Jeans, sales rose 13.7 per cent, despite a net two store closures, and Jay Jays sales were up 6.7 per cent even though a net three stores closed.

In women's fashion, Portmans' sales rose 3.5 per cent and Jacqui E's 3.3 per cent, but Dotti's sales slipped 0.1 per cent as a net six stores closed.

Credit Suisse analyst Grant Saligari said the Smiggle growth plan was well ahead of market expectations and Premier had managed to increase profits strongly without investing additional capital.

"You're getting growth without putting capital into the business – that's valuation accretive," he said.

Analysts also believe there is potential for Premier to cut rents in Australia and the UK, where Smiggle leases have break clauses enabling the retailer to renegotiate 10-year leases after five years. Premier booked $25.8 million in one-off costs to clear the way to break leases early on about 134 Smiggle stores.

Mr McInnes said Premier was loath to close profitable stores but, now that it had other options including online, concessions and wholesale, it would do so unless landlords came to the party.

"We just want landlords to offer us a level playing field," he said.

Online sales rose almost 32 per cent to $148 million after growing 65 per cent last year and further growth is expected this year. Premier is in talks with Alibaba to sell Smiggle products in China.

"Importantly, that opportunity isn’t included in our $450 million [Smiggle sales target], it’d be in addition to that," Mr McInnes said.

Premier's bottom-line net profit rose 27.7 per cent to $106.8 million, compared with $83.6 million in 2018, when the company wrote down the value of Just Jeans, Jay Jays and Dotti by $30 million.

The bottom-line result included a $18.9 million profit from Premier's 28 per cent stake in appliance maker Breville, which is worth $239 million on the books but has a market value of $692 million. Premier also owns a 10.8 per cent stake in Myer worth $48 million, half what it paid two years ago.

Premier increased its final dividend 12.1 per cent to 37¢, payable on November 15, taking the full-year payout to 70¢ a share compared with 62¢ in 2018.

Large-scale retailers such as JB Hi-Fi, Chemist Warehouse, Bunnings, IKEA and Harvey Norman have been given the green light to collectively negotiate cheaper energy prices from suppliers.

The Australian Competition and Consumer Commission (ACCC) today announced a draft determination permitting members of the Large Format Retail Association (LFRA) to begin accepting tenders.

Big box retailers have long been pushing for the ability to collectively bargain for cheaper electricity in response to increasing energy costs, arguing a pooling of demand would allow the group to tender for more competitive deals from suppliers.

Members of the group span across 4096 retail locations across Australia and collectively spent more than $200 million on electricity in 2018. The association claims benefits of the move include potential cost savings for consumers, along with increased competitiveness for both members and energy companies.

''Members of the buyers group could potentially pass on the electricity cost reduction in the form of lower prices.''

LFRA chief executive Philippa Kelly

While the competition watchdog's final assessment is still to come, ACCC Commissioner Stephen Ridgeway gave the retailers permission to start negotiations, believing it will lead to greater competition in the energy market.

"We propose to allow this joint tendering because we expect it will lead to more competition between suppliers for the group’s combined electricity demand," Mr Ridgeway said.

"Collectively tendering is also likely to save the retailers time and money compared to individual negotiations for electricity supply."

Allowing the retailers to negotiate would be unlikely to cause "significantly public detriment" as the LFRA's members electricity demand makes up a small proportion of demand across Australia.

However, additional members joining the group must not result in the LRFA's annual consumption of electricity in any state or territory exceeding 1 per cent.

LFRA’s chief executive Philippa Kelly welcomed the interim decision from the ACCC, saying it brought the group closer to finalising the first nationwide collective bargaining and joint purchasing arrangement for retailers.

"Energy is usually the third largest expense for Australian businesses. Now, the businesses in this submission will get on a more sustainable financial footing as their cost of electricity is reduced," Ms Kelly said.

"Members of the buyers group could potentially pass on the electricity cost reduction in the form of lower prices, invest in improved product offerings, expanding their product range or employ additional customer service staff with the expected savings."

The ACCC will issue its final determination in November.

Latitude Financial has forecast a cash net profit of $278.1 million for this year in broker reports which have been presented to potential investors as Australia's largest non-bank lender prepares to float as early as next month.

The confidential Goldman Sachs report said Latitude's board was targeting a dividend payout ratio of 55 per cent to 75 per cent of cash net profit "and management expects future dividends to be franked".

People involved in the initial public offering (IPO) preparations, who are not authorised to speak about it ahead of a final decision on the float plans, have said a decision is expected within days. It means a prospectus for the float could be available by next week ahead of a listing date in October.

Latitude Financial has forecast a cash net profit of $278.1 million for this year in broker reports which have been presented to potential investors as Australia's largest non-bank lender prepares to float as early as next month.

The confidential Goldman Sachs report said Latitude's board was targeting a dividend payout ratio of 55 per cent to 75 per cent of cash net profit "and management expects future dividends to be franked".

People involved in the initial public offering (IPO) preparations, who are not authorised to speak about it ahead of a final decision on the float plans, have said a decision is expected within days. It means a prospectus for the float could be available by next week ahead of a listing date in October.

In a further sign the consumer finance business is gearing up for another potential float after it pulled the plug on a listing plan last year, investment bankers have started to contact fund managers, and analysts are set to hold briefings with potential investors next week.

The activity comes after Latitude, in a deal with Harvey Norman this month, announced a plan to slash costs for retailers in the buy now, pay later market, and it is likely investors will take the company's push into the fast-growing segment into account when considering the company's value.

The Goldman report said peer companies for Latitude's "traditional" lending businesses traded on a price to earnings ratio of between 9 to 15 times, which would equate to a valuation of between $2.5 billion and $4.2 billion. The report also highlighted Latitude's push into the buy now, pay later sector, where stock valuations are much higher.

Fund managers who did not want to be named because float preparations are still confidential said they expected Latitude management to arrange meetings with the market shortly, to gather feedback on the potential pricing of the stock.

Latitude, which did not comment, is owned by private equity firm KKR, Deutsche Bank, and Varde Partners, an alternative asset adviser.

The firm cancelled IPO plans last year, which would have valued the company at $5 billion and raised $2 billion from the market, while it changed chief executives and awaited the final fallout from the bank royal commission.

Ahmed Fahour, a former Australia Post chief executive and senior banker who took the top job in October last year, declined to talk about the prospect of a float earlier this month.

“As I’ve said before, it's really not my decision, it is a shareholder decision," he said.

"My job is to make this company IPO ready.”

The broker research said Latitude was a capital-light business and benefited from having low funding costs, no branch network to support, and low customer acquisition costs in its payments and instalments business.

The key risks cited were regulatory factors, including a "step change" in compliance standards in Australia in recent years and economic factors including the level of unemployment and interest rates.

Retail powerhouse Premier Investments has joined Myer and David Jones in taking action against landlords over unfair and "unrealistic" lease terms as the Brexit uncertainty affects its expansion plans in the UK.

The Australian-based retailer, whose brands include Just Jeans, Smiggle, Peter Alexander, Jay Jays and Dotti, told investors at its full-year results on Friday it had no qualms about walking away from leases, even in high-profile locations.

Chief executive Mark McInnes said while Premier was not in the business of closing stores, it wouldn't hesitate to do so in cases where landlords refuse to give the company the same rent deals offered to competitors or international retailers.

"Many landlords have offered capital incentives and lower rent to attract international fashion companies and we have been asking for exactly those same capital deals and rental deals," he said.

"It's not our objective to close stores, but if landlords don't provide realistic rents ... we will."

Premier's stance follows similar threats from department store giants Myer and David Jones, which are currently renegotiating leases to shrink store sizes and cut costs.

''It's not our objective to close stores, but if landlords don't provide realistic rents...we will.''

Chief executive Mark McInnes

Mr McInnes was also confident the company's burgeoning online division would pick up the slack for any sales lost through its lease exits, saying not only were online sales up 31.7% to $148.2 million, but they were "much more" profitable than brick and mortar sales.

Premier's strict action on leases has resulted in 35 store closures over the last financial year but has also helped the company achieve its eighth straight year of earnings growth, with net profit after tax (NPAT) for the year up 27.7 per cent to $106.8 million.

Overall sales were up 7.5 per cent to a record high of $1.27 billion, and like-for-like sales improved 4.2 per cent. Premier shares soared 16.2 per cent, closing at $18.26.

Brexit and Boris bite

Economic and political instability from Brexit has forced the company to re-assess its retail leases across its 145 Smiggle stores and concession stands in the UK, with Premier ending a number of lease agreements early in order to renegotiate cheaper rents.

This incurred a one-off cost of $25.9 million, with directors saying the UK retail environment was "distressed".

Mr McInnes said while it was difficult to predict when conditions might improve, he was confident the UK's economy would recover in due course.

"Great Britain has been through many, many trials and tribulations in the last hundred years, including a couple of wars," he said.

"I'm sure when all this mess is over it will bounce back."

Despite the Brexit-induced issues, Smiggle achieved record global sales for the year of $306.5 million. Sleepwear brand Peter Alexander also reported record sales, up 13.3 per cent to $247.8 million.

Premier chairman Solomon Lew dismissed claims Australian retail was recessionary, saying the company was outperforming in a "failing or struggling" market despite closing 35 stores.

"If you look at our sales growth, closing stores is not hurting us," he said. "Obviously we're doing something right. Our recipe is a lot better than the competitions."

However, the company said it had still seen no indication of consumers spending their income tax cuts, despite economists' predictions Australians were opening their wallets.

Despite his 10 per cent stake and historical opposition to Myer's operations, Mr Lew remained largely quiet on the department store, saying only he was "not sure" on the company's strategy and could not see any "green shoots" despite the company's profitable year.

Macquarie analyst Shaun Weick labelled the result as "strong", backing up Lew's claim Premier's brands had been outperforming a challenging retail market.

Premier will deliver shareholders a record final dividend of 37 cents, taking the full-year dividend up 12.9 per cent to 70 cents.

Struggling discount retailer The Reject Shop has appointed Michael Freier as company secretary, effective immediately. Freier is a lawyer who has been general counsel of The Reject Shop since August 2016 and assistant company secretary since April 2018.

Darren Briggs has resigned as company secretary but will remain chief financial officer. 

The company is still without a chief executive officer. CEO Ross Sudano resigned in May of this year, and general manager of the supply chain, strategy and innovation Dani Aquilina was appointed acting CEO. 

Chairman Bill Stevens will retire in October after the annual meeting.

For FY19, The Reject Shop booked a $1.5 million trading loss compared with a $16.6 million profit for the previous full financial year, as well as an after-tax $15.4 million writedown on assets and goodwill.

It has breached fixed-charge cover covenants in June and will do so again in September notwithstanding modest gearing and a net cash position of $6.8 million at June 30.

It has undergone a financial review by KPMG and is closing or selling off a  number of underperforming stores.

Vicinity finds chief people officer

Vicinity Centres has announced the appointment of Tanya Southey as chief people and culture officer following an international search. She will begin with Vicinity in late October.

Southey joins Vicinity with more than 20 years’ executive experience across human resources and culture transformation, including as human resources director at Carlton United Breweries, group general manager, people, at Jetstar and vice-president, human resources, at GE Money.

She will report to CEO and managing director Grant Kelley and be part of Vicinity’s executive committee. 

Southey has also had an extensive career in executive coaching. She lives in Melbourne with her family and will be based at Vicinity’s national office in Chadstone.

Vicinity is a real estate investment trust company specialising in ownership and management of Australian shopping centres, with approximately $6.9 billion of shopping centres under management.

As well as a number of regional centres, it owns premium malls like Chadstone in Melbourne and The Strand Arcade in Sydney. It reported a net profit after tax of $346.1 million for the year to June 30, a 72 per cent slump from the previous year’s $1.218 billion profit.

Cash Converters CFO resigns

Cash Converters International has announced that chief financial officer Martyn Jenkins has resigned, effective immediately. He joined the company in 2013 and during that time held a number of roles in the UK and Australia.

Katrina Grose will assume the CFO role on an interim basis while the company undertakes an internal and external search for a permanent appointee to the role.

Grose is a chartered accountant and a chartered secretary and has held the role of group financial controller for the company since 2015.

Cash Converters International is an Australian retail pawnbroking company which also provides payday loans. It has international franchise operations in many areas such as the US and Canada, the Middle East, Western Europe, Southeast Asia and New Zealand.

Vicinity Centres (Vicinity) today announced the appointment of Tanya Southey as Chief People & Culture Officer (CPCO) following an international search. Ms Southey will begin with Vicinity in late October 2019.

Ms Southey joins Vicinity with more than 20 years’ executive experience across human resources and culture transformation, including as Human Resources Director at Carlton United Breweries, Group General Manager, People at Jetstar and Vice President, Human Resources at GE Money.

In her new role, Ms Southey will report to CEO and Managing Director, Mr Grant Kelley and be part of Vicinity’s Executive Committee. “We are thrilled to have attracted someone of Tanya’s calibre to Vicinity, her passion for supporting people and teams to achieve their full potential will be of enormous benefit to our people and to the execution of our strategy,” Mr Kelley said.

Mr Kelley said Ms Southey also brought with her an extensive career in executive coaching and was passionate about creating strong organisations that can achieve high performance not only through their products and services, but through creating collective mindsets, values and attitudes.

“Tanya’s deep experience in human resources and transformation combined with her expertise leading and coaching people, uniquely qualifies her to continue our transformation into a high-performance culture.

“I know that Tanya is looking forward to joining our team and supporting our people during a dynamic and transitional time for our business and the retail property industry,” Mr Kelley said.

Mr Kelley said that Ms Southey’s appointment formed part of the new Executive Committee structure to advance Vicinity’s strategy to create a portfolio of market-leading destinations, realise mixed-use opportunities and expand our wholesale funds platform.

Ms Southey lives in Melbourne with her family and will be based at Vicinity’s national office in Chadstone.