News

Best & Less Group (BLG) and its new majority shareholder BB Retail Capital (BBRC) have appointed Ray Itaoui as the permanent CEO.

Itaoui is the former owner of Sanity alongside its founder Brett Blundy, with both owning capital market firm BBRC.

Consequently, the recently proposed CEO appointment of Erica Berchtold, who currently leads The Iconic, will no longer go ahead. Berchtold was expected to start as CEO of BLG on September 4.

Itaoui has operated and invested in Australian and global retail businesses for over 20 years, including Sanity, Bras N Things, Honey Birdette, Mr Vitamins, MakeUp Cartel and Universal Store.

He also served as the Chairman of Sanity, Bras N Things, Honey Birdette, Mr Vitamins and as an independent non-executive director of ASX-listed Aventus Group.

“I am excited to lead BLG and committed to taking the decisive action necessary to position the company for the current challenging trading conditions,” Itaoui said.

“I believe strongly in BLG’s potential to extend our leadership position in the value segment, leveraging our unique offer, privileged relationship with our customers, and the capability of BBRC.”

Itaoui was initially appointed as interim CEO of the company after it passed the main hurdle of BBRC's takeover process. The now former BLG directors associated with Bignor and Allegro - now former majority shareholders - resigned from their positions, with Jason Murray resigning from his position as Executive Chair.

BBRC now holds a voting power of approximately 71.54% in the company as of June 21, with existing minority shareholders still able to sell off their shares until June 30 next week. 

In a recent update, BLG downgraded its net profit expectations to $3.6-$4.2 million, significantly down from its $18-20 million prediction earlier this year. .

Chair of the BLG Independent Board Committee Stephen Heath told shareholders that this decrease in net profit will have an adverse impact on the quantum of any final dividend for FY23. 

“In light of the deterioration in BLG’s trading performance, as well as the likely reduced trading liquidity of BLG shares given the Bidder's increased Voting Power as a result of acceptances received under the Offer, the BLG Independent Board Committee (comprising of Stephen Heath, Melinda Snowden and Colleen Callander) (IBC) believes that the BLG share price may fall materially following the close of the Offer.

“Accordingly, the IBC recommends that those shareholders who have a shorter-term horizon for their investment in BLG or who have concerns about their future ability to exit their holdings should 'accept now'.

“Shareholders who have a longer-term investment horizon and are comfortable in remaining a minority shareholder in BLG may consider ‘taking no action’.”

IBC encouraged existing shareholders to read the risks of remaining a minority shareholder outlined in BLG’s Original Target’s Statement last month. 

In a statement released today (June 22), BLG said if BBRC’s voting power exceeds 75% of total shares on issue, “it may be able to delist the company from ASX following the fulfilment of certain requirements set by the ASX.”

As of its 2022 annual report, BLG operate 182 Best & Less stores across Australia. The Group also owns New Zealand value apparel brand Postie, which operates 61 stores across NZ.

The company's revenue for FY22 was $622.2 million.

When the post-Mother’s Day consumer spending slump hit large areas of the retail community, the initial reaction from many retailers was that surely this was an aberration.

Sadly, my task today is to follow up my May 31 alert of the downturn with a further alert that not only has the post Mother’s Day downturn become entrenched, but the downward sales slope has got steeper.

Discretionary retailers are looking at a slump in sales of well over 10 per cent and sometimes reaching the high teens.

As I will describe below, we are also looking at a potential fundamental change in the attitude of Australians to the economic conditions in which they live.

This change in economy will test the increasing view of younger staff members that lifestyle is more important than financial success obtained from longer working hours, which drove their parents and grandparents.

Many listed retailers are now alerting shareholders to the seriousness of the dip.

While a similar fall took place in the early weeks of the pandemic in 2020, sales then recovered quickly and a three-year boom replaced initial despondency.

But this time there is no boom on the horizon and many retailers are starting the financial year overstocked and overstaffed.

To make matters worse, the government’s inflation boosting policies mean the cost of doing business continues to escalate rapidly because inflation is entrenched in areas like energy, labour and in many cases rent.

It’s a perfect storm for those retail sectors that depend on discretionary spending. And for food retailers, consumers are switching to lower cost and lower margin products at an unprecedented rate.

As I discussed on Wednesday, if the government had applied the economic brakes to help the Reserve Bank control inflation, we would now not expect further interest rate rises and be looking forward to a rate fall.

Instead, as I pointed out, governments (including states) stimulated and moved to lower productivity, so the central bank is confronted with low unemployment and entrenched inflation and is under pressure to keep increasing interest rates, thus compounding the sales falls and community misery.

Remember that the misery is being applied to only some two thirds of the population — those with sizeable mortgages and who are renting.

I am not calling an Australian recession because the overall economy is boosted by minerals and agriculture, plus the spending of those whose finances make them immune from the misery.

But for the two thirds of the population in the eye of the storm it will be a severe recession and fear of what is ahead is now changing the attitude of Australians to the national outlook.

The ANZ-Roy Morgan Consumer Confidence index has now spent 16 straight weeks below the mark of 80, the longest stretch at that level since the index began on a weekly basis in 2008.

But ANZ senior economist Adelaide Timbrell believes that hidden in those figures is a more fundamental change in the Australian community. I have reached similar conclusions based on the experience of retailers.

Timbrell points out that confidence about “current financial conditions” has slumped 10.6 points in the past four weeks.

Last week was the third consecutive week with ‘future financial conditions’ below 90, the longest it has been this low on record.

It’s that four-week slump in “current financial conditions” outlook that has been translated into consumer spending.

And it will get worse because the attack on contract labour by the current government is also an attack on those with a second income to pay their mortgages.

Watch out banks.

When companies set their budgets for 2023-24 around March, sales were a little soft but holding well, and so there was no panic.

Boards and chief executives over a wide area now suddenly find their budgets, plus the incentives that go with them, are totally wrong. This can create a sense of hopelessness among staff.

A whole new set of realistic financial forecasts need to be established along with very different strategies to cope with the new environment.

For most CEOs this will be the first time they have had to rewrite budgets and not all will be good at the sudden implementation of new strategies.

And while debate rages on the contracting front what should have been a nation uplifting referendum on recognising the role of Aboriginal and Torres Strait Islanders in our history, the referendum has been hijacked by the wording of the proposed constitutional measures. Many leaders of the indigenous communities believe a “Yes” vote will be result in a dramatic shift in power away from non-indigenous people.

The debate will be ferocious and just what the nation did not need at this time.

Strong spending on cafe, restaurant and takeaway food is driving retail turnover growth, but food inflation and rising prices overall are clouding the figures.

Retail spending data from the Australian Bureau of Statistics released on Thursday showed a 0.7 per cent jump in turnover in May across as shoppers looked for bargains at mid-year sales.

Spending on food and eating out also helped lift May’s numbers, with cafes, restaurants and takeaway food services up 1.4 per cent to hit a record level of $5.4 billion for the month.

Industry experts were cautious about the numbers, however, observing that inflationary pressures and price increases were having an impact on monthly turnover figures for food and dining.

“It’s an essential item, we all have to eat... but there is no doubt that unavoidable price increases are having a part to play in that sector,” Australian Retailers Association chief executive Paul Zahra said.

Monthly consumer price index data released on Wednesday showed inflation had flattened slightly to an annual reading rise of 5.6 per cent in May, though food and non-alcoholic beverage prices had jumped by 7.9 per cent in the past 12 months.

Quick service food retail operators have been upbeat about trading conditions despite consumer spending concerns.

Shares in major local KFC franchisor Collins Foods have surged by close to 16 per cent so far this week, after the company reported a better-than-expected full-year financial result. Its network of more than 200 Australian KFC restaurants hit $1 billion in annual revenues for the first time.

Collins Foods boss Drew O’Malley said the business had been trying to minimise product price increases wherever possible to show diners that its restaurants remained good value.

“We think the decision not to seek a full offset to short-term cost pressures via menu pricing has been the right decision for the consumer,” he said.

Zahra said takeaway food options were well-placed as consumers “traded down” to more affordable eating-out options.

“In quick-service restaurants, what we are seeing is they are doing well [as] we are seeing consumers going down the price hierarchy,” he said.

But the retailers’ association is cautious about the spending outlook overall as sales continue to slow across household goods, clothing and in department stores.

Turnover among household goods retailers jumped by 0.7 per cent to $5.7 billion in May, but it’s down by 4.4 per cent since May 2022.

On Wednesday, electronics retailer Harvey Norman flagged a pre-tax profit slump of at least 25 per cent for the 2023 financial year, prompting retail analysts to warn the worst is yet to come.

Citi’s equities team said the outlook for further interest rate rises had worsened since the beginning of the year, making the spending outlook tougher.

“We expect conditions to worsen given the further roll-off of fixed rate mortgages and further interest rate hikes,” Citi said in a note to clients.

Australian retail turnover rose 0.7% in May 2023 to $35.5 billion, Australian Bureau of Statistics (ABS) data revealed.

This follows a flat result in April 2023 and a 0.4% rise in March 2023, with year-on-year retail spending up 4.2%.

Despite the 0.7% rise from April, clothing, footwear and accessory sales dropped alongside department store sales at 0.6% and 0.5% respectively. Marking the only drops across all retail, the two sectors slipped by $28.8 million (-$18.5 million for fashion and -$10.3 million for department stores).

This follows a rise in April for both sectors when sales were boosted by increased spending on clothing items due to cooler and wetter-than-average weather.

According to ABS head of retail statistics Ben Dorber, the overall rise in sales was buoyed by lifts in discretionary spending and food retail, including eating out.

“This latest rise reflected some resilience in spending with consumers taking advantage of larger than usual promotional activity and sales events for May,” Dorber said.

Other retailing recorded the largest rise at 2.2%, ABS reported, with turnover growing strongly across a variety of businesses, including online-only retailers, florists, and pharmaceutical and cosmetics retailers. An early start to some end-of-financial-year sales events boosted turnover along with Mother’s Day and the ‘Click Frenzy Mayhem’ sales event.

“Just as we saw during the November Black Friday sales last year, consumers appeared to take extra advantage of discounting during large sales events in May in response to cost-of-living pressures,” Dorber said.

National Retail Association CEO Greg Griffith said despite an overall tightening on discretionary spending, Australians seem ready to splurge when the occasion arises or during sales promotions.

However, the good news may soon end as Griffith warned the 5.75% payroll cost increase that goes into effect on 1 July could push inflation higher and weaken retail trade in the coming months.

“The wage increase has dampened any hope of the Reserve Bank pausing interest rates next month, which will further injure consumer confidence,’’ Griffith said.

Meanwhile, Australian Retailers Association (ARA) CEO Paul Zahra noted that household goods sales have experienced a decline over the last six months. The sector is currently down 4.4% year-on-year compared to May 2022, despite a 0.6% rise on April 2023.

Zahra said he expects this to be a bellwether for most consumer spending in the months ahead.

“It’s important to remember that cost-of-living pressures typically have a lag effect on retail – which is why we’re seeing a gradual softening in spending,” he said.

“Clothing and department stores are still showing modest growth, but this is mostly driven by early promotional activity and cooler than average temperatures.”

Zahra said cost-of-living and cost-of-doing-business pressures remain the greatest concern for retailers.

“While we’re seeing a softening in spending, retailers are simultaneously feeling the pressure from increasing operating costs across the board,” Zahra said. “We are now experiencing a collision between the cost-of-living crisis and a cost-of-doing business crisis”

Across the states and territories, retail was up in all states and territories except Tasmania, which was down 0.1% on the prior month. The Northern Territory recorded the largest rise of 1.6% and is now its highest level

“Conditions for small businesses are less favourable than their larger counterparts,’’ Griffith said.

“The recent Federal Budget has delivered on some cost-relief measures such as the Small Business Energy Incentive and the continuation of the instant asset write-off. However, there is still a need for ongoing government support for the retail sector.”

The Iconic has appointed Jere Calmes as its new chief executive officer. 

Calmes has rejoined parent company Global Fashion Group (GF) after a three-year tenure as chief of Lamoda, which GFG sold in late 2022. Calmes led Lamoda to grow net merchandise value (NMV) by over 140% to ~€1.3bn, with profitability and positive cashflow since 2021.

Under his leadership, active customers reached nearly four million, with order frequency increasing to over five times per year. During his tenure, Lamoda grew marketplace share of NMV by over 45% and increased NPS to over 80%. 

GFG CEO Christoph Barchewitz said The Iconic is poised for the next phase of growth with 2.2 million active customers.

"We’re extremely pleased to have Jere rejoin GFG as CEO of our ANZ business. His impressive track record in fashion e-commerce and adjacent sectors, leading sizable consumer-facing operations, make him an ideal fit for The Iconic.

"Jere is also familiar with the business and the significant opportunities ahead. I am really looking forward to working with him again and am confident he will continue building on The Iconic's success."

Calmes said his focus will be enhancing The Iconic's position in the region through its fashion and lifestyle assortment and customer experience, while transitioning it into a comprehensive platform business.

“I am honoured to be joining The Iconic and working with such a professional and dynamic team once again, both in Australia and across GFG.

"As one of the most loved e-commerce platforms in the region, offering the strongest assortment of local and international brands, 1 the team has done an amazing job to evolve the business and I can't wait to play a part in this fascinating future.”

Outgoing CEO Erica Bertchtold welcomed him to the role.

“While it is bittersweet to be leaving The Iconic, I am delighted to hand over the reins to Jere who has been a trusted colleague for over three years as part of the GFG executive team. I am confident Jere and the team will take The Iconic to new heights and I look forward to welcoming him soon.”

The Best & Less Group Board of Directors have appointed Ray Itaoui as a director of the company and Executive Chair.

Itaoui will assume the responsibilities of CEO for a transitional period until Erica Berchtold joins BLG as CEO, expected to be in September 2023.

The BLG directors associated with Bignor and Allegro - now former majority shareholders - have resigned from their positions, with Jason Murray resigning from his position as Executive Chair.

Itaoui is the former owner of Sanity alongside its founder Brett Blundy, with both owning capital market firm BB Retail Capital.

For over 20 years, Itaoui has operated and invested in Australian and global retail businesses including Sanity, Bras N Things, Honey Birdette, Mr Vitamins, MakeUp Cartel and Universal Store.

He also served as the Chairman of Sanity, Bras N Things, Honey Birdette, Mr Vitamins and as an independent non-executive director of ASX-listed Aventus Group.

As of its 2022 annual report, BLG operate 182 Best & Less stores across Australia. The Group also owns New Zealand value apparel brand Postie, which operates 61 stores across NZ. 

The company's revenue for FY22 was $622.2 million. 

Mecca Brands, the cosmetics empire run by Jo Horgan and Peter Wetenhall, recorded revenues of $688.9 million in the 12 months to the end of December 2021, accounts filed with the regulator this week show.

That revenue figure was more than 20 per cent higher than the previous year, and suggests they are significantly higher today, given Mecca’s aggressive overseas expansion and a new flagship store set to open in Melbourne this year.

The growth of Mecca, founded in Melbourne in 1997, has underpinned the wealth of Ms Horgan and Mr Wetenhall. The Financial Review Rich List put the pair’s fortune this year at $778 million, up 7 per cent. Ms Horgan and Mr Wetenhall were each paid $10 million in dividends in 2021.

As a private company, Mecca does not regularly disclose its earnings. But accounts filed with the Australian Securities and Investments Commission on Wednesday show the company recorded a $23.5 million profit in 2021, down marginally from a $25.7 million profit a year earlier.

That was because costs rose along with the higher revenues.

Mecca also had debts of $185.9 million, down from $197.4 million in 2020.

The accounts reflect the impact of the COVID-19 pandemic, and Mecca said it had closed some of its stores during the year.

“As a result of temporary closures within the retail network, management has been working closely with landlords to manage rental agreements and related rental costs,” Mr Wetenhall wrote in the filings.

“Further, the business experienced a significant shift to the online channel, which has contributed to the underlying financial performance”.

Mecca has more than 100 stores in Australia and New Zealand, a Chinese retail presence on TMall and a Sydney CBD flagship store that opened in 2020. It is developing a two-storey Melbourne CBD outlet, which is expected to be the largest beauty store in the Southern Hemisphere when opened.

Ms Horgan has previously distanced herself from suggestions that the retailer could one day list on the ASX.

“I think having a private business allows you to have one focus, and that is the customer,” she told The Australian Financial Review in April. “I think as soon as you become a publicly listed business, you have a responsibility to shareholders, of which there are usually many. And I think that takes up a lot of headspace and time.”

Customers faced with the rising cost of living and higher interest rates are spending less at bedding and furniture group Adairs, which warned its annual profits will be hurt after sales eased this quarter.

Adairs, which is due to release its annual results on August 21, is the latest retailer to flag on Friday that consumer spending is drying up, following Wesfarmers chief executive Rob Scott’s warning this week that “the honeymoon is very much over”.

Jeweller Michael Hill International suffered a 3.5 per cent drop in sales over the half-to-date, blaming a softening in consumer sentiment in Wednesday’s after-market confession.

In late May, youth apparel group Universal Store warned subdued trading will persist into fiscal 2024 as its customers battled rent increases and student debt, triggering a 25 per cent plunge in its share price.

“After a solid sales performance in the first half of fiscal 2023, the impact of rising interest rates and higher cost of living has created a more subdued trading environment since April with lower traffic observed both in stores and online,” Adairs’ trading update said.

The company declined to comment further as its shares hit a fresh three-year low and tumbled as much as 18 per cent in Friday’s session. They lost 16 per cent to $1.58.

Adairs has three brands – namesake bedding chain Adairs; Furniture on Focus, which it acquired in December 2021; and online-only homewares brand Mocka.

The group pared back its guidance for annual earnings before interest and tax to between $62 million and $65 million, compared to its earlier guidance of between $70 million and $80 million.

Sales forecasts for the financial year have fallen to between $616 million and $622 million, from its previous range of between $625 million and $665 million. Even its revised range will put the group on track to beat the record $564.5 million achieved in 2022.

Adairs also pulled back its capital expenditure guidance to between $12 million and $13 million, from up to $15 million previously flagged. Group gross margin is still expected to be ahead of the second half of financial year 2022, and group inventory will finish below December 31 levels.

Morgans head of research Alexander Mees said Adairs just started its mid-year sale and “we suspect the early indications are not positive”.

Sales fell 3.4 per cent from the previous year over weeks 27 to 48. Year-to-date sales growth is 5.2 per cent measured from weeks 1 to 48.

Focus on Furniture was down 10.9 per cent on the previous year’s sales for weeks 27 to 48. Its year-to-date sales are still in growth territory: up 5.4 per cent on the previous year.

Sales for online furniture shop Mocka slumped 23.8 per cent since April compared to the previous year, but the division hadn’t been performing as strongly – its year-to-date sales growth is down 25.5 per cent on the previous year. The company had said earlier that the online-only homewares business was normalising as shoppers return to its bricks and mortar stores.

Australian retailers have seen a drop in online spending by $262 million in April 2023 to $3.3 billion, data from the Australian Bureau of Statistics revealed.

In seasonally adjusted terms, total online retailing sales were down by $49 million to $3.7 billion in April.

ABS notes that its seasonally adjusted estimates are produced by removing seasonal patterns from the original estimates.

Seasonally adjusted online sales fell by 1.3 per cent (-$49.0m) following a fall of 3.0 per cent (-$118.3m) in March 2023.

Original online sales in April fell by 7.2 per cent (-$262.2m).

Non-food online sales were down by $31.2 million in seasonally adjusted terms to $2.6 billion, while food sales in comparison dropped by $17.9 million to just over $1 billion.

In original terms, the proportion of online sales to total retailing fell from 10.5 per cent in March 2023 to 10.0 per cent in April 2023. According to the ABS, this proportion is the lowest since April 2022, when online sales also made up 10.0 per cent of total retailing sales.

Also in original terms, the proportion of online non-food retailing sales to total non-food retailing fell from 16.6 per cent to 16.1 per cent. The proportion of online food retailing sales to total food retailing fell from 5.7 per cent to 5.3 per cent.

US giant Amazon is projected to reach $5.5 billion in Australian turnover next financial year, and will keep thriving as more shoppers seek better value for money, says broker Jarden.

Ben Gilbert, who heads the Jarden research team, said a perfect storm was brewing for Amazon to gain more share of consumers’ wallets propelled by a weaker macroeconomic backdrop and more customers doing price comparisons.

“Amazon is maintaining momentum in a slowing market, taking greater than 10 per cent of incremental sales excluding food. Amazon thrives as consumers seek out value, they research more, with Amazon’s range and pricing putting it as a first point of call,” he said.

Mr Gilbert said the sectors most at risk remain office, electronics, fashion, house and garden, and recreation. In Australia, Amazon’s penetration and Prime membership take-up was high, suggesting scope for material growth ahead, he added.

The e-commerce giant has more than doubled its operational footprint in the past year after the launch of its first robotic fulfilment centre at Kemps Creek in western Sydney. Australia has been one of Amazon’s most successful new market entries, according to Mr Gilbert. Its direct impact has been less visible owing to a retail boom, COVID-19 and overhyped expectations when the marketplace first launched in 2017.

Amazon Australia had a strong 2022, with reported revenue rising 50 per cent year-on-year to surpass $2.6 billion. Jarden estimates it generated about $4 billion of gross merchandise value, which includes sales from third-party merchants.

Over the next 24 months, as Amazon adds more postcodes to its same-day delivery service in Melbourne and Sydney, it will continue to expand its addressable market. But it needs to add more major brands to keep shoppers coming back.

Amazon Australia offers about 200 million items, but overseas that figure is about 300 million.

Mr Gilbert said if Amazon achieved this, it would heap more pressure on discretionary retailers such as Adairs, shoe seller Accent Group, marketplace Kogan, youth retailer Universal Store, Peter Alexander-owner Premier Investments, JB Hi-Fi and Harvey Norman.

While many retailers are mulling staff cuts, Amazon Australia flagged plans to hire more than 1000 seasonal workers preparing for the mid-year sales season.

Loyalty and last mile capabilities are another battleground for Amazon. Mr Gilbert thinks brands with the most active customers – those that have purchased in the past 12 months – will have more ability to withstand competition.

“Customers find the most beneficial programs are those that accumulate points to save for a big reward or redeem small rewards more quickly, more than special recognition or special access to new product,” he said.

Mr Gilbert said the 5.75 per cent increase to minimum wages from July 1 flagged by the Fair Work Commission last week created a material headwind for retailers, which were already battling rising utilities, rents and outbound freight. A weaker Australian dollar would also create challenges for vertically integrated players next year as hedging rolls off.

The takeover bid for discount fashion retail brand Best & Less Group (BLG) by BB Retail Capital has been accepted by sufficient shareholders to become unconditional.

BB Retail Capital is a private investment firm owned by Australian businessmen Brett Blundy and Ray Itaoui who made an off-market cash offer of $1.89 per share last month.

The company’s interests are currently controlled by investment group Allegro, which holds a 32.43 per cent share while the Bignor Family, a company associated with Best & Less’ chairman Jason Murray, owns an 8.27 per cent share in the business.

Together, the entities control a 40.7 per cent stake in the company. The takeover bid was conditional on 55 per cent acceptance by Best & Less shareholders, a threshold that has now been reached. All other conditions had earlier been met.

The takeover offer will remain open until 7 pm June 22 during which time all shareholders can opt to sell or hold their stakes.

“BLG shareholders who accept the offer will be paid the offer price per accepted share by the bidder within seven days of their acceptance now that the offer is unconditional,” said the company in a statement.

Best & Less sells a range of “value apparel” for families through a network of 248 stores and also trades online.

Cost-of-living pressures and higher interest rates have pulled infant goods retailer Baby Bunting into the dark cloud over discretionary retailers, which have increasingly reported languishing sales amid a crunch in consumer spending.

On Tuesday, Baby Bunting slashed its full-year profit expectation by a third as it struggled to improve sales. The $189 million company said it expected its net profit after tax to be in the range of $13.5 million to $15 million, compared with its previous guidance of $21.5 million to $24 million.

Despite Baby Bunting’s “Storktake” promotional event, the retailer said its trading both in stores and online was “unprecedentedly low” and well below expectations. Total sales growth for the financial year was about 1 per cent and comparable store sales growth was negative 3 per cent.

The company said that if the slowdown in sales continued, it expected comparable store sales to be between negative 4 per cent and negative 5 per cent, particularly as June traditionally delivered a larger proportion of the company’s second-half profit.

While it has maintained a gross margin towards the lower end of its expectations, the retailer said the full-year figure would likely be moderately below the bottom end of that range.

Shares in Baby Bunting took a pummelling, dropping 19 per cent to $1.45 a share about 1.30pm AEST.

Consumer discretionary stocks have been particularly sensitive to the higher interest rates and cost-of-living pressures putting a dampener on household spending.

Bedding and furniture group Adairs last week announced its sales growth had slowed 7 per cent in the second half and edged up a modest 1.9 per cent for the financial year.

“The impact of rising interest rates and higher cost of living has created a more subdued trading environment since April with lower traffic observed both in stores and online,” the company said in its trading update.

Jewellery chain Michael Hill also last week reported a decline in sales in its Australian retail jewellery segment in the second half, saying the 3.5 per cent fall was a result of a challenging economic environment.

“Given the prevailing economic conditions and resulting softening of consumer sentiment, trade has been more challenging for the jewellery industry in the second half, particularly in Australia and New Zealand,” the company said.

The latest figures from the Australian Bureau of Statistics showed household spending growth continued to slow in April, dropping to 6 per cent from a peak of 29.1 per cent in August last year and an 11.9 per cent increase in February.

Spending growth was slower for categories such as clothing and footwear (3 per cent) and furnishings and household equipment (1.8 per cent), with Wesfarmers boss Rob Scott warning in May that “the honeymoon is very much over” as customers become more conscious of their spending.

Eric Morris has stepped down as Brand Collective CEO but will continue to work with the company in non-executive and advisory roles, and sit on its board.

David Thomas – who has previously run Country Road Group and David Jones – has been appointed as the new CEO of the business.

Morris was appointed CEO when Brand Collective merged with the PAS Group in March last year and has been with the company for 18 years. His most recent challenge was integrating the two entities and growing their portfolio.

Of his decision, Morris said: “It has truly been an amazing journey, from the formation of The PAS Group in 2005 following the acquisition of the Yarra Trail business by Private Equity, to my involvement in each subsequent acquisition of the PAS brands and to the delivery of the business as it stands today.”

Thomas said he is delighted to join Brand Collective and pledged to work with the team to enhance business performance and deliver on future growth opportunities.

Executive chairman of Brand Collective, Larry Kestelman, said the business is “positioned for a prosperous future” and thanked Morris for his contribution to building the brand.

Brand Collective is a multi-brand apparel, footwear and sports business which sells 27 leading Australian and international brands, including Reebok, Superdry, Everlast, Replay, Clarks, Julius Marlow, Hush Puppies, and Moox.

Big W, David Jones, Lorna Jane, Rip Curl, R.M. Williams and The Iconic have signed up as members of the newly launched National Clothing Product Stewardship Scheme (NCPSS).

Each organisation has committed $100,000 to fund a 12-month transition phase while a new Seamless scheme is established.

Seamless was created by a Consortium led by the Australian Fashion Council (AFC) with Charitable Recycling Australia, Queensland University of Technology, Sustainable Resource Use and WRAP Asia Pacific.

AFC CEO Leila Naja Hibri said Seamless is the industry’s response to its clothing waste problem which will change the way Australians make, consume and recycle their clothes.

“Today, some of our industry’s most pioneering and progressive brands and retailers are uniting to do what no single business, organisation or even government can do alone,” Hibri said.

“Seamless will guide the transition from the current unsustainable linear model of take, make and dispose, to a circular economy of reduce, reuse and recycle.

“We need to start transitioning to the wardrobe of the future, where clothes are acquired differently, loved for longer and recirculated with care. This systematic and seismic transformation will require courage, creativity and most importantly, collaboration.

“We need to act now. Our industry, and most importantly our planet, depends on it.”

The NCPSS and the Roadmap to Clothing Circularity was officially launched by the Minister for Environment and Water, Tanya Plibersek, and is intended to drive the industry towards clothing circularity by 2030.

This will be done by incentivising clothing design that is more durable, repairable, sustainable and recyclable; fostering new circular business models for Australian fashion based on reuse, repair, re-manufacturing and rental; and expanding clothing collection and sorting for effective re-use and ensuring non-wearable clothes are recycled into new high-value products and materials.

It also involves encouraging consumer behaviour change for clothing acquisition, use, care and disposal.

The NSW Environment Protection Authority is also contributing $100,000 to the transition phase as a supporting partner.

The scheme design report released today recommends that Seamless is funded by a 4 cent per garment levy, paid by clothing brands and retailers who become members of the scheme.

AFC noted that if 60% of the market by volume sign up to the scheme, a funding pool of $36 million will be raised per year to transform the industry. It added that the activities driven by Seamless, stakeholders and citizens are projected to divert 60% of end-of-life clothing from landfill by 2027.

The Australian Government provided funding for the scheme design.

The Minister for Environment and Water Tanya Plibersek has vowed to take action on circularity in the fashion industry if little is done over the next 12 months. 

At the launch of Australian Fashion Council’s new Seamless initiative, Plibersek pleaded with fashion retailers to join the scheme, which will be funded by a 4 cent per garment levy by scheme members, alongside $100,000 contributions by six major fashion retailers: The Iconic, David Jones, RM Williams, Lorna Jane, Rip Curl and Big W.

The minister said if not enough fashion retailers sign up, she will launch a government-designed system alongside a levy to pay for it.

“We have a choice here,” Plibersek said. “This can be an industry-led approach. You collect the money, you decide how the money is best used, you invest in the research you need, you invest in the collection systems you need, you take charge… or I'll do it.

“I've been really clear that this is too big an environmental problem to turn our backs on. I want to see industry leadership. I don't want to be making these decisions for you. But if I don't see enough movement in a year, then I will regulate.”

According to Plibersek, the average Australian produces about 10 kilograms of clothing waste each year.

“We're throwing out the equivalent of say, two winter coats, six pairs of pants, three dresses, five t-shirts, a pair of shoes and a bag of odd socks every year. Now times that by 25 million.

“It's actually a quarter of a million tonnes of clothing going into landfill every year - it's pretty hard to conceptualize how big an amount that is.

“And of course, there's the waste. There's the economic waste of using something a few times and sticking it in the landfill. But there's also the huge environmental impact of doing that.”

Alongside waste, Plibersek said some clothes that break down release microplastics into the soil, which end up in water streams.

“The average Australians is ingesting a credit card's worth of microplastics every week, through the food we consume as it gets into our food cycle, through the water we drink.

“And of course, the manufacturing of clothing is very emissions-intensive - global textile production releases more carbon dioxide than the international flight and maritime industries put together.

“And if you see the sort of consumer movement in Europe to say don't fly anywhere because of the carbon emissions, you have to think is this coming for our industry as well?

Plibersek said this is where the new Seamless scheme comes in.

“It is about saying we don't accept this exponential growth of waste going into our landfill - there's exponential use of raw materials that then just get wasted. We've got to do something different.

“[The new scheme] does that by charging a tiny levy on every item of clothing, four cents on an item of clothing. There is no way on God's earth that Australian consumers are going to object to four cents on an item of clothing to stop it from going into landfill.

“Australians want to recycle. We saw the way people responded when Redcycle went bust. Across the community, people were alarmed by that.

“They want to minimize the impact they're having on the natural environment. And if you can help them do that for four cents on an item of clothing, they're going to be patting you on the back.”

Danish luxury brand Ganni is set to open its first Australian flagship store in Sydney on June 2.

The Copenhagen-based ready-to-wear brand is known for its ‘Scandi 2.0’ sense of style. It operates 37 retail stores across Europe and the US and delivers internationally to 35 countries including Australia, South Korea and Canada.

The flagship, located in The Galeries on George Street, takes inspiration from the family home of Ganni’s founders, husband-and-wife duo Ditte and Nicolaj Reffstrup.

It is fitted with vintage furniture, Artek stools made from repurposed Ganni fabrics, recycled plastic waste podiums, retro vases and a selection of art from female talents.

“Sydney is such a vibrant and diverse city, and we’re honoured to now be a part of it with our first flagship store,” said creative director and founder, Ditte Reffstrup.

“I have always felt a special connection to our Australian community and I am so humbled by their loyalty. We are super excited to bring a little bit of Copenhagen to Sydney.”

To celebrate the store opening, the brand has commissioned local artist and entrepreneur, Carla Uriarte, to create an artwork that will live permanently in the store.

Rebecca Vallance has partnered with Qantas Airways to create a limited-edition collection of business-class pyjamas and amenity kits. 

The lines – to celebrate the resumption of Qantas’ flights to New York post-Covid – feature the upgraded New York Route’s flight numbers QF3 and QF4 as well as a monogram of the Qantas ‘Roo and Rebecca Vallance’s logo. The collection comes in a colour scheme of blues with subdued Art Deco undertones of the Waldorf Astoria hotel. 

“New York has always felt like a second home to Rebecca Vallance, and we hope to be visiting even more with the opening of a brick-and-mortar retail store in SoHo in the near future,” said founder and creative director, Rebecca Vallance. 

“We curated the bespoke Rebecca Vallance design as a homage to one of the world’s most vibrant and exciting cities, with inspiration from our latest collection – ‘Avenue Astoria’. ” 

The printed Rebecca Vallance gowns are also made of shiny Italian fabric with Art Deco-inspired motifs, alongside the love heart diamante belt. In addition, the dresses on display will be a part of a raffle for a custom couture gown that will be given away to a Qantas Frequent Flyer, who purchases a Rebecca Vallance item from either Qantas Marketplace or directly from Rebecca Vallance.

A limited number of Rebecca Vallance Qantas Pyjamas and Amenity kits will also be available for purchase via points redemption at Qantas Marketplace. 

Trade has been more challenging for the global jewellery industry in the second half of FY23, according to New Zealand-born retailer Michael Hill.

This has been particularly noted in Australia and New Zealand, with the latter impacted by significant weather events and a recent resurgence of security incidents and related costs.

Michael Hill added that third-party transactional data for the total Australian retail jewellery segment has shown a double-digit decline in sales for the first four months of the second half.

The Australian jeweller recorded a group sales drop of 3.5% for the second half, while its total group sales for FY23 year-to-date are up 5.5%.

“Despite the more challenging market conditions and the resulting impact on many retailers, I’m encouraged by the Michael Hill performance, as we continue to take market share in our category,” CEO and managing director Daniel Bracken said. “Looking forward to FY24, I’m energised by the pipeline of strategic initiatives that underpin our growth aspirations for the group.”

Meanwhile, the brand has taken over operational control of its newly acquired Bevilles from today, June 1.

Initial steps for the Bevilles’ store rollout growth strategy are reportedly progressing well, with Michael Hill noting that offers of new locations from a number of landlords have been tabled and are currently being considered to prioritise the highest potential new locations.

The company is planning to open 80-100 Bevilles stores by FY28, including further expansion in New Zealand and Canada where Michael Hill already operates. This could also include coverting existing Michael Hill stores into Bevilles locations where the demographic aligns.

Bevilles currently operates 26 Australian stores across Victoria, New South Wales and South Australia. Michael Hill operates 148 across all Australian states and territories, along with 47 in New Zealand and 86 in Canada.

The financing of its Bevilles expansion, alongside other company initiatives, comes from a new three-year $90 million credit facility from ANZ and HSBC.

As well as expanding Bevilles store network, the facility will fund a new digitally-led 'Bespoke' diamond jewellery brand, further rollout of its gold recycling platform, continued international digital expansion and additional organic strategic growth initiatives.

“I’m excited the Bevilles Jewellers acquisition has completed and welcome the Bevilles team members to the Michael Hill family,” Bracken said.

“This acquisition not only demonstrates the Board’s commitment to strategic investment and growth but also provides a platform for significant store network expansion and delivery of incremental earnings.”

Universal Store chief executive Alice Barbery says young consumers are facing serious pressure from rising rents and university fees, which will dent spending in coming months at the trendy youth apparel retailer.

Shares in Universal crashed 25 per cent after it flagged on Wednesday that while it remains on track to deliver record sales for the year ending June 30, subdued trading will persist into fiscal 2024, after noting that spending in April and May-to-date has tightened.

Ms Barbery told The Australian Financial Review that she has clear insights to the retailer’s core consumer given most of its staff are also about the same age.

“The two biggest costs for them are rent and HELP, used to be called HECS debt. They’re paying back their student loans, which are increasing at an extraordinary rate. And the rents if you’re on $70,000 a year – if you’re a young person and your rent goes up $150 a week, you’re going to feel it.

“We knew that customers would get more discerning, and they are getting more discerning, but they’re still coming through, and our foot traffic is still really good.”

The Brisbane-based company’s shares tumbled to $3.11, while fellow youth jewellery fashion chain Lovisa Holdings, backed by Brett Blundy, fell 7.7 per cent to $21.84. JB Hi-Fi, which also counts on the youth consumer, fell 2.8 per cent to $44.06.

Ms Barbery said a clear message for shareholders is the company is not overstocked, and has not had to dramatically discount to move inventory.

“I do think this is an overreaction,” she said referring to the sell-off. The retail sector is on the front line of cost-of-living pressures, and many are starting to show evidence of slowing spending.

Universal Store noted that its new Perfect Stranger retail format is performing strongly and continues to show potential for an attractive national roll-out of its top-selling brand. Cheap Thrills Cycle will deliver record sales and solid earnings, and emerging brand Worship has had an “encouraging performance”.

Ms Barbery said the store footprint is growing.

“I didn’t feel that this was a bad news story. It was just a story of a current economic climate and while youth customers are more shielded from economic downturns, they’re certainly exposed in these two areas,” she said.

Universal Store’s stock at June 30 is expected to be higher than the prior year, mostly because of the Cheap Thrills Cycle acquisition made last October, new store openings, and more inventory to support an upgraded distribution centre.

Group sales are expected to be in the range of $258 million to $261 million compared with $208 million in 2021, with Universal Store sales projected at $238 million to $240 million.

Underlying full-year sales for Cheap Thrills Cycle are expected to be $40 million to $42 million, compared with $35 million last year.

Group gross margins are expected to slightly exceed the 61.1 per cent delivered in 2022. Underlying earnings before interest and tax will come in between $39 million and $41 million, up from $32.6 million.

A total of 95 physical stores are expected to be open by the end of the year, made up of 77 Universal Stores, 8 Perfect Stranger sites, and 10 Thrills stores. Four new store openings have been pushed out until the first quarter of next financial year.

Universal Store will release its full-year results on August 25.

Sharemarket traders are positioning for a steep downturn across the Australian economy as small-cap retail companies skewed towards middle and low-income earners get dumped in anticipation of a rough 12 months ahead.

The alarm bells rang louder on Wednesday, after ASX-listed budget-fashion bellwether Universal Stores said shoppers cut their spending in April and May as cost of living increases – including rents and food prices – hurt young shoppers.

The gloom broadened on May 16 after ANZ-Roy Morgan’s weekly survey showed Australian consumer confidence fell to its lowest level since the peak of the pandemic shock in April 2020.

A record 56 per cent of families surveyed last week said they felt financially worse off than this time last year, with 37 per cent planning for “bad” economic times over the next 12 months. Overall, confidence levels were equivalent to those last recorded in the 1990-91 recession.

The survey spooked investors who started selling retail stocks before Universal Stores confirmed their suspicions on Wednesday.

Shares in the retailer of brands such as Birkenstock, Wrangler, Thrills, and Dickies fell 11 per cent in five trading sessions from May 15, before its profit warning sparked a further 23.9 per cent slide.

On Thursday, broker Citi slashed its earnings per share forecasts for Universal by 23 per cent for financial year 2023 and 24 per cent for FY2024.

It also lopped the retailer’s valuation by 42 per cent and warned that other retail stocks faced a broad de-rating as analysts valued them on lower profit multiples and higher discount rates given the increased uncertainty around future cash flows.

Foot Locker wobbles

In the US last Friday, shares in footwear and activewear giant Foot Locker plunged 27.2 per cent in a single trading session after it reported same-store sales fell 9.1 per cent in the March quarter, with total revenue down 11.4 per cent.

The share price fall was exaggerated as Foot Locker posted a strong final quarter for 2022, before a dramatic reversal in the first quarter of this year.

Some of the reversal could be linked to the rise in the US cash rate, which at 5.25 per cent is now higher than inflation at 4.9 per cent. This means financial conditions are now restrictive and the current value of money is worth more than future cash flows.

In Australia, March quarter inflation at 7 per cent remains well ahead of the cash rate at 3.85 per cent, which means financial conditions are still relatively loose, with room to turn restrictive.

The worries about higher discount rates, tighter monetary policy, rising living costs, and Foot Locker’s shocker are fuelling the sell-off elsewhere.

Shares in footwear and fast-fashion operator Accent Group are down 20 per cent over just five trading sessions and discount jewellery group and retail darling Lovisa dropped 4.8 per cent on Thursday to take its total loss over the past five trading sessions to 16.5 per cent.

Elsewhere, City Chic, Nick Scali, Michael Hill and Baby Bunting are all down this month as investors brace for poor trading updates.

Friday could bring more volatility as retail sales data for the previous month is expected to extend an accelerating downturn.