s years, however, and have been accompanied by advice that sales in recent weeks have slowed as a result of another round of lockdowns imposed by state governments. The relative success of some prominent retailers can’t mask the vacant shopfronts in shopping malls, let alone the tenancies that remain open courtesy only of short- or even long-term rent concessions. Moreover, the success of some chains doesn’t reflect the experience of so many small, independent retailers in shopping strips – including in some of the most popular precincts – that are now punctuated by empty shops. The latest lockdowns are increasing damage and spreading the pain more broadly across the industry, with support packages less generous than in 2020 and consumer confidence and spending seemingly more cautious. The Covid-19 pandemic and the unprecedented government responses have arguably left the Australian retail industry structurally weaker and a large number of retailers struggling to survive, let alone rebuild. The pandemic has dented retail property values and shaved rents as retailers have closed their doors or, in the case of some of the chains, pruned their store networks. The lean growth years for the retail industry prior to the emergence of Covid-19 in March 2020 generated some high-profile retail business collapses and industry exits, as well as takeovers and shrinking store networks. In all likelihood, the full impact of Covid-19 will be more business failures as rental concessions and bank loan tolerances expire, especially if supply-chain costs continue to rise sharply and consumer spending is slow to rebound from 2021 trading restrictions. M&A and listings galore The effects are likely to accelerate merger-and-acquisition activity while interest rates are low, as well as generate new stock exchange listings and capital raisings to repair balance sheets while investors remain bullish. Prospective new entrants on the sharemarket include Chemist Warehouse, Greenlit Brands chains, Cotton On, Retail Zoo and possibly Larry Kestelman’s PAS Group. Other possible public floats include Naomi Milgrom’s Sussan Group and the Wesfarmers chains Officeworks and Kmart, depending on the outcome of Wesfarmers’ takeover offer for Australian Pharmaceutical Industries (API). The Chemist Warehouse and Fantastic Furniture floats are more a question of when than if, while private-equity firm Bain Capital has revived plans to divest Retail Zoo after shelving them in 2019 due to negative sentiment around retail franchises at the time. Kestelman acquired PAS Group in 2020, when it was in voluntary administration, and has recently expanded its apparel and footwear portfolio with the acquisition of Brand Collective from private-equity firm Anchorage Capital Partners. He is also understood to have shown an interest in the Sussan Group and Blue Illusion – both of which have been open to trade sales. Cotton On has been raising its profile and consolidating its operations as it reportedly mulls over a public float after monitoring market conditions and the Best & Less listing on the stock exchange. Along with JD Sports and a private-equity firm, Cotton On is also understood to have shown interest in acquiring General Pants Co from the Smorgon family. The most significant takeover play is currently Wesfarmers’ $687 million bid for API. Wesfarmers is seeking further information from API following an initial rejection of its offer and it is understood that there are other potential suitors. While David Jones has shown some positive signs of life, Myer remains vulnerable as a takeover target and is considering an equity issue to reduce the influence of Solomon Lew. Lew has indicated that he is not interested in making a bid for Myer at this time but his 16 per cent shareholding is disconcerting for the Myer board, which recently disclosed it expects to post its first second-half profit since FY17 for the latest financial year. The profit for the half is expected to be between $4 million and $7 million provided there are no writedowns and full-year net earnings of between $47 million and $50 million, a result underpinned by $69 million in JobKeeper payments from the federal government and $18 million in rent concessions from landlords. Bunnings Warehouse is on the prowl for further takeover opportunities following its purchase of Beaumont Tiles and Adelaide Tools, while furniture retailer Nick Scali also has an appetite for acquisitions. The Covid-19 factor seems certain to generate even more deals as the industry re-balances following the pandemic.