The week that was

Rough end to the week for Myer

A massive week for the retail industry – with big deals, appointments and announcements made by retailers both locally and abroad. Here’s a brief look back at the major news this week.

Less than salubrious

We begin by looking at the not-so-positive from this week.

Retail conglomerate Westfarmers kicked off the week by announcing it’s taking a $1.3 billion hit in writedowns and impairments against its underperforming Bunnings United Kingdom and Ireland (BUKI) and Target department stores.

Canadian activewear retailer and manufacturer Lululemon announced its CEO Laurent Potdevin had resigned effective immediately amid unspecified misconduct.

Potdevin, who had been with the company for four years, also resigned from the board, which has already begun searching for his replacement.

“Lululemon expects all employees to exemplify the highest levels of integrity and respect for one another, and Mr. Potdevin fell short of these standards of conduct,” the retailer stated.

Michael Hill International advised that the repositioning of Emma & Roe and its exit from the US will drag earnings for the first half of fiscal 18 down over 60 per cent.

According to the latest Australian Bureau of Statistics (ABS) data, retail turnover increased by 2.49 per cent year-on-year (YoY), following a 2.87 per cent increase in November.

Seasonally adjusted retail turnover fell 0.5 per cent in December, tempering November gains and fuelling concerns that the all-important holiday month may not have delivered.

“We’re very concerned about clothing and footwear,” said Australian Retailers Association executive director Russell Zimmerman.

“There are more and more retailers getting into that space and what we’re hearing is that retailers, generally speaking, are concerned in the sector.”

Property group Mirvac’s half-year profit fell eight per cent to $465 million, due to lower gains on revaluation of its property investment portfolio and the timing of residential lot settlements.

However Mirvac’s retail portfolio remains strong, with occupancy levels maintained at 99.4 per cent, with total sales productivity growing to $10,149 per square metre, and comparable specialty sales productivity increased to $10,034 per square metre, up from $9,864 at 30 June 2017.

Kelly Slessor and Emma Sharley think there’s an opportunity to improve the current shopping experience

The more wholesome

Furniture retailer Nick Scali reported a 15 per cent rise in net profit after tax of $23.5 million for the half-year.

Nick Scali managing director Anthony Scali said the six new stores opened in first half FY18 have performed above its expectations, with three of the new stores located in the Home-Co centres previously occupied by Masters.

The furniture chain also opened its first store in New Zealand during the period in Auckland, which Scali said was the best performing new store for January in terms of sales orders.

Swedish fashion chain Hennes & Mauritz (H&M) announced it will open its first South Australian store at Rundle Mall Plaza, Adelaide, in the second half of 2018.

Luxe firm Tapestry – formerly known as Coach – will create a fashion hub and centre of excellence in Sydney, after announcing the buyback of its Coach business in Australia and New Zealand from the local distributor.

The retailer expects “a closing in the third fiscal quarter” as it looks “to drive growth across our portfolio, further unlocking the value of a multi-brand operating model.”

Quiksilver parent Boardriders appointed Dave Tanner as its CEO, following the disappearance of Pierre Agnes last week.

On the local front, Sydney-based female tech founders launched a personal stylist shopping app, which uses artificial intelligence to web browse and suggest recommendations. 

Fashion-tech entrepreneurs and ex-Westfield executives Kelly Slessor and Emma Sharley devised the app, after conducting a study of 1,000 women, aged 25-45 years, which identified 80 per cent of women don’t like shopping due to the time it takes and pain of having to return items.

Elsewhere, David Jones announced it will open its second store in New Zealand, opening its first Auckland store as part of the over $720 million redevelopment at Westfield Newmarket.

david jones wellington 1
David Jones’ Wellington store has proven popular

“We know New Zealanders are well-travelled and fashion savvy with an appetite for international brands and world-class shopping experiences,” said David Thomas, David Jones CEO.

GPT Group meanwhile put Wollongong Central shopping centre up for sale with price expectations of about $500 million.

The property firm recently completed the $68 million repositioning of the centre, which saw the launch of the latest generation David Jones (including food hall), global retailer H&M, Mecca Maxima and other national retailers.

German supermarket giant Aldi signalled its intention to open and refurbish a raft of stores throughout the country in 2018 as competition in Australia’s grocery sector heats up amid the entry of international competitor Schwartz Group into the market.

Petbarn owner Greencross Limited appointed former Qantas executive Simon Hickey as its new chief executive and managing director, to replace outgoing chief Martin Nicholas.

The week also saw department store retailer Myer sign a three year deal as the exclusive fashion and retail partner and major sponsor of the Sydney Gay and Lesbian Mardi Gras. Speaking of Myer…

Big end to the week

On Friday, Myer flagged more writedowns after the department store chain’s sales fell by 6.5 per cent during its key Stocktake Sale period in January.

Shares in the troubled retailer fell to a fresh record low of 56.5 cents – down more than 50 per cent in a year – after it said sales for the six months to January fell 3.6 per cent following a poor performance over Christmas and the holidays.

Myer says it now expects net profit to fall to between $37 million and $41 million when it reports its first-half results in March, but that excludes impairments the size of which it is still calculating.

Solomon Lew’s Premier Investments – Myer’s largest shareholder that has been engaged in an ongoing war with the retailer – wasted little time in publicly stating its thoughts.

“Myer is now in peril and shareholders must urgently unite to save the company and what is left of our investments,” Premier said in a statement.

Ex-Myer deputy chief Daniel Bracken has a big task ahead at SFG

Meanwhile Specialty Fashion Group brought on ex-Myer deputy chief executive Daniel Bracken to replace Gary Perlstein as its new CEO and managing director, as declining earnings have pushed the business to laying off staff.

SFG has booked $18.5 million in earnings before interest, tax, depreciation and amortisation (EBITDA) for the six months ended December 31, up on its $14 – 17 million guidance range, but down 39 per cent on HY17.

And finally, Hanes Australasia bought Bras N Things from Brett Blundy’s BB Retail Capital in a deal worth $500 million.

The all-cash transaction is valued at A$500 million on an enterprise-value basis. The purchase price is approximately 10 times 2017 EBITDA and is expected to be less than 8 times EBITDA after supply chain and revenue synergies.

Here’s looking towards next week’s chaos…

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