Get the latest retail news straight to your inbox

    Don’t go searching for insights in the retail space, we deliver them direct.
    The week's most important retail news, delivered to your inbox every Friday.
16
Aug-18
Thursday

Beacon Lighting puts the spotlight on profit

11
Also from the ASX, Beacon Lighting Group has posted record net profit after tax of $19.6 million in FY18, a 17.7% increase from FY17. In its announcement, the retailer attributes the results to record-level store sales and strong trading by its commercial and international businesses, its wholesale globes business and its Roadway and Massons for Light businesses. Full-year group sales rose 9.7% to $236 million.

Nick Scali posts record profits

9
A results announcement lodged with the ASX shows that furniture retailer Nick Scali has posted a 10% increase in net profit after tax to $41 million in FY18, up from $37.2 million in FY17. The strong result was driven by a 20% increase in gross margin to 62.7% and an 8% rise in total sales to $250.8 million, helped by ten new store openings across FY17 and FY18, up from $232.9 million in FY17.

The power of the spin doctor

26
An article in the AFR covers Coles' recently reported results, which show the grocer's strongest sales growth for two years and a return to profit growth for the first time since 2016. However, 'strongest' doesn't necessarily mean strong.  The increased sales combined with improving gross margins and cost savings helped Coles deliver only a modest 3% profit growth in the June-half after a 14.1% fall in earnings in the December-half and a 13.4% decline in profits in 2017. A comment has been made that the improving momentum is positive for sentiment ahead of its $20 billion demerger from Wesfarmers, which is expected to be completed in November. We feel that this is just putting a spin on lacklustre results.
15
Aug-18
Wednesday

Crypto-currencies woes

14
The Wall Street Journal reported that Bitcoin, the most widely used digital currency, this week fell below $6,000 for the first time since late June.  A broad investor retreat has pushed the market for digital currencies down 70% from its January high, reflecting user frustration over their modest inroads into commerce and a general shakeout in speculative investments.  We have warned repetitively that this bubble will burst, sooner rather than later.

Wesfarmers net profit tumbles 58.3%

24
Reuters reported that Wesfarmers Ltd posted a 58.3% drop in full-year profit. The results are mainly caused by its failed Bunnings venture in the UK, which forced the retailer to take a A$1.65 billion loss in fiscal 2018. Net profit for the retail-to-mining conglomerate fell to A$1.20 billion for the 12 months to June 30, compared with A$2.87 billion last year.

Amazon opens huge Sydney warehouse

11
TechRadar reported that Amazon Australia has now opened its second fulfilment centre in Moorebank, Southwest Sydney, close to the M5 motorway, Sydney airport and ports. At 43,000 square metres of indoor space, the new warehouse is nearly twice the size of the Melbourne fulfilment centre. The large space makes room for a wider product range, allowing “thousands of small and medium-sized Australian businesses” to use Amazon’s fulfilment program “to more easily access customers across the country”.

When the predator becomes the prey

14
The AFR reported that investors in online retailer Shoes of Prey had 87% wiped off the value of their investment as the company faces a last-ditch bid to secure a funding lifeline. Founded in 2009, Shoes of Prey was one of Australia's most promising retail startups. However, the company has been forced to change strategies several times - most recently planning to target the "Cinderella" market - people with unusually small or large feet. A fitting metaphor for a business that seems to be struggling to fit into the market.
14
Aug-18
Tuesday

Strong retail figures from the US

24
CNBC quoted the NRF commenting that US retail sales in 2018 are forecast to climb higher than what had been expected, thanks to tax reform and other upbeat economic indicators. Retail spending is predicted to climb at least 4.5%, against a prior forecast range of 3.8 to 4.4 %. "Higher wages, gains in disposable income, a strong job market and record-high household net worth have all set the stage for very robust growth in the nation's consumer-driven economy," NRF President and CEO said in a statement. "We knew this would be a good year, but it's turning out to be even better than expected." Wouldn't such news be great in Australia too?

Kmart Tyre and Auto sold

17
The Australian Financial Review reported that a German company, Continental has finalised the purchase of Kmart Tyre and Auto for A$350 million. KTAS operates close to 290 stores in Australia and generates about $400 million in annual revenue. Continental operates in 44 countries and its annual revenue is around A$70 billion. This is a good move (in our assessment) for Wesfarmers, as the medium to long-term progressive switch to electric cars will erode the revenue base for businesses such as KTAS or Burson.

Iconic expansion

11
The Australian Financial Review reported that The Iconic will be adding kid's wear, introducing more than 70 brands. The Iconic hopes to make a profit this year (for the first time) - it has accumulated $152 million in losses since 2010.  Clearly, Amazon is not the only e-commerce operator who runs their retail business at a loss.

US jeans moves

7
The Wall Street Journal reported that VF Corporation, the owner of Lee and Wrangler jeans, plans to spin off its denim business in a bid to sharpen its focus on faster-growing outerwear and active-wear brands. VF said Monday that it wants to create the yet-unnamed company through a tax-free spinoff to its shareholders. The newly formed company will hold the VF’s jeans business, which includes Wrangler, Lee, Rustler and Rock & Republic, and its 80 VF outlets. These businesses generate about $2.5 billion in annual revenue. The company acquired Lee, its first denim brand, in 1969. It added Wrangler, Rustler, and JanSport to its portfolio through its purchase of Blue Bell Holding Co. in 1986.  
13
Aug-18
Monday

How high will Afterpay soar?

18
The AFR reported on the wide philosophical divide about "buy now, pay later" leader Afterpay's real market value and future prospects. Afterpay has more than doubled its market capitalistion to over $3 billion is just six weeks, with shares closing last Friday at $14.57 (a 100 times forward earnings and at 50 times based on fiscal 2020 earnings forecasts). Here's were the bulls and bears differ. The bulls believe that Afterpay should be valued as a payments platform company, with the scale that comes from taking a clip of the ticket on an expanding volume of transactions. Conversely, the bears see the business as a consumer finance company, needing capital for growth and battling credit risk issues, arguing that a high proportion of Afterpay's customers could not, or should not, get a loan elsewhere. Given its recent expansion into the US market and a growing millennial customer base, we don't see the markets cooling on Afterpay any time soon.