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Retailers likely to benefit from pre-election budget


Yahoo! Finance reported that Australia’s pre-election budget may benefit retailers in the form of planned tax refunds. With an election scheduled for next month, Australia’s budget has forecast a return to surplus, while also increasing tax relief to more than 10 million low- and middle-income earners. The payments will come as rebates of tax paid and may trigger an increase in retail spending of as much as 1.5% in the September quarter, according to Citi analysts.


Amazon cuts prices at Whole Foods

The Wall Street Journal commented on Amazon planning to cut prices on hundreds of items at Whole Foods stores.  According to WSJ, “the e-commerce giant seeks to change the chain’s high-cost image amid intense competition among grocers.”  We interpret it somewhat differently – it looks like Amazon is learning what real retail is all about.  Running a supermarket is even harder, due to its high velocity – all mistakes are multiplied a hundred-fold. We can only guess that under Amazon’s stewardship sales have started to decline, so they've decided to reposition the business. A risky strategy in our opinion – it could make matters worse.

Walmart is beating Amazon in a business worth US$49b

The AFR reported that on a number of fronts in online shopping,'s strategy is clear and brutally effective. There is one important area, though, where Amazon's strategy looks much fuzzier: Click-and-collect. This is a model that's well-suited for traditional retailers. Target's Drive Up service is offered at about 1,000 stores and will be in all stores by the end of 2019. Walmart's grocery pick-up program is available at about 2,100 stores and will be in 3,100 stores by the end of the fiscal year. Both Walmart and Target say their net promoter scores – a key measure of customer satisfaction – are especially high for curbside services. However, beyond the grocery segment, Amazon has a limited number of pick-up centers and lockers. It all adds up to a smattering of tentative moves. Perhaps being an also-ran at click-and-collect won't be so terrible for Amazon. But the e-commerce heavyweight will be better off if it gets more skin in the game.    

Latest retail statistics from the US

Reuters, like many other media outlets, perseveres with reporting immaterial retail statistics. According to Reuters, “US retail sales unexpectedly fell in February, the latest sign that economic growth has shifted into low gear.”  The drop was 0.7% in comparison to … January.  Considering that February had 9.6% fewer days than January, this doesn’t sound too bad.  But, the real issue is the benchmark used – in retail, month-on-month figures have little bearing. The relevant figure, year-on-year growth was 2.2% in February.  This tells us that the US economic boost is slowing down, but it is still at a respectable cadence.

Napoleon Perdis Cosmetics creditors count their losses

The AFR reported that unsecured creditors of Napoleon Perdis Cosmetics will receive between 4¢ and 13¢ in the dollar under a rescue proposal by Livia Wang and fashion executive Henry Lee. This is more than they would receive (between 0 and 5¢ in the dollar) if Napoleon Perdis Cosmetics, which went into voluntary administration in January, were wound up, its administrators say. According to a report by Worrells, the administrators received 41 expressions of interest for NPC and 28 parties signed confidentiality agreements, but only two proposals made it to the final round."Kuba's DOCA proposal was (taking into consideration the imperative to strive for the best outcome available to all creditors) the most attractive offer on balance," the report said.

Amazon Australia delivers more losses

The AFR reported that despite Amazon's soaring revenues Down Under losses are mounting. Accounts lodged with the corporate regulator show that Amazon's e-commerce business made $292.3 million in calendar 2018, but lost $5.3 million after tax. Meanwhile, Amazon Web Services made $306 million (plus $12 million as a landlord to related parties) but lost $15.7 million after a $6.9 million provision for income taxes. The 2018 losses compound losses from the 2017 calendar year. The results indicate that ultimate parent Amazon Inc is applying the same patience in regards to the profitability of its Australian businesses as it once applied to itself. Concurrently, Tax Office data released in December showed Amazon paid $10.4 million in corporate income tax in the 2016-17 financial year. With local retailers already feeling pressure from stagnant wage growth, low discretionary household spending and low levels of consumer confidence — as well as high rents and land tax — the news that Amazon is basically not paying tax will be a difficult pill for Australian retailers to swallow.

Woolworths announces closure of 30 Big W stores

The AFR reported that Woolworths will book $370 million in one-off costs this year after biting the bullet on its loss-making Big W chain, closing 30 stores and two distribution centres. The store closures, which represent about 16% of the Big W network, were announced today by chief executive Brad Banducci following a six-week review foreshadowed at the half-year results. The 30 stores will close over the next three years and the two distribution centres, at Monarto in South Australia and Warwick in Queensland, will close at the end of their leases in 2021 and 2023. Woolworths has not yet said which stores will be on the chopping block and is also yet to announce how drastic the loss of jobs will be. But it did say it would aim to recycle many of the employees back into the business where possible.

H&M turnaround strategy shows promise

An article on Reuters notes that fashion retailer H&M reported a much smaller than expected fall in quarterly profit last Friday as it sold more products at full price and margins held up, in a first sign that its turnaround strategy is producing results. Shares in H&M, the world’s biggest clothing retailer after Zara-owner Inditex, surged as much as 15.8% as the Swedish group said it expected sales at discounted prices to continue to fall in the current quarter. H&M has trailed Inditex in performance and seen its profits shrink and stocks pile up in recent years as it failed to react quickly enough to demand swings and a boom in e-commerce. Friday’s profit and margin beat indicated that H&M’s plan to revive profit growth, which has involved heavy investment in logistics, integration of stores and online business and an in-depth review of its stores and brands, was working.

Apple shifts to services

The Hustle reported on Apple's latest strategy, a shift to services. While Apple built its empire on hardware, recent announcements prove Apple needs revenue from services in a hardware-saturated world. With a range of flashy new services - Apple TV+, Apple News+, Apple Card, and Apple Arcade - the company hopes to transform its 1.4B active devices into monthly money-makers that consumers rely on to watch videos, read news, play games, and make payments. Twitter trolls and journalists dismissed Apple for hazy details on pricing and launch dates, and stock fell 1.2%. But if the past’s any guide, bets against Apple seldom pay off... When Apple released its first iPhone, TechCrunch said it was “about as useful … as a rotary phone,” and Microsoft’s CEO insisted, “There’s no chance that the iPhone is going to get any significant market share.”

Napoleon Perdis rescue?

The AFR reported that "Daigou queen" Livia Wang and former Witchery executive Henry Lee have come to the rescue of Napoleon Perdis, offering to buy his eponymous make-up empire, which went into voluntary administration in January. Ms Wang and Mr Lee have formed a private investment company, Kuba Investments, which proposes to take control of Napoleon Perdis Cosmetics through a deed of company arrangement  (DOCA). The value of their offer has not been revealed, but administrator Simon Cathro of insolvency firm Worrells said on Thursday the proposal would result in a better return to creditors than if Napoleon Perdis were liquidated. Creditors, who are owed more than $22 million and include the ANZ bank, the ATO, Australian Pharmaceutical Industries and Myer, are due to meet on April 8 to consider whether to accept the DOCA. Mr Perdis, who founded the business 24 years ago, and his wife Soula-Marie Perdis support the deal.

Chemist Warehouse strike ends

The AFR reported that Chemist Warehouse will increase workers' wages by as much as 22% and convert casuals to permanent following two weeks of strikes at its major distribution centres. The privately owned pharmacy giant reached an in-principle agreement with the National Union of Workers on Thursday that will result in its warehouse employees in Victoria and Queensland getting an 18.75% pay rise over the four years, with 8.75% to come within two weeks. In a joint statement the NUW and Chemist Warehouse said that the offer will see strong wage increases, greater security of employment, flexibility of working hours that will meet the needs of both workers and the employer, and a commitment from all to continue to have a respectful and productive workplace.

Low-value GST generating triple the forecast revenue


Inside Retail reported that the GST on low-value imported goods generated $81 million in the first three months after it was implemented on July 1, the ATO this week revealed. That is already in excess of the $70 million the tax was expected to deliver in its first 12 months of use, and revenue continues to track at 300% of what was forecast. The ATO also revealed that the digital services tax has generated $272 million in its first year since being implemented, 1800% ahead of forecast. These figures, he said, prove the low-value international online sales tax and digital services tax were not an impossible nut to crack, despite the opposition they faced from some corners of the industry at the time. We had repeatedly advocated for low-value GST as a way to close a loophole that enabled overseas sellers to avoid charging GST on orders shipped to Australia that were under $1000, creating a price advantage over domestic bricks-and-mortars.