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Woolworths drops $562 million on new distribution centre

The AFR reports that Woolworths is banking on a "quantum leap" in productivity after investing $562 million in a new automated distribution centre. According to the article, the most valuable feature of the new distribution centre is its ability to pick cartons off shelves and assemble pallets for specific aisles in supermarkets and load pallets on to trucks in the right sequence to meet the specific needs of stores. It all sounds impressive, however here's the kicker: they didn't have to spend half a billion dollars to get these (pretty basic) stock flow improvements.

Walmart to buy Coles?

The AFR reported on a trend in the past 12-months, which is big companies doing big transactions. Most of Australia's top-20 companies have investment bankers working on deals, while offshore swoopers have landed with mega bids for Westfield Group, APA Group, and Santos. M&A is a confidence game and confidence is growing. It means we haven't seen the last of the activity and the big question is where the next big bid lands? On that note, when Wesfarmers announced the demerger from Coles in February, it caught the attention of some powerful offshore retailers. As a $20 billion business, Coles is big, which limits the field of potential buyers. Sources are pointing to US-based Walmart as one company with the firepower, the willpower and maybe even the need to consider such a deal.

Reserve Bank holds rates despite risks

The AFR reported that the Reserve Bank of Australia has extended its record run of policy inaction, holding rates steady at 1.5% and remaining unmoved by concerns about higher mortgage rates and emerging market turmoil. In our assessment, the economy has started to slow down. As this continues, the worry is that with the very low rates the Reserve Bank doesn't have much in its arsenal to counter a downturn.

UK shoppers headed to the pub not the shops this summer

Reuters reported that British retailers posted sluggish sales growth last month as potential shoppers chose to make the most of this summer’s record hot weather and spend money at the pub instead. A British Retail Consortium report noted total spending was up just 1.3% on a year earlier, the weakest growth since November last year, apart from a big dip in April due to the timing of the Easter holiday. Contrasting the retail data, a broader measure of consumer spending by Barclaycard shows a 4.5% increase in August, boosted by an 11.9% year-on-year jump in spending at pubs. 2018 was the joint-hottest summer on record since records began in 1910, which benefited supermarkets, pubs, and restaurants.

Retail spending growth figures misrepresented again

The Australian Financial Review reported that retail spending growth was flat in July against a 0.4% gain in the prior month, which suggests consumers may have become less willing to open their wallets amid falling house prices and weak wages growth. Additionally, the Australian dollar dipped a fifth of a US cent in response to the disappointing data. As usual, we had to dig for meaningful comparison data, turning to the ABS to find year-on-year figures (YoY). Viewed through the YoY lense, retail spending grew approximately 3.5% against July 2017. Quite a different story, isn't it?

Steinhoff AP homewares sales fall

The AFR reported that furniture and general merchandise retailer Steinhoff International has indicated that consumer and supplier uncertainty triggered by a global accounting scandal is responsible for weak sales in the majority of the markets it operates in, including Australia. Down Under, sales at Freedom, Fantastic and Snooze, as well as department stores Best & Less and Harris Scarfe rose 1% to A$1.55 billion in the nine months ending June as new stores offset weak same-store sales. In household goods, total sales rose 7%, buoyed by a full nine months contribution from Fantastic Furniture, which was acquired in December 2016. Excluding the Fantastic acquisition and sales from new stores, same-store sales fell 5%. In general merchandise, total sales fell 3% but same-store sales rose 2% despite intense competition from Kmart, Target, Myer and online rivals. Steinhoff Asia Pacific plans to change its name to Greenlit Holdings to distance itself from its parent's troubles.

Luxury retail set for impressive growth

A report by professional services firm Deloitte indicates that luxury retail sales will increase by 6-8% annually through 2024, compared to the expected 3% annual growth in the broader retail sector. According to the report, an acceleration of new brands entering the Australian market, current players expanding their position, strong online performance and high-spending tourists are the emerging trends driving the predicted growth.

Dyson accelerates electric vehicle project

Product engineering company, Dyson, most famous for vacuums, has joined Volkswagen AG, Daimler AG, and General Motors in the race for electric-car market share. According to a post in The Hustle, the company has unveiled plans to turn the old Hullavington Airfield in England into its vehicle testing site. Dyson has said that it expects to be on the road around 2021. As a wildcard entrant to the electric vehicle space, it will be interesting to see what kind of impact Dyson will make.

Coca-Cola takes plunge into coffee

Reuters reports that Coca-Cola Co will purchase coffee chain Costa for U$5.1 billion from Britain’s Whitbread. The deal, which will cost Coke about U$1.3 billion more than some analysts had expected, forms part of a bid to extend the soda company's reach into healthier drinks and take on the likes of Starbucks and Nestle in the booming global coffee market. Coke will acquire Costa's 4,000 outlets and plans to use its distribution network to supercharge Costa’s expansion as it chases market leader Starbucks (29,000 stores across 77 markets). Beyond coffee shops, Coke has said that Costa will provide an important growth platform ranging from beans to bottled drinks. With the deal expected to close in the first half of 2019, this is a major shake-up for the coffee category, which is growing by around 6% a year.

Myer cuts execs, scores Aesop

The AFR reported that Myer's new CEO has cut 30 executive and senior management roles this week to reduce costs and focus on strengthening the retailer's connection with its customers. The job cuts will save the business $6 million a year. Also this week, Myer announced a partnership with Aesop, snatching the beauty brand from David Jones to become the exclusive department store stockist in Australia this September.

US shoppers in the mood to spend

An article from Associated Press reports that many traditional retail chains such as Home Depot, Kohl's, Best Buy and Target have posted strong sales in the US, both online and in stores. The piece suggests that four trends are driving the retail revival: a strong economy with unemployment at an 18-year low and average hourly wages up 2.7%, store experience enhancements including delivery, curve side pickups and self-checkouts, revamped websites targeted at competing with Amazon, and alluring private label brands. The news is a welcome reprieve from the media's hyperbole talk of the retail apocalypse for brick and mortar stores.

Mecca tops the list as the best AU retail employer

Great Place to Work released its annual Best Places to Work study yesterday. In retail, Mecca, with 2,587 employees, made the list for the fifth consecutive year. Kennards Hire was the only other retail business with 1,000 employees or more to make the list, and L’Occitane Australia was the only retail business with 100 to 999 employees to be recognised. No retailers with fewer than 100 employees were on this year’s list. Mecca Brands ranked fifth in its category, behind tech companies Salesforce, Atlassian and Cisco Systems, and the Hilton hotel chain.