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Amazon lifts block on US site delivery

The AFR reported that Amazon has made a U-turn on its decision to block Australian consumers from shopping on its US site after working out a way to add GST to online orders from overseas. Amazon outraged Australian consumers in June, when it said it would stop shipping from and other international sites to Australian addresses from July 1, when the new GST regime came into effect. The move materially impacted Aussie consumers who lost access to both the US site's wider product range and cheaper prices. Reading between the lines, Amazon's decision to backtrack must be related to the commercial consequences of the "embargo".

The dark side of holiday shopping

Forbes commented that as sales in the US surge, retailers brace for record theft. According to the article, 92% of US companies said they had been a victim of organised retail crime in the past year, and 71% of them said these incidents were increasing.  30% of retailers reported that their goods had been targeted by criminals while in transit.  The term 'organised retail crime' means large-scale theft of merchandise with the intent to resell it.  According to Forbes,  laws are becoming less of a deterrent, particularly as some US states have increased the threshold for a theft to be considered a felony instead of just a misdemeanour. It is worth noting that some of the stolen merchandise makes its way back to retailers as fraudulent returns. US retailers expect in excess of 10% of their holiday sales to be returned and 1/10th of it to be fraudulent.

Lowe's downsizing continues

About two weeks ago we reported that Lowe's decided to close 50 stores in the US and Canada.  Reuters now reported that Lowe's is now looking to shed its retail operations in Mexico and two of its smaller US businesses as the (country’s second-biggest) home improvement chain strives to compete with rivals, including Home Depot. Lowe's CEO said the company failed to boost its sales due to the assortment of merchandise and an inability to restock shelves with the right kind of inventory, despite a rise in customer visits.  In our opinion: quite a fundamental mistake - what's the point in promoting the business, and then when the customers come in, fail to deliver?

Will The Reject Shop reject it?

The AFR reported that The Reject Shop's was surprised this morning with a $2.70 a share cash takeover offer from Allensford Pty Ltd, which is owned by Ruffy Geminder's Bennamon Pty Ltd. It's a firm bid with no request for due diligence, no wish for presentation from management or any funding or regulatory conditions.  The bid is at a 19% premium to the stock's one month volume weighted average price. The AFR wonders whether The Reject Shop's shareholders are frustrated enough with recent developments - including a profit warning last month - to sell out at the price offered.

Retail's growing issue of rising wages and IT costs

Citi Research just published its latest update for the retail industry in Australia and New Zealand, emphasising the growing issue of rising wages and IT costs. Citi sees both as crucial ingredients for successful retailing in today’s landscape, and expressed concern that both these cost buckets are starting to accelerate: “Navigating wage and IT costs will separate successful retailers”. We couldn’t agree more – in the past we commented repetitively about the danger of misdirected, excessive spending on IT in retail.

Bitcoin bubble burst

Reuters reported that Bitcoin slumped on Tuesday to its lowest value this year (below U$4,327), tumbling as much as 10% and losing 25% of its value within a week.  It recovered slightly since, but it is worth noting that Bitcoin has plummeted over 75% this year from a peak of U$20,000 touched in December as retail "investors" piled into one of the largest bubbles in history.  We are not the only ones who have warned repetitively that gambling is not an investment.

Lidl US to acquire Best Market

Multiple media outlets reported that the US arm of German discount grocer Lidl will acquire 27 Best Market supermarkets in a deal that extends its market reach into metro New York. Lidl didn’t disclose a timetable for the conversion of the Best Market stores but said it plans to begin the remodeling, reinvestment and rebannering process next year. Lidl US’s expansion into a major market area like New York stands to turn up the competitive pressure that hard discount grocery chains — including fast-growing rival Aldi. It's worth noting that Lidl is owned by the same company as Kaufland, which is ramping up its operations Down Under.    

Baby Bunting gets the last laugh

The AFR reported that baby goods retailer Baby Bunting has tweaked its full-year profit guidance and expects earnings to rise at least 34% and as much as 45% in 2019, buoyed by a rebound in sales and margins following the collapse of four major rivals. The rebound in earnings follows a tough year in 2018, when the collapse of Toys 'R' Us and Babies 'R' Us, Bubs, Baby Savings and Baby Bounce led to massive industry-wide discounting and dented the retailer's gross margins, leading to a 19% fall in EBITDA to $18.6 million. Though, as we predicted in a previous post, Baby Bunting weathered the storm and is now getting the last laugh.

Organised retail crime losses reach all-time high

The NRF reported that organised retail crime (ORC) is continuing to grow, with nearly three-quarters of retailers surveyed reporting an increase in the past year. The report found that 92% of companies surveyed had been a victim of ORC in the past year and that 71% said ORC incidents were increasing. Losses averaged $777,877 per $1 billion in sales, up 7% from last year’s previous record of $726,351. Retailers attributed the increase to the easy online sale of stolen goods, gift card fraud, shortage of staff in stores and demand for certain brand name items or specific products. We've repeatedly commented that a cybercrime-enabled loss preventation function has become essential to retail operations in the Digital Age.

Profit disaster looms at Myer

The AFR reported that Solomon Lew has warned that not even Father Christmas could stem an alarming sales slide at Myer. The department store revealed late on Friday that sales for the first quarter of 2018-19 had plunged by 4.8% as it belatedly responded after a day of high drama when its shares were forced into a trading halt by the ASX's compliance unit. Myer had also claimed online sales growth of 3.6% but later revealed that this figure included self-checkout purchases in stores. If the current sales trend continues through the quarter to 31 January, Myer will take a 55% hit to gross profit compared to 1H18.

Cotton On in the Big Apple

Inside Retail reports that fast-fashion retailer Cotton On is set to open its first store in New York City, located in Empire Outlets – an in-development outlet centre located on Staten Island, NY. The outlet store will feature the brand’s women’s wear, menswear, and accessories, and is expected to open in early 2019. Retail Directions has been a key technology partner for Cotton On globally for over a decade.

Victoria’s Secret faces tough times

Multiple media outlets reported that Victoria’s Secret’s stock has nosedived 72% in the last 3 years as investors continue to jump ship from its parent company, L Brands. Even worse, 43% of that drop happened in 2018 alone. The company's monopoly has all but disappeared amid the rise of new direct-to-consumer underwear brands with a focus on body positivity. Victoria’s Secret cut its apparel and swimwear in 2016, and this year it plans to close 20 stores.