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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.

Best Buy reports solid growth

Best Buy in the US reported another quarter of solid growth. According to the Wall Street Journal, “Same-store stores rose 6.2% in the second quarter, its sixth straight quarter of gains. Online sales rose 10%, slower than previous quarters. In the past five years, Best Buy has doubled its online sales, which now are about 15% of its total annual US sales.” Looking at the retailer's online performance in context with its 1,000 store footprint, U$244 million profit during the quarter, and $9.4 billion revenue, some quick math tells us that this translated into a contribution of about 1.5% towards its annual overall growth. The creation of a truly omni-channel business model has been an important factor inBest Buy’s success.

Coles' plastic bag tactics pay off

Coles' plastic bag backflip has been criticised by customers and environmentalists and undermined its sustainability claims. The motives behind the move may appear to be about soothing angry shoppers, but closer reflection reveals that it's more focused on getting under the skin of arch-rival Woolworths. Most interestingly, Coles' decision to hand out free plastic bags for two months after banning single-use bags on 1 July appears to have paid off where it counts the most –  at the checkout. The AFR reports that the retailer is on track to post the strongest sales growth in more than two years, with Morgan Stanley analysts forecasting same-store sales growth to reach 2.5% in the September quarter compared with 0.3% growth in the same period a year ago.

Shoes of Prey ceases trading

The AFR reported that online retailer Shoes of Prey has ceased trading, after a nine-year journey of mixed fortunes that took the business from pureplay online into stores and back again. According to the article, Shoes of Prey is currently exploring a dual-track process to either raise more capital or sell. Reading between the lines brings a different perspective. Last year the retailer turned over $7 million and lost $6 million. The venture is another example of when investors capital is used to suck revenue out of the market and give stock away. Seems to be a common pattern.

Myer's brand quest

An article in today's AFR covers Myer's search for new brands to replenish its range after losing key brands Country Road and Mimco to rival David Jones. When South African retailer Woolworths Holdings acquired David Jones, Country Road, and Politix, it initially stated that it would not remove company-owned brands from Myer. However, Woolworths has reversed that decision as part of a strategy to differentiate David Jones from Myer. An obvious blow to the already struggling department store, Myer has declined to comment on the impact of the loss of the brands, which follows the exit of Espirit earlier this year.