We have high respect for National Retail Federation (NRF), but even they occasionally get it wrong.  The NRF reported that retailers and other groups have expressed concerns that the Trump administration's new tariffs on steel and aluminium will raise prices for consumers and launch a trade war. NRF President said that, "A tariff is a tax, plain and simple. In this case, it's an unnecessary tax on every American family and a self-inflicted wound on the nation's economy."  He completely ignored the fact that China has been massively subsidising steel manufacturers, suppressing and destroying steel producers around the world.  The NRF didn’t have any issues with the European Union imposing an even higher tariff (28.5%) on Chinese steel imports in August 2017.

The Telegraph in the UK reported that New Look will close 60 stores, reducing its store portfolio by 10%.  The fast fashion retailer has instigated a company voluntary arrangement and is seeking approval from its lenders for a restructuring plan.  Alistair McGeorge, New Look's Chairman, said that New Look had "wrongly moved to become younger and edgier".  New Look has been a great success story in the past and their current woes confirm how difficult it is to run a successful fashion business.

The AFR reported that Myer is poised to drop off the S&P/ASX 200 Index. This would force index funds to sell their Myer stock.  Myers stock has fallen by 60% over the last 12 months, reaching a low of $370 million this week.  Considering that Myer spent around $500 million on IT over the last decade, it makes us wonder … what would have happened if they purchased normal rather than gold-plated systems and kept most of the money.  According to AFR, Myer is close to breaching debt covenants. Should this happen it will inevitably lead to board, management, and debt restructuring.

The NRF reported that Costco's sales and membership fees rose 10.8% in the second quarter. The retailer also said it will use savings from the recent US Federal Tax Cut to lower prices and boost employee pay. In 1995, we came across a book titled ‘The Discipline of Market Leaders’, covering the concept of Value Disciplines.  According to the authors, great businesses focus on one of the disciplines and become leaders in the chosen space.  Costco purse the Operational Excellence discipline and they are exceptionally good at it.

The Washington Post commented that American women are increasingly trading their high-heeled shoes for flats and sneakers. As the workplace grows more casual people are finding ways to work more steps into their days. Women's' sneaker sales soared 37% last year, while sales of high-heeled shoes dipped 12%, according to NPD Group.  Something to note for Australian shoe retailers.

A new type of crime has started to emerge, called ‘synthetic-identity fraud’.  According to the Wall Street Journal, this has now become one of the fastest-growing forms of identity crimes and one of the hardest to combat. Because the person taking out the cards or loans isn’t real, there are no consumer victims to alert lenders. When companies and law enforcement discover something amiss, they often wind up chasing ghosts. Something to watch…

The Wall Street Journal has been pondering about “Amazon’s Next Big Thing”.  Apparently, Amazon is now in talks with big banks, including JPMorgan Chase, about building a checking-account-like product the e-commerce company could offer its customers.  WJS said that “with millions of customers, troves of data, access to cheap capital and seemingly unlimited leeway from its investors to enter new businesses, Amazon is a fearsome competitor.”  We have been watching Amazon with interest, wondering when the US Government will invoke the Sherman Act, to undercut Amazon’s influence on the US and global economy.  The last notable case was in 2001, against Microsoft.  It was settled and Microsoft avoided being broken up.  Other large corporations were not that lucky.

The Financial Post in Canada reported that the "grocerant" trend is catching on in Canada.  Supermarket chains such as Loblaw and Metro are adding more prepared foods and sit-down dining areas in their stores.  Prepared meals on supermarket shelves are nothing new, but the idea to have a dining area within the store may appear novel.  However, a short visit to a Costco store will prove that this too is an old hat…

Sometimes we get amazed.  The National Retail Federation commented that private brands are making a resurgence and proving to be a powerful differentiator. NRF mentions companies like Amazon, Brandless, ALDI and Trader Joe's, who “are using private brands to build relationships with customers in unprecedented ways”.  We just want to clarify that some of the smartest operators have been doing this for decades and we have been advocating the essential importance of exclusive brands for the last 10 years.  Businesses like Aldi and Marks & Spencer have been built around high quality, private brands. So, sorry NRF, you have just discovered some old news…

Fed Chairman, Jerome Powell told lawmakers this week during testimony on Capitol Hill that "US economic outlook remains strong".  The Wall Street Journal reported that US Consumer Sentiment index has reached its second-highest monthly reading since January 2004.  According to the Journal, US households have been upbeat about the economy in recent months, with growth supported by rising incomes and low unemployment. The recent package of tax cuts also has boosted most workers’ take-home pay.  Makes you wonder what has been added to the water in Canberra, because some Australian politicians have begun advocating tax increases, to “balance the books”.  What about spending a bit less?  Business and most people in Australia already pay plenty of tax.