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8
Feb-19
Friday

David Jones CEO David Thomas departs

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The AFR reported that David Jones has been rocked by its second scandal in less than 10 years, with chief executive David Thomas resigning despite being cleared of a discrimination complaint, the fourth CEO to depart in five years. DJs said Mr Thomas' successor would be announced in due course and Woolworths chief executive Ian Moir will work directly with the DJs management team in the interim. On the trading front, the retailer has been discounting heavily to lure shoppers amid the worst discretionary retail conditions since the global financial crisis. DJs' sales tanked in the run-up to Christmas, with same-store sales growth slowing to just 0.9% in the 26 weeks ending December 23 after rising 2.4% in the 20 weeks ended November 11. This followed a 3.3% fall in same-store sales in the year-ago period.

Walgreens pioneers a freaky future for the frozen foods aisle

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The Hustle reported that after successfully testing out “smart cooler” screens in Chicago in the US, Walgreens will roll out face-recognising, eye-tracking screens to frozen food displays. Marketers have been looking for ways to bridge the gap between brick and mortar retailers and digital advertisers for years, and now Walgreens is betting that smart-fridge displays could be a chill solution. Powered by AI-powered cameras, the “smart” screens, which cover the front panel of cooler doors, display different ads based on age, gender, and even the outside temperature. For retailers like Walgreens, the screens provide a new source of ad revenue and also a quicker way to know when to restock. For big brands, the screens offer the targeting of internet-style advertising, in-store.
7
Feb-19
Thursday

France puts up food and drink prices under new law

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Reuters reported that France’s agriculture minister sought to reassure households that food shopping bills would not jump dramatically as a rise in minimum food prices aimed at raising farmers’ incomes came into effect last week. The government had postponed introducing the measure in December as France reeled from nationwide unrest and sometimes violent “yellow vest” protests over high living costs and the squeeze felt on household budgets. The new legislation includes a 10% increase in the price floor for food products and curbs promotional offers so that retailers cannot discount products by more than 34% of their value. The French government said the average household shopping bill would increase by just 50 cents to 3 euros a month. There is clearly something wrong with the French economy if the government was driven to enforce pricing laws telling retailers what they need to charge consumers.

Coles convenience earnings dive after Viva deal

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The AFR reported that analysts have cut profit forecasts for Coles by as much as 10% after the recently floated retailer signed a new fuel supply agreement with Viva Energy which will decimate earnings from petrol and force Coles to ramp up convenience-store sales. Coles expects earnings from its convenience division to fall to $50 million this year because of falling fuel volumes – compared with $190 million in 2017 and $133 million in 2018 – and managing director Steven Cain warned the business would barely break even in future if fuel volumes did not improve. Under the 10-year agreement, which was finalised on Wednesday after two years of talks and trials, Viva will set the retail price of fuel, collect the full retail margin and receive higher royalties on Coles Express convenience store sales. Viva will pay Coles $137 million in compensation next month – equivalent to Coles Express 2018 earnings – to reflect the value transfer.

Retail takes a blow in spending stall

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The AFR reported that discretionary retail is bearing the brunt of the December spending hit. According to recently released ABS figure for December, overall, retail trade fell by a seasonally adjusted 0.4% with clothing, footwear, and personal accessory spending proving to be a major drag by sinking 2.4%. NAB chief economist Alan Oster said these results pointed to a weak set of gross domestic product statistics for the December quarter. Deloitte national retail, wholesale, and distribution lead David White believes retail's Christmas decline had led to a shift in the way the Australian economy was perceived. Deloitte's latest CFO Sentiment report said "overall sentiment has shifted - from a glass half full on outlook and risk appetite, to more of a glass half empty" during the second half of last year. It attributed the fall in consumer spending to diving house prices and a tightening of credit after the financial services royal commission.

Denim is making a comeback

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MediaPost reported that consumers in North America and Europe are especially enthusiastic about denim. Consequently, Walmart says it is introducing Sofía Jeans by Sofía Vergara. Denim’s renewed appeal is also driving strong results at Levi Strauss. For years now, pundits have said that the rise of athleisure and those comfy yoga pants might signal a permanent disenchantment with denim. However, in a 12-month period ending July 2018, overall jeans sales rose 5% to US$16.4 billion, compared with gains of just 1% in the overall apparel market. Skinny jeans reigned supreme, up 6%, accounting for 40% of all women’s jeans sales.
6
Feb-19
Wednesday

Clearance sales triggering a "domino effect"

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The AFR reported that closing-down and clearance sales are triggering a "domino effect" on the discretionary retail sector and could force more shops to the wall, according to the administrator of menswear chain Ed Harry. KPMG partner Brendan Richards, who was appointed administrator to Ed Harry last month, says the sales are adding to pressure on rivals and contributing to promotional fatigue among consumers. For example, the administrators of cosmetics chain Napoleon Perdis, which went into voluntary administration last week, cut prices by 30% store-wide before closing 28 of its 56 stores on Monday. Half a dozen chains have handed control to administrators in the past six months, including Napoleon Perdis, Ed Harry, Roger David, Laura Ashley and Rugs a Million, and more are expected to follow in the next few months, using voluntary administration to close loss-making stores, cut costs and restructure debt.

Dismal December for retail as sales slump

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The AFR reported that retail sales fell during December as online sale events in November reduced consumer spending in the weeks leading up to Christmas. Seasonally adjusted retail turnover fell 0.44% in December according to the Australian Bureau of Statistics, dropping well below market expectations for flat growth. Household goods and clothing and footwear led the falls during December after strong rises in November from Black Friday promotions. Foot traffic in retail stores in December was the worst on record as the changing spending calendar and increased online shopping left bricks and mortar retailers struggling. Kmart, Kathmandu and PAS Group issued profit warnings or downgraded forecasts earlier this year after weak Christmas sales while David Jones revealed that sales tanked in the lead-up to Christmas. Looking at approximate year-on-year statistics, retail spending was still up around 2.5% over December 2017.

NRF: US retail sales to top US$3.8 trillion in 2019

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The National Retail Federation has forecast that retail sales in the US during 2019 will increase between 3.8% and 4.4% to more than US$3.8 trillion despite threats from an ongoing trade war, the volatile stock market and the effects of the government shutdown. Preliminary estimates show that retail sales during 2018 grew 4.6% over 2017 to US$3.68 trillion, exceeding NRF’s forecast of at least 4.5% growth. The number includes online and other non-store sales, which were up 10.4% at US$682.8 billion. That met NRF’s forecast of 10-12% online growth, and online is expected to grow in the same 10-12% range again this year. The numbers exclude automobile dealers, gasoline stations and restaurants. NRF expects the overall economy to gain an average of 170,000 jobs per month, down from 220,000 in 2018, and that unemployment – currently at 4% – will drop to 3.5% by the end of the year. Gross domestic product is likely to grow about 2.5% over 2018.

HMV deal reached to save 100 shops

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Reuters reported that HMV, the British music retailer that collapsed after Christmas, has been sold to the owner of Canada’s Sunrise Records in a deal that will save 100 stores and 1,487 jobs. Administrators said that 27 stores were not included in the deal and would close immediately, resulting in 455 redundancies. HMV, Britain’s best-known record store chain, has been hit by competition from online rivals and music streaming services. The group, which opened its flagship store on London’s Oxford Street in 1921, was rescued from a previous collapse in 2013 by restructuring specialist Hilco, but it collapsed again in December, blaming a 30% fall in the DVD market. Like the previous owner of HMV said, given the rise of digital music distribution, the retailer faces a tsunami of retail challenges.  
5
Feb-19
Tuesday

Online retail sales weakened in December

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The AFR reported that online retail spending fell sharply in December, lending further credence to the view that November's blockbuster e-commerce promotions came at the expense of Christmas sales. National Australia Bank's online retail sales index recorded a 1.4% month-on-month contraction in December, down from a 2.9% increase in November. Official retail sales data for December is due later today. The only other December contraction in NAB's online series was back in 2016, when the index recorded only a 0.1% drop. Low wage growth, high personal debt levels and a weakening housing market are weighing on consumer ability to spend on non-essentials.

Amazon squeezes Coles and Woolworths

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The AFR reported that Woolworths and Coles are under growing pressure to cut prices on health, beauty and cleaning products and offer free deliveries to avoid losing market share and volumes to Amazon. Analysis by Credit Suisse has confirmed Amazon is actively matching and, in most cases, undercutting Woolworths and Coles on a wide range of non-food grocery brands after launching Amazon Pantry last year. The analysis found Woolworths' average daily prices were 14% higher over a two-week period in January than Amazon's prices on a basket of 50 identical baby, beauty, cleaning and health products and its minimum prices were 4% higher than Amazon's prices. Coles' prices on a basket of 40 identical products were 25% on average higher than Amazon's over a two-week period and its minimum prices were 18% higher. When the major retailers lower or raise prices, Amazon follows the next day.