Retail News

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EXPERT OBSERVATION
The March retail report showed a slightly better than expected monthly gain but a materially weaker than expected result for March quarter sales volumes, the latter being the more important takeaway.
Monthly sales posted a 0.3% gain, beating expectations of a 0.2% rise with Feb’s surprisingly firm 0.8% gain marked up to a 0.9%. Annual growth lifted from 3.2%yr to 3.5%yr.
That’s where the good news ends though. The wash up for the quarter as a whole showed all of these gains in nominal sales were due to higher prices with sales volumes declining.
Real retail sales dipped 0.1% in Q1, coming in well below consensus expectations of a 0.3% gain with the quarter on a par with the flat result in Q4. Annual growth has slowed to 1.1%yr but with a cumulative gain of just 0.2% over the last three quarters is in danger of dropping below 1%yr next quarter.
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The undershoot vs expectations was due to a stronger than expected rise in retail prices which rose, up +0.8%qtr vs +0.7%qtr in Q4. The sub-category detail shows a particularly big rise in food prices (+1.4%qtr vs 1.2% in Q4). Non food retail prices posted a 0.2%qtr gain.
The detail also points to a material slowing in sales across sub-categories associated with ‘big ticket’ discretionary spend, consistent with a wealth effect drag from the housing market correction. In particular, household goods retail volumes declined 0.6% in the quarter to be flat over the year, a marked slowdown on the 5.4%yr growth seen this time last year. Department stores also recorded a contraction, sales volumes down 1.2%qtr, and –0.7%yr. Other non food categories, mostly ‘small ticket’ discretionary, recorded small gains for the quarter and over the year. Cafes and restaurants were the only bright spot, recording a 1%qtr gain in Q1 to be up 1.4%yr.
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By state, NSW was the only state to post a gain in Q1, up 0.6%qtr, but was coming off a bigger 1.1%qtr fall in Q4, annual sales growth slowing to just 0.9%yr. Results across the other states were: Vic –0.3%qtr, +2.3%yr; Qld –0.1%qtr, +1.5%yr; SA –0.4%qtr, –0.4%yr; WA –0.6%qtr, –0.7%yr and Tas –0.9%qtr, +1.7%yr. The broad based weakness in the quarter suggests that it is not just about spillovers from the correction in housing markets which to date has been largely confined to NSW, Vic and WA.
Looking by channel, online sales look to have posted a 0.7% gain in the March month, annual growth slowing to 'just' 12.7%yr, a subdued gain for this segment.
Overall the March retail report points to downside risks to the wider consumer spending estimates in the March quarter GDP, the headwinds that emerged in the second half of last year clearly carrying into 2019. 
MATTHEW HASSAN is a Senior Economist for Westpac. 
Read full article <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2019/May/er20190507BullRetailQ1.pdf" target="_blank">'Australian retail sales Q1'</a>.
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Matthew_Hassan-HHWHptmrw4

Retail volume results materially weaker than expected: Westpac's Matthew Hassan 

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Men’s fashion chain Ed Harry has become the first retail administration of 2019 with the bricks and mortar retail collapse putting 500 jobs at risk.
The first Ed Harry menswear store opened in Glenelg, South Australia, in 1993.
Ed Harry employs more than 500 people with over 80 stores.
They include new stories at Strathpine in Queensland, DFO Perth at Perth Airport, Western Australia, and Riverlink at North Ipswich, Queensland.
Longtime landlords include Stockland Green Hills at East Maitland, New South Wales; Westfield Plenty Valley at Mill Park, Victoria, Stockland Traralgon, Westfield Kotara in New South Wales, and Stockland Merrylands in Sydney.
Ed Harry continued a long tradition started in 1932 by Victor Harry (joined later by his son Edward) of affordable men’s clothing.
In 2011 Ed Harry was acquired by the Specialty Men’s Apparel group with many new-look stores opening in Victoria, Western Australia and Sydney. 
Ed Harry also relocated its national head office to Port Road in Hindmarsh, SA.
More than 100 South Australian retail jobs are at risk.
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j.ballantyne1990-6AQqhLzZaK

Ed Harry collapse puts 80 retail landlords on alert

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Temple &amp; Webster, which suggests it was becoming "the next Harvey Norman" has reported its inaugural profit.
It claims to be Australia’s largest e‐commerce company in the furniture and homewares market.
Temple &amp; Webster has over 130,000 products on sale from over 700 suppliers.
Temple &amp; Webster earned $300,000 before interest, tax, amortisation and depreciation in the June-half following a 24% rise in revenues.
The company finished the year with a cash balance of $9.9 million and had net cash flows of $600,000 in the June quarter.
"[Two] years ago we promised our shareholders we would reach profitability during calendar year 2018 without having to raise additional capital, and I am proud to say that we achieved this goal," Coulter said in a statement on Monday.
He expected Temple &amp; Webster to be EBITDA positive in 2019, eight years after its launch in 2011 and two year after being floated in 2016 with its management team, including Mike Henriques (former Wayfair Australia GM) and Sven Lindell (ex Bras N’ Things, Woolworths and Rebel).
Temple &amp; Webster shares rose 7% to 76¢, compared with their issue price of $1.10.
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E-commerce furniture and homewares store Temple & Webster makes its inaugural profit

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Oroton stores will operate as usual after the 79-year-old luxury handbag retailer fell into voluntary administration.
"The board is disappointed that it has had to take this step after running such a comprehensive process," interim chief executive Ross Lane, the grandson of Oroton founder Boyd Lane, said in a statement to the ASX on Thursday.
"However, having carefully considered the options available to the company at the conclusion of its strategic review, it is apparent that voluntary administration is necessary to protect the Oroton business and the future of this iconic Australian brand."
The group's 62 Oroton stores across Australia, New Zealand and Malaysia, which employ about 550 staff, will continue to operate as administrators from Deloitte Restructuring Services look at recapitalising or selling the brand.
The Lane family have a 22% stake, with fund manager Will Vicars having an 18% stake.
Entities controlled by Vicars entered a put and call arrangement with Westpac to secure critical credit support for Oroton in August.
Oroton sank to a $14.3 million loss in the year to July, compared to a $3.4 million profit the previous year.
Contributing to the loss were costs linked to its wind-down of its Gap franchise after it terminated an agreement with the US apparel group.
The group's shares, which have been suspended, last traded at 43.5 cents.
The company's December 1 annual general meeting has been postponed.
The first creditors meeting is set for December 11.
"However, having carefully considered the options available to the company at the conclusion of its strategic review, it is apparent that voluntary administration is necessary to protect the Oroton business and the future of this iconic Australian brand," the board advised the ASX.
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Oroton's 62 stores to continue trading as administrators move into luxury handbag chain

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The loss-making Australian Geographic retail chain of 67 stores could disappear by March 2017.
The Myer Family Investments vehicle, owned by one of Australia's richest families, has owned the chain since 2007.
The Australian Financial Review said commercial property sources said individual store leases at some of the outlets were being offered to rival retailers as the Myer family tries to salvage some value from a retail business that had been generating annual sales of close to $50 million.
It is understood the retail chain has been quietly offered to potential buyers but that avenue has been largely unsuccessful, leading to plans for a wind-down of the business.
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<div>It follows the Australian Broadcasting Commission deciding 12 months ago that the national broadcaster would shut its 50 ABC Retail store network.</div>
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<div>Records lodged with the Australian Securities and Investments Commission show that financial accounts lodged by Australian Geographic Retail for the 2014-15 financial year indicate the business reported a loss of $3.34 million, a worse result than the previous year when it reported a loss of $2.54 million. </div>
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Australian Geographic's total revenue was $49.1 million in 2014-15, up from $44 million in the previous year.
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Australian Geographic retail stores tipped to close

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Vacancy across Melbourne’s 10 key retail strips has fallen by a quarter over the last four years, driven largely by strong population growth in the city's inner suburbs, according to the latest Savills research.
The research found that overall vacancy rate had fallen to 7 percent from 9.5 percent over the four years from May 2012 with 184 shops now vacant, down from 253.
Glenferrie Road, Hawthorn and Church Street, Brighton were the top performers with vacancy rates of 2.1 and 2.3 percent respectively, while Bridge Road trailed the field at 13.6 percent. 
Savills Victorian research manager, Monica Mondkar, said while vacancy in some strips remained high, the most vibrant retail and entertainment precincts outside of the CBD were doing well and could look forward to continued growth as Melbourne’s inner suburbs recorded double digit population growth.
"Some strips, such as Bridge Road, have struggled in recent years but that has been more to do with tenancy mix and a lack of local government initiatives," she said.
"Retailers in the most popular strips, such as Chapel Street, South Yarra and Toorak Road, Toorak, can generally now look forward to tighter vacancy with stronger fundamentals underpinned by the massive influx of residents to new apartment developments.
"Retailers left behind will be those in strips where the mix of retailers has failed to attract consumers and where they lack effective local government support.’’ 
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Of the 2,620 shops surveyed, the Cafes, Restaurants &amp; Takeaway Food Services category had seen the largest increase of 20 percent to 581 shops, Services was up 12 percent to 612 shops, while Clothing, Footwear &amp; Accessories fell 15 percent to 663 stores.
Notable leases included those of national fashion retailers, Peter Sheppard at 626 Burke Rd, Camberwell, Bendon at 143-151 Bridge Rd, Richmond, Mimco at 87 Church St, Brighton, Flannel at 40b Church St, Brighton, and Trenery at 1015 High St Armadale, while international brands, Canadian cosmetic retailer As Colour opened a store at 230 Chapel St, Prahran, and Nike leased space at 71-73 Church St, Brighton.
ABS retail trade (seasonally adjusted) indicates that Victorian retail trade grew by 5.2 per cent in the 12 months to March, above the national average growth of 4.1 per cent, while consumer confidence, buoyed by low interest rates, measured 103.2 points in May, up from 102.4 points a year ago.  
<a href="/images/2016/06/15/Screen%20Shot%202016-06-15%20at%2011.48.29%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/06/15/Screen%20Shot%202016-06-15%20at%2011.48.29%20AM.png" alt=""> 
Savills Victorian director-Retail Services, Michael Di Carlo, said the increase of 186 new stores in food and beverages and services retailing correlated with the dramatic growth in the number of apartments.
"Population growth has been the key to the growth in these sectors, and these are the sectors which cater for the most immediate needs of local residents. The decrease in fashion related stores, on the other hand, may be about the competition from national and international brands along with a preference for that type of shopping elsewhere including the CBD or the larger enclosed centres," Di Carlo said.     
He said yields and rents varied widely according to the particular attributes of the strip.
"Strip retail, especially suburban strip retail has long been a favourite of the small investor and in recent years that focus has intensified with the emergence of the SMSF and of course record low interest rates.
"Yields have always been tight in these markets but those factors have seen even further downward pressure to the point where yields around 3.5 to 4.5 per cent are now much more common,’’ Di Carlo said.
"Rents can vary dramatically between precincts and indeed, in some cases, within precincts  They are very much about the location, the position within the location and current and historic vacancy levels.’’
He said rents for strips shops in the best strip locations generally ranged between $800 and $1200 a square metre.    
 
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Vacancy in Melbourne’s top retail strips down 25 percent: Savills

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Woolworths' move to exit the Masters hardware chain have put REIT landlords Charter Hall, SCA Property and Aventus Property at some potential risk, according to The Australian.
But the fallout will not negatively impact on property values or rents in the wider retail sector, the research group BIS Shrapnel told the Australian Financial Review.
Instead BIS Shrapnel expect continued demand for household goods off the back of the residential construction boom. 
Longer term yields were likely to soften when the residential construction phase started to winds down, BIS said.
After a double-digit capital growth in 2015 there is expected to be an overall lack of supply of large new retail space to drive investor demand and push up capital values.
The REITs own just four of the 62 stores in the chain, with Macquarie Group analysts suggesting that these REITs are well placed to recoup unpaid rent.
Newy listed Aventus has exposure to one Masters store in Cranbourne in Victoria in its portfolio of 15 bulky goods stores.
SCA may turn their Mount Gambier town centre store into a bulky goods store or a supermarket.
Charter Hall has a contract to buy a third Masters site to add to the two stores they currently have in Sydney and Melbourne. 
"Large-format yields have firmed but they are still at a premium to other retail property, so there is scope for that gap to close further," said Maria Lee, senior project manager at BIS Shrapnel.
"Consumer demand should stay strong for the next couple of years because spending tends to lag housing construction and turnover. We are only seeing building commencement peaking now," she said.
BIS Shrapnel forecasts rental growth of over 3 per cent per annum over the next five years, compared with less than 1 per cent over the last five years, driven by continued demand for this type of retail space, as supply contracts.
New, large-format, retail supply reached over 600,000 square metres in 2015, the highest level of new building since the global financial crisis, comprising mainly  Bunnings and Master store openings, said BIS Shrapnel.
Ms Lee said Woolworths had already cut back its pipeline of new Masters stores.
She anticipated the likely subdivision of numerous Masters stores. Some will be taken over by Bunnings, she said. 
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