News

Catch has reported a loss of $108 million for the first half of the financial year, including restructuring costs of $33 million relating to inventory provisions, redundancies and asset write-offs. 

The Wesfarmers-owned online marketplace saw gross transaction value decline by 26.8 per cent during the period. 

Wesfarmers managing director Rob Scott said the result, for the half-year ended December 31 2022, was due to internal and external factors.  

“The disappointing financial performance in Catch reflected operational and execution challenges in addition to the broader decline in online retail demand during the period. 

“Catch’s earnings were impacted by significantly lower margin in the in-stock business due to increased clearance activity, as well as higher fulfilment and delivery costs associated with layout and process inefficiencies during commissioning of the new Moorebank fulfilment centre in New South Wales."

Catch has appointed a number of senior leaders in a turnaround strategy, including former Cotton On Group eCommerce head Brendan Sweeney in October 2022. 

"Restructuring activities to reduce overhead costs were commenced in December 2022 and additional commercial controls on range and inventory management have been implemented," Scott confirmed. 

Wesfarmers acquired Catch Group for $230 million in 2019.

JB Hi-Fi is the latest company to show that consumers are shrugging off the burden of higher interest rates on their home loans and spending up big on electronics and appliances over the past six months.

Bumper sales of laptops, gaming consoles and whitegoods during the Black Friday/Cyber Monday and Boxing Day promotions propelled the retailer to record sales and earnings in the December half.

JB Hi-Fi’s news comes a day after Super Retail posted a near 20 per cent December profit upgrade, with the owner of Supercheap, Rebel, BCF and Macpac telling The Australian Financial Review that shoppers are still spending, and retail is returning to normal with global supply chain kinks getting ironed out.

This week, Tyro Payments also revealed strong spending at retailers, pubs, restaurants and other hospitality venues that led to a strong first half and prompted the fintech to lift its profit guidance.

The early showing of half-year accounts came as the Westpac-Melbourne Institute index of consumer sentiment rose in January for a second month. Roy Morgan Business Confidence also improved in December, driven by a higher conviction about the performance of the Australian economy over the next year.

While consumers are battling higher costs for everyday items such as groceries and fuel, recently released strong retail sales and CPI data has raised the chance of another RBA rise in February.

JB Hi-Fi’s chief executive Terry Smart said trading conditions had started to normalise following two years of COVID-19 disruptions.

“Our relentless focus on providing the best value and high levels of customer service every day, both in store and online, continues to resonate with our customers,” he said.

JB Hi-Fi’s first-half sales gained 8.6 per cent to $5.3 billion in the six months to December 31 – topping analysts’ expectations.

Online sales in the December half reached $752.1 million, about 14.2 per cent of total sales in the first half. Same-store sales for JB Australia reached 8.5 per cent, while JB New Zealand bounced strongly to be up 16.1 per cent and The Good Guys brand same-store sales gained 7.3 per cent.

The rate of comparable sales growth across the business slowed from the first quarter to the second quarter.

Continued sales growth, combined with improved gross margins, resulted in strong earnings before interest and tax (EBIT) gain of 14 per cent to $479.2 million.

Net profit after tax for the December half is tipped to be up 14.6 per cent to $329.9 million compared with $287.9 million a year ago.

Mr Smart declined to add further outlook commentary when contacted, but last October flagged continuing pressure on household budgets, and noted the $5.1 billion retailer will be cycling some significant sales from last year driven by COVID-19. He was anticipating the second half of the financial year would be “a bit more challenging than the first half”.

Despite the positive news initially sending JB shares higher, they ended Tuesday down 42¢ to $46.68 each.

Milford Asset Management portfolio manager Roland Houghton said both JB and Super Retail updates, along with other industry feedback, suggests the consumer remained resilient despite the headwinds of higher prices and rate hikes.

He said this earnings season should be reasonably solid for the retailers, but it would be very company-specific, and companies that had managed inventory well and promoted effectively in the key sales periods of Black Friday, Cyber Monday and Boxing Day would be the top performers.

“Those which have brand strength will be critical. I think from a nominal perspective we should see reasonably good revenue numbers, but the real unknown is around the margins,” he said in an interview.

Mr Houghton warned there was still much more to wash though the system with inflationary pressures still persisting, and questioned whether consumption would be sustained as fixed-rate mortgages rolled over and in the face of rising living costs.

“We’re particularly cognisant of the hiking cycle that is still not over, and it’s still not yet in the daily P&L of the consumer because we haven’t had fixed rates come off, and even the December rate hike isn’t going to flow through to your mortgage until March,” he said.

Consensus upgrades

E&P Financial group analyst Phil Kimber said he expected consensus upgrades of about 15 per cent – broadly similar to JB’s share price increase since January 1.

Mr Kimber said that when JB releases half-year audited statutory results on February 13, the focus will be on earnings composition (in particular GP margins and sustainability) as well as trading in January and February.

He still kept his negative recommendation, believing calendar 2023 would be significantly tougher than last year given the rising cost of living and the reallocation of spending away from goods to services.

“We therefore expect material earnings declines (vs prior corresponding period) to commence in 2H23 and into FY24,” he said in a note.

Kogan.com Limited has reported an inventory reduction in-warehouse of 39% since June 30, 2022, buoyed by unprecedented discounting that has impacted gross profit and gross margin.

Inventory has been reduced to $98.3 million (comprising $84.1 million in-warehouse and $14.2 million in transit) as at December 31, 2022, from $159.9 million (comprising $137.9 million in-warehouse, and $22.0 million in transit) as at June 30, 2022.

The reduction in inventory did result in reduced operating costs across both warehousing and marketing, and supported a growth in net cash (after loans and borrowing) to $74 million - after having funded the Mighty Ape Tranche 3 payment ($14.2 million), repaid loans and borrowings of $25 million and successfully acquired online homeware brand Brosa. 

Having now cleared through the bulk of this excess inventory, Kogan said it will continue optimising operating costs and streamlining the business to return to the levels of operating margins previously delivered prior to the COVID-19 pandemic. 

The Company expects gross margins to improve from January 2023, and to further optimise operating costs progressively through the second half of the financial year. 

Meanwhile, the half saw Kogan First subscribers grow to 404,512 by December 31, 2022 (47.6% growth year-on-year) and Kogan Mobile Australia reach the most ever Active Customers in its history (4.2% growth year-on-year). 

However, Kogan reported that the reflected subdued sales activity for the Company, whilst cycling a half in the prior year that was impacted by COVID-19 lockdown orders. 

Kogan.com founder and CEO Ruslan Kogan said the impacts of inflation and interest rates have begun to affect the lives of Australians and New Zealanders. 

“We’ve been growing Kogan.com for more than 16 years now, so we’ve been through many cycles, and we know that when customers are watching their costs carefully, eCommerce becomes even more important,” Kogan said.

“Since Kogan.com launched out of a garage in 2006, we’ve been obsessed with making the most in-demand products and services more affordable. We are proud to be making that possible for our millions of customers and the growing base of loyal Kogan First Subscribers. 

For the half, Kogan.com reported a gross sales amount of $471.1 million, down 32.5% year-on-year, said to be impacted by soft trading condition. It achieved a gross profit of $62.9 million.

Variable costs as a percentage of gross sales reduced to 7.6% in the first half of FY23 from 8.5% in the prior corresponding period.

Discount retail chain The Reject Shop has lost its chief executive after just six months in the job as its sales recovered from last year’s COVID slump.

In an announcement to the ASX on Wednesday, the company said Phil Bishop had resigned for personal reasons, and that the search for his replacement would commence immediately. He will leave with six months’ pay and statutory entitlements.

“On behalf of the board and The Reject Shop team, we thank Phil for his work over the past six months and wish him well,” the retailer’s chairman Steven Fisher said.

Shares in the company slipped 2.4 per cent to $4 about midday.

Bishop served as chief operating officer at Officeworks before joining The Reject Shop in July. His predecessor Andre Reich had resigned from the top job to pursue other opportunities in April.

The company’s Chief Financial Officer, Clinton Cahn, will be acting chief executive, having performed the role in the transition period between Reich and Bishop last year. He’ll also remain finance chief during the search for a new CEO.

The Reject Shop, which has 377 stores across Australia, flailed in the first half of last year, as shoppers stayed at home due to the Omicron variant of COVID-19.

But business improved over the past months, with the company flagging a 3.5 per cent rise in sales to $439.7 million for the latest half, and operating earnings between $22.5 million and $23.5 million, up from $20.5 million in the December half of 2021.

With shoppers having returned to shopping centres and stores, the “positive momentum” has continued during the first four weeks of the year, the company said. The Reject Shop will report its half-year results on February 23.

The news of Reject’s CEO departure comes as discount retailer Best & Less is also searching for a new chief executive after its boss Rodney Orrock stepped down on Wednesday for health reasons. He will leave the company at the end of his medical leave in late February.

“While Rod continues to make good progress in his treatment and recovery from lymphoma, he has decided to step down to prioritise his long-term health,” the company said in an announcement to the ASX.

Best & Less said an external search process for a permanent chief executive was underway, with Jason Murray remaining as executive chair in the interim.

A consumer spending slowdown is setting the scene for a fierce battle on price in the department store sector after a strong start to 2023 by Myer and David Jones.

Analysts warn that while the iconic big two department stores are heading into this year with strong foundations, their discount peers – chains such as Kmart and Big W – may be better placed to capture budget-conscious shoppers as households “trade down” purchases over the next three months.

Australian Bureau of Statistics retail figures for December 2022 showed department store sales took the biggest month-on-month hit of any category, down 14.3 per cent compared with November.

However, recent trading updates from Myer show the company’s sales were up by close to 25 per cent in the first five months to December, while David Jones’ turnover was up 31 per cent.

Morningstar analyst Johannes Faul said the ABS figures needed to be viewed in context of the incredibly strong November for the sector as shoppers flocked to the Black Friday sales.

“It was a decline in December, but on an amazing November,” he said. “Year-on-year, department store sales are up.” The sector generated $1.7 billion in December 2022 – up from $1.5 billion in 2021.

Despite a COVID rebound, overall retail sales growth is slowing, and Faul said he expected shoppers to “dial back” discretionary purchases over the next six months.

That trend could spell trouble for department stores such as Myer and DJs, which sit in the middle of the market, said co-director of RetailOasis, Trent Rigby.

He said as consumer confidence fell and spending slowed, speciality retailers such as The Reject Shop and discount department stores such as Kmart tended to benefit while mid-market operators found it tough to maintain momentum.

“Expecting consumer confidence and spending to continue to trend the way they are for the rest of 2023, then big players within that middle market [like] Myer, Target and DJs will be the worst impacted.”

Director of valuations at global advisory firm Gordon Brothers Brendan Smyth agrees that discount players could see an advantage when shoppers “trade down” discretionary purchases as they search for the lowest price.

“There is going to be more consumers being more conscious about where their dollars are being spent and how they’re spending,” he said.

“Maybe it’s a bit more affordable to go to Myer than it is to DJs, it’s a bit more affordable to go to Kmart than it is to Myer, maybe Big W is even more affordable than Kmart is.”

But Smyth says the discount end of the market will also have its own challenges this year even if they pick up more customers as higher supply chain costs eat into margins.

“Where it’s going to be hard for those discount players is that they sell a lower-margin product, but they need to make margins themselves.”

Kmart and Big W are yet to release trading updates for the past few months, though Big W’s owner, Woolworths, confirmed last November that the store had a 30 per cent jump in sales in the three months to September.

Myer investor Wilson Asset Management is upbeat about the department store’s position going into a slowdown, with portfolio manager Oscar Oberg saying the company’s turnaround plan is on track.

“Over the next six to12 months we will start to see more inbound tourism and more people coming into the city which will be very positive for Myer’s CBD stores. There’s a long way to go [in terms of growth] here and we think the business can generate profit over $100 million per annum very soon.” Oberg said.

Rigby says his team is viewing a bounce-back in the department store model as somewhat temporary, however, warning that the broader challenges facing the entire sector have not gone anywhere.

“The biggest challenge for department stores will be how they attract and maintain a younger digital consumer,” he said.

Smyth believes it will be the brands that match their offers best to budget-savvy shoppers that will have the edge this year.

“Pricing, relevance to the customer and customer experience are all going to be the key things,” he said.

Grill’d founder Simon Crowe is confident the premium burger chain will scoop up price-conscious customers who choose to trade down from more expensive restaurants as they tighten their spending.

Crowe said Grill’d was an “aspirational and premium” brand but also affordable for diners seeking to reduce their discretionary spending as they adjust to rising interest rates and high inflation.

“We obviously don’t want for people to be doing it tougher out there, but in an economic environment that becomes challenging, Grill’d is actually better placed than anybody,” Crowe told this masthead.

He pointed to the global financial crisis, during which he said the burger chain saw a “significant uplift in volumes”.

“We see people who decide to tighten their belts a little migrate from premium casual dining to fresh or fast casual dining, exactly where our brand sits ... We gain a net influx of guests coming to us from above because they still want quality and service, but they want more affordability, and we provide all of those.”

Grill’d’s range starts at $12.50 and increases to $16.90 for a single burger. A ‘snack’-sized side of chips and a 600ml Pepsi Max would bring the meal to $21.90 for the cheapest burger.

The burger chain was among several foodservice brands that raised their prices last year amid mounting supply chain pressure and rising ingredient costs, but Crowe said he was not expecting to pass through any further price increases to customers in 2023.

“A lot of the pricing pressure in the supply chain have already been brought to the fore, and I don’t expect there to be significant pressure going forward.”

Crowe also owns premium chocolate brand Koko Black, which he said had just seen off the “strongest Christmas we’ve ever had”. Like Grill’d, the business owner is similarly unconcerned that cost-of-living pressures will stop Australians reaching for sweet treats.

“The macro environment or economic challenges won’t be disruptive to those businesses that are focused on long-term brand building and product quality,” he said.

Grill’d last week launched its Gamechanger burger patty made from black angus cattle that produce 67 per cent less methane, a sustainability-driven initiative that Crowe said took lessons learned from the short-lived conversion of two high-performing stores into plant-based-only restaurants. Grill’d Surry Hills and Collingwood were temporary renamed ‘Impossibly Grill’d’ and served a full plant-based menu for just 21 days before fierce customer pushback reinstated the original menus.

The Gamechanger patty was a partnership with Sea Forest, a Tasmanian producer of asparagopsis, an edible red seaweed that, when fed to cattle, results in the animals producing less methane. Customers pay $1 to swap their patty, which is offered at 61 Grill’d stores in a national network of 160.

The initiative has cost the burger chain $2 million. The take-up of the new patty has outstripped demand so far, said Crowe, who was looking to prove that demand existed for more sustainable options.

“We know that the dollar is at least what it will cost us. We’re trying not to put more costs in because we want to make the hurdle for consumers to jump as low as possible,” he said.

“The step change for us is enormous and we’re happy to do it. But yes, it needs to be the demand remains high.”

Despite inflationary pressures and rising living costs, retail spending increased 1.7 per cent in December, according to the Mastercard SpendingPulse report, released by the Australian Retailers Association.

Consumers spending on apparel rose by 6.7 per cent, on groceries by 6.6 per cent, lodging 4.1 per cent, electronics 3.5 per cent, jewellery 2 per cent, and at restaurants by 1.8 per cent last month.

Year-on-year sales were down for fuel and convenience at 4.1 per cent and home furnishings at 2.4 per cent.

ARA CEO Paul Zahra welcomed the figures and said achieving spending growth in December was “encouraging” for retailers.

“These December results are a testament to the resilience of the retail industry and set a good foundation as we anticipate a period of uncertainty this year with inflationary pressures and the rising cost of living,” he said.

Although Zahra flagged inflation as a factor in the increased sales, he forecast a “challenging environment” for businesses as rising operating costs will tighten margins moving forward.

Walt Disney boss Bob Iger announced plans for a dramatic restructuring of the world’s largest entertainment company that includes cutting 7000 jobs and $US5.5 billion ($7.9 billion) in cost savings.

The reductions include lower spending on programming and $US2.5 billion in non-content related cuts. About $US1 billion of the savings are already underway, Iger said on a conference call with investors on Wednesday. The job cuts amount to about 3 per cent of Disney’s global workforce.

As part of the change, Disney’s CEO also announced that the company will be reorganised into three divisions: an entertainment unit that includes its main TV and film businesses, the ESPN sports networks, and the theme-park unit, which includes cruise ships and consumer products.

The reorganisation is intended to improve profit margins, Iger said, and represents his third major transformation of the business following efforts to beef up its film franchises through acquisitions and the development of its online business.

Iger, who returned to the lead the company in November after his successor Bob Chapek was fired, has been under pressure to improve results. Activist investor Nelson Peltz is seeking a board seat at the April 3 annual meeting, arguing in part that Disney shares have underperformed and the company needs better cost controls.

Earlier on Wednesday, Disney announced upbeat financial results, led by big gains at its theme parks.

Profit came to 99 US cents a share in the period ended December. 31, Disney said, above the 74-US-cent average of analysts’ estimates. Revenue grew 7.8 per cent to $US23.5 billion, slightly above projections.

Subscribers to the Disney+ streaming business declined 1 per cent in the quarter to 161.8 million, the first such decline, amid cancellations of the Hotstar service in India after Disney lost streaming rights to cricket there.

Losses in the streaming business more than doubled to $US1.05 billion from a year earlier, but that was better than management had forecast three months ago.

“The work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders,” Iger said in a statement.

Outsized losses in streaming contributed to the ouster of Chief Executive Officer Bob Chapek late last year and the return of Iger, who led the company from 2005 to 2020. The Burbank, California-based entertainment giant is seeking to achieve profitability in its streaming division next year and fend off Peltz, who holds a stake worth about $US1 billion.

After years of focusing on subscriber growth in streaming, Wall Street’s attention in recent months has turned to when the media industry’s staggering investments in online film and TV shows will begin earning a return.

To help counter the losses in streaming, Iger is considering licensing more of Disney’s films and TV series to rivals after years of keeping the vast majority of the titles exclusive to its own platforms.

Disney’s parks continued to shine, with revenue in that division increasing 21 per cent to $US8.74 billion and earnings climbing 25 per cent to $US3.05 billion. The results included sales and earnings from consumer products that were little changed.

Revenue from Disney’s traditional broadcast and cable TV business, such as ESPN, fell 5 per cent to $US7.29 billion, while operating income slumped 16 per cent to $US1.26 billion, hurt by weakness outside the US.

Michael Hill International Limited has reported double-digit sales growth for the first half of FY23 across its international portfolio.

Group sales were up 11.7% on last year to $363.3 million, and 14.5% on FY21 - with seven fewer stores.

Its Australian segment revenue grew by 18% on last year and 8.8% on FY21, with its New Zealand segment growing by 13.8% on last year and by 10% on FY21.

Michael Hill’s Canada portfolio grew revenue by 0.5% on last year, and by 25% on FY21.

Michael Hill CEO and MD Daniel Bracken welcomed the result, saying the company was comping a record second quarter last year.

“This year, while the first quarter results were cycling store closures, the delivery of 4% growth in Q2 was outstanding, underpinned by yet another strong Christmas execution,” Bracken said.

“The first half sales of $363m represent a new record, up $30m on the previous best half in FY20, even with 22 fewer stores.

“While record sales were a highlight, equally pleasing was our ability to maintain elevated margins despite significant input cost pressures and increased promotional activity in the market.

“Considering Canada had a record first half last year, this year’s result still delivered growth, and represents 26% growth on two years ago.”

Meanwhile, the company reported a decline in digital sales of 9% on last year, however they were still up 30% on H1 FY21.

It also announced a successful transition to its new state-of-the-art global headquarters in Brisbane, which houses the global leadership team and functions, a high-tech distribution centre and a reimagined artisanal jewellery workshop.

Australian families are feeling financial stress as they work their way through back-to-school shopping lists, but Officeworks boss Sarah Hunter says consumers are also joyful at the thought of a year of learning without COVID-19 interruptions.

“This is the first year we are all so hopeful our children will have a completely ‘as normal as it can be’ full year of school,” the chief executive of the Wesfarmers-owned office supplies store said.

The prospect of a school year sans-COVID disruptions is driving families into stores to choose all-important items like pencil cases, lunchboxes and drink bottles together.

“We are seeing a lot of parents come into store and want to have that experience with their children,” Hunter said.

This week is one of the most important trading opportunities of the year for retailers focused on education essentials, and there is significant spending to be captured. Finder figures for 2023 put the price of a full set of school supplies, including stationery, textbooks and uniforms, at $571 for primary school students and $771 for secondary students annually.

Despite the excitement about a new year of in-classroom learning, merchants must strike a difficult balance this year on the price of materials, given households are absorbing several months of rising interest rates and soaring inflation, which hit 7.3 per cent for the 12 months to November.

The cost of education increased by 4.6 per cent compared with the 12 months to November 2021, according to Australian Bureau of Statistics figures. Meanwhile, this masthead reported last week that Victorian families are facing debt collection services for unpaid private school fees as even wealthier households start to feel the pinch. 

A UBS consumer survey for the last month of 2022 shows inflation is most affecting income earners on less than $48,000 a year, with this cohort expecting their income to contract further over the next year.

At the same time, book lists are featuring more technology requirements than ever. Beyond standard exercise books, glue sticks and highlighters, students need increasingly sophisticated headphones, laptops and tablets.

Then there are bento boxes for lunchtime and art supplies. Even the staple musical instrument of primary school, the recorder, is still a part of the return to school – Officeworks has sold close to 10,000 recorders during this financial year.

That’s making price guarantees more important, with Hunter saying Officeworks’ promise to beat the price of school goods at other retailers by 20 per cent is drawing in shoppers.

“There is certainly financial pressure, absolutely – which is why they come somewhere where they trust,” she said.

That includes a focus on low-cost basics, with many of its most popular home brand products including glue sticks, exercise books, drink bottles and pencil cases coming it at less than a dollar.

Competition for household back-to-school spend is growing, however, with players like Amazon expanding its range over the past two years. This is also a major trading period for kids stationery brand Smiggle, which reported $261.2 million in sales last year.

After a few years of remote learning, the importance of adding individualised touches to school gear is growing, Hunter said.

“One of the interesting trends we’ve started to see more of is personalisation.”

That’s one area where Officeworks is hoping to capitalise with budget-friendly options for kids to order monogrammed pencil cases, drink bottles and bag tags through the group’s printing business.

“What Smiggle and Amazon don’t do is ‘personalised by you’. That’s where we see a really big opportunity,” Hunter said.

The Fair Work Ombudsman (FWO) has commenced legal proceedings in the Federal Court against Super Retail Group (SUL) and four subsidiary companies, alleging underpayments.

Super Retail Group’s subsidiaries include Rebel Sports, Super Cheap Auto, SRG Leisure Retail trading as BCF and Ray’s Outdoors and Macpac Retail.

Between January 2017 and March 2019, it is alleged that employees were underpaid a total of approximately $1.14 million for their work.

Underpayments of individual sample employees ranged from small amounts to about $34,500 during this timeframe. The workers were responsible for store management, setting up stores, retail and administration.

The case came to light after the company self-reported “widespread” underpayments to the FWO and the Australian Securities Exchange in 2018.

The regulator has alleged that most of the underpayments were a result of subsidiary companies paying salaried employees annual salaries that “failed” to cover their minimum lawful entitlements.

Fair Work Ombudsman, Sandra Parker, said keeping large corporate sector employers “accountable” for any underpayments remained a “priority”.

“The breaches alleged in this case – inadequate annual salaries for employees stretching across multiple years – have become a persistent issue for businesses across many industries,

“Every employer should be clear that if annual salaries do not cover all minimum lawful entitlements for all hours actually worked, the results can be substantial back-payment bills, plus the risk of significant court-ordered penalties. Penalties can also be higher for serious contraventions.”

The company has also “failed to pay all entitlements” owed for hours worked while overtime entitlements, weekend and public holiday penalty rates were underpaid.

FWO is seeking penalties against Super Retail Group and its four subsidiaries — about $63,000 per breach while the holding company will be fined $63,000 for liability-related penalties.

In an ASX statement, Super Retail Group MD and CEO, Anthony Heraghty, said: “We note the allegations in the proceedings and reiterate our view that this matter represents a regrettable chapter in our company’s history.

“It is unacceptable and contrary to the company’s values for any team member not to be paid correctly. We are sorry for the impact on our team members and today we restate our unreserved apology to each person affected.”

The company said a comprehensive back payment program for affected team members has been undertaken with the assistance of external advisers.

Australia’s largest online book retailer Booktopia has cut up to 40 staff in its latest round of cost-saving measures, as it aims to shake off its recent history of leadership plot twists and financial losses.

The company said in an announcement on Monday, that it had implemented a number of cost-cutting measures as a response to changing consumer sentiment, greater online competition and inflation.

That includes an organisational restructure involving “30 to 40 redundancies,” or about 10 to 15 per cent of its employees, which the bookseller expects will save between $4 million and $5 million in annualised costs.

Booktopia chairman Peter George said the measure was part of a vision to position the company for challenging online retail conditions in the near term. “Letting some of our talented staff go as part of these cost-cutting initiatives is a disappointing but necessary step in these economic times,” he said.

A spokesperson for the company said the redundancies were largely in administrative roles rather than warehouse positions.

Shares in the company were up 32 per cent on the announcement, closing at 27.5 cents. Booktopia shares have shed hundreds of millions of dollars in value since listing on the ASX in December 2020 at $2.30.

An investigation by The Age and Sydney Morning Herald revealed that the group fell out of favour with investors during its first 18 months on the ASX amid concerns about its leadership.

Struggling to meet its earnings forecasts after a period of strong pandemic-inspired growth, the bookseller quietly began laying off staff last year.

Nash effectively returned to the helm of the company last September as executive director, after calling for a shareholder meeting in August, with a plan to use his family and friends’ 30-per-cent-plus stake to overhaul the board.

The company’s four remaining directors resigned, leaving Booktopia searching for replacements. In December, Peter George, well known for his execution of corporate turnarounds, was appointed chairman and non-executive director. George has been involved in several prominent turnarounds including those for Nylex and, more recently, Retail Food Group.

Other cost-cutting initiatives announced on Monday included an increase in postage and handling costs for consumers, price adjustments on various products to reflect increasing costs and a reduction in the company’s lease obligations.

The initiatives are expected to deliver $12 to $15 million of improvements to the company’s earnings in FY24 and beyond.

A “growing appetite” for luxury brands is driving demand for space in prime Sydney CBD retail locations, according to research from Ray White.

Sydney CBD’s prime retail real estate comprises Martin Place, Castlereagh Street, Park Street and George Street, along with Pitt Street Mall.

According to Vanessa Rader, head of research at Ray White Commercial, an increase in the personal and household goods retailing segment due to an influx of jewellery retailers, which now account for 21.5 per cent of stores, not far behind clothing and soft goods, which account for 31.2 per cent. Services such as banks, communications, beauty and medical contribute 16.1 per cent.

Rader said an increasing number of international luxury brands have converged on the Sydney CBD retail areas during the past two years.

“The growing emphasis on these establishments within our CBD brings a new level of quality and activity back to the city after a difficult few years and now represents 23.4 per cent of our street-fronted shops within our prime retail core.”

Despite rising interest rates, Rader says there is strong demand for luxury brands by consumers, both domestically and from overseas visitors.

The redevelopment of MLC has added brands like Valentino and Messini to Castlereagh Street which has been home to Chanel, Bvlgari, Hermes, Gucci and Prada. Dior has relocated to this precinct area while Cartier secured a new flagship location on George Street.

King Street now features Hublot, Panerai, Tiffany & Co and Chaumet.

The results from Myer and a week ago JB Hi-Fi tell us a lot about the two individual companies themselves, the broader retail dynamics, and the post-Covid post-rate hikes economy.

The core point to bear in mind is that JB and Myer sit at opposite ends of the 21st century retail reality.

JB has been one of the outstanding successes, very effectively riding and indeed exploiting and conquering the wired - and indeed, unwired: read Wi-Fi - world of today.

Myer in contrast looked like being confined to the dustbin of sprawling 20th century bricks and mortar department store history. What worked, so brilliantly, for Harry Selfridge and Sydney Myer, worked no more a century later.

Well, no surprise, JB keeps ‘hitting it out of the park’. Sales up 8.6 per cent, profit up 14 per cent. Whatever CEO Terry Smart is putting in the morning coffee, it’s kicking butt.

With apologies to Terry, even more impressive though were the numbers unveiled by Myer CEO John King.

I might add that King is the very model of my perfect CEO: just getting on with delivering results. No bombast, no pontificating. So, please Sol, even if grudgingly, give him a tick.

Myer reported sales up a stunning 25 per cent in the five months to December 31; including an even more mind-boggling 38 per cent actually in its stores. As a consequence online sales actually dropped 9 per cent.

The explanation of both, up to a point, was a certain premier named Dan Andrews, and to a lesser extent one named Dominic Perrottet. That’s to say, those lockdowns in the 2021 base comparative period.

But it wasn’t just about springing back from closed stores. Myer sales were actually up 19 per cent on the last, December half 2019, pre-Covid period.

That’s to say, there is – seemingly rather vibrant – life in the old blended bricks and mortar and online girl after all.

That’s the key point about Myer and King. He’s succeeded in keeping the stores vibrant – albeit, where necessary, closing them – while developing an online business which is now of serious and more critically sufficient scale.

Yes, online sales dropped from the 2021 lockdown comparative period. But they were still way up on the pre-Covid period and now comprise one in every five dollars spent at Myer.

In short, the Myer growth future is online, and it’s got the business to go there, while rebalancing the bricks and mortar to a sustainable, profitable future.

In short, Myer and JB combine to tell us there is a retail future both in stores and online.

The key to success is balancing the two, while precisely locating the physical locations and making the online offer seductive and seamless and indeed connected to the core stores’ physical reality.

Now, there is good and bad news in the broader message delivered by both Myer and JB.

That message is, simply, that despite rate rises, the consumer has disposable money and the consumer is prepared to spend.

The good news should be obvious: the economy ain’t going over any sort of cliff anytime soon.

Further, again both good and bad news, the consumer is spending that money locally.

The ‘bad news’ part is of course what it says about inflation and interest rates.

Simply, that inflation ain’t going to miraculously and conveniently, disappear; and rates aren’t going to go back to the fabulous ‘free money’ levels of 2020 and 2021.

That said, as 2023 unfolds, I suggest that China is going to throw a – positive, broadly unexpected – curve ball into everything.

We are going to see China ‘get back to work’ – simply, delivering cheap product to the world.

I can see a very, very positive global dynamics – if politicians and activists don’t cruel it.

Tattarang has announced a significant investment in Camilla Australia Pty Ltd (CAMILLA), the Australian fashion brand owned and creatively directed by Camilla Franks.

The brand has now grown into a global group since its launch in 2004, sold across 65 countries.

Tattarang Director Nicola Forrest AO confirmed the investment makes Tattarang a minority shareholder. 

“We are delighted to back Camilla Franks, an extraordinary entrepreneur leading a cutting-edge fashion brand doing amazing things in the creative space,” Forrest said.

Forrest said Tattarang would also focus on female founders at an earlier stage in their entrepreneurship journey and she aimed to assist more businesswomen to develop successful enterprises at the scale of CAMILLA.

“Camilla is a brilliant example of a passionate and committed entrepreneur who truly cares about her brand and her customers and has put Australian fashion on the global stage, as well as being a role model to other female founders,” she said.

Franks said that she was delighted to welcome Tattarang as an investor and partner in CAMILLA, marking the first investment partnership the business has made since it was founded 18 years ago.

“I’ve finally found the perfect partner to help us colour the world. Partnering with Nicola and the Tattarang family is the perfect brand fit for our future vision.

“Through purposeful storytelling, creative and conscious empowerment and shared values and dreams we can take the business to a wider world stage.

“Together, we can elevate women on a global scale, harnessing the amazing artistic talent Australia has to offer, and lead with passion. It brings me great joy and pride to announce I will be joining forces with Tattarang to grow and share this beautiful brand,” Franks said.

Forrest said she is actively working to level the playing field for female entrepreneurs and woman-led or founded businesses, with Tattarang allocating capital both directly and via early-stage female-focused funds.

“It’s time for change: I believe that equal is greater and that having gender as a focus will deliver results for both women and men,” Forrest said.

“This is good for business because there is a strong correlation between gender equality and organisational success across profitability, attraction and retention of best talent and business reputation.

“We will support the next generation of women entrepreneurs who are willing to take a risk and back their dreams — Australia needs more entrepreneurs like Camilla Franks,” she said.

The investment priorities for CAMILLA include additional stand-alone boutiques – particularly in the United States.

International sales now represent ~40% of business sales, with the United States representing the most successful international market overall.

CAMILLA has also transitioned into a global omnichannel brand – more than doubling its digital mix over the last three years, growing from 18% in 2018 to 47% online sales today.

The growth in online sales is complementary to an experiential bricks-and-mortar presence which consists of 25 retail boutiques across Australia and the United States, and 264 wholesale stockists across the globe spanning 65 countries.

Australians sharply reined in Christmas shopping in December, in the first sign that runaway inflation and surging interest rates are weighing on household budgets.

Retail sales dropped by 3.9 per cent to record the first monthly fall for 2022, according to seasonally adjusted figures from the Australian Bureau of Statistics.

ABS head of retail statistics Ben Dorber said “the large fall in ­December suggests that retail spending is slowing due to high cost-of-living pressures”.

“Retail businesses reported that many consumers had ­responded to these pressures by doing more Christmas shopping in November to take advantage of heavy promotional activity and discounting as part of the Black Friday sales event,” he added.

Inflation reached 7.8 per cent in December and economists predict a collapse in consumption through 2023 as high prices and higher mortgage repayments bite.

Analysts, however, said they still expected the Reserve Bank board would deliver its ninth straight rate hike next Tuesday, taking the key cash rate from 3.1 per cent to 3.35 per cent.

Citi chief economist Josh Williamson calculated that spending on discretionary items fell by 5.4 per cent in December – the biggest drop since lockdowns in April 2020.

“The fall in nominal retail trade at the end of 2022 may be a signal that monetary policy is starting to work via the channel of discretionary spending. But the RBA can’t take this as a signal to stop tightening next week,” he said.

Mr Williamson said he ­expected a further cash rate increase next week, following by two more to a peak of 3.85 per cent.

The retail sales figures exclude spending on services such as travel and accommodation and which economists believe boomed over summer as Australians enjoyed the first Christmas holidays free of Covid restrictions.

Taking this into account, Capital Economics senior economist Marcel Theriault said “a solid ­increase in services spending means overall consumption should still have risen at a decent clip”. “But the engine of Australia’s reopening rebound has shifted down a gear,” Mr Theriault said.

Despite the surprisingly large fall in spending in December – ­analysts had forecast only a 0.2 per cent decline – retail sales remained elevated following a booming 2022 in which Australians continued to spend freely despite steadily higher interest rates, soaring inflation and plunging real wages.

Retail spending was up 7.5 per cent over the year to December, the ABS data showed.

Economists also noted the difficulty in accounting for seasonal factors thanks to the ever-growing popularity of the Black Friday and Cyber Monday sales, which are timed around the American Thanksgiving holiday.

The retail industries that suffered the largest falls in sales in ­December were those which ­experienced the biggest boosts during the November sales events, the ABS said. Department store sales collapsed 14 per cent, followed by a 13 per cent drop in spending on clothing and footwear, and an 8 per cent decline in household goods, according to the seasonally adjusted figures.

“Seasonal spending patterns continue to change and evolve around Black Friday and the holiday period,” Mr Dorber said.

“While there was a strong rise in original terms for December, as is expected in the lead up to Christmas, this year’s rise in original terms was smaller than those typically seen in past December months. This has led to the large seasonally adjusted fall.”

Food retailing was the only ­segment to record an increase in December – up a slight 0.3 per cent, while cafes and restaurants spending was flat. Shoppers spent less than usual across the states and territories, with 4.7 per cent declines in Victoria and Western Australia leading the falls. Retail sales in NSW fell by 3.4 per cent.

Asia-based omnichannel brand operator Bluebell Group has expanded its reach into Australia, initially with brand partners Gentle Monster and Pinko.

The retail group marked its market debut with the opening of Italian fashion label Pinko in Sydney’s Westfield mall in November, followed by the launch of South Korean luxury eyewear brand Gentle Monster’s first store in Australia at Sydney Airport before Christmas. 

Bluebell Group said it has a larger plan for Australia this year, aiming to expand the current in-market brand partners’ presence in the country and introduce other brands as well. 

Australia marks Bluebell Group’s first market outside Asia and its 10th market after Japan, South Korea, Mainland China, Hong Kong, Taiwan, Macau, Singapore, Malaysia and Cambodia. 

Brands the company partners with around the region include AllSaints, Anya Hindmarch, Bally, Celine, Christian Dior, Davidoff, Fendi, Furla, Givenchy, Jimmy Choo, Kenzo, Loewe, Louis Vuitton, Love Moschino, Marc Jacobs, Moschino, MSGM, Owndays, Paul Smith, Rimowa, Sergio Rossi, Tod’s and Ugg.

“Opening the Australian market is a milestone for us, completing our Asia Pacific footprint from Japan all the way down to the Southern hemisphere,” said Nelly Ngadiman, MD of Bluebell Southeast Asia & Australia. 

Gentle Monster joined Sydney Airport’s new luxury retail tenant lineup in the T1 International terminal disclosed last August, which also includes Balenciaga, Prada, Bottega Veneta, Burberry, Bulgari, Moncler, Hermes, Loewe, Rolex and Saint Laurent.

The Australia launch follows Bluebell Group’s recent full acquisition of China’s Hainan-based travel retail operator Star Brands Travel Retail. 

Founded in 1954, the family-owned group has more than 3800 employees, 600 points of sale and US$2 billion in turnover. 

The Australian shopping spree has continued with retail spending surging in November, a sign the Reserve Bank is likely to continue raising interest rates in coming months in a bid to rein in inflation as the global economic outlook deteriorates.

The spending was despite high costs for building supplies and labour and larger bills for dining out lifting inflation back up to a 32-year high in the lead-up to Christmas, and as forecasts show the global economy is on the brink of recession.

Monthly data from the Australian Bureau of Statistics showed inflation rose to 7.3 per cent in the year to November, back to September’s level after dipping to 6.9 per cent in October.

Treasurer Jim Chalmers said November’s inflation data highlighted the economic pressure being felt by all Australians.

“Even after inflation peaks in our economy, we need to remain vigilant to the global economic pressures that will continue to impact us for some time,” he said.

New forecasts from the World Bank paint a gloomy picture for the global economy, with growth around the world for 2023 now expected to be just 1.7 per cent, down from the 3 per cent predicted six months ago.

The bank warned the global economy was so fragile, events including a COVID resurgence or increased geopolitical tensions could push it into recession.

Chalmers said Australia’s economy was also facing threats from ongoing natural disasters, as well as shocks including the war in Ukraine.

“We should be optimistic about the future of our economy and our country but realistic about what the deteriorating international outlook means for us in Australia,” he said.

Opposition finance spokeswoman Jane Hume said households were paying the price for the government’s inaction on tackling cost of living pressures.

“This government was elected on a promise to lower the cost of living, and they assured Australians, time and time again, that they had a plan. Instead, we’ve seen inflation continue to rise and no plan from the government to tackle it,” she said.

ABS head of price statistics Michelle Marquardt said November’s increase in inflation was mainly driven by housing, food, transport and furniture. Housing inflation, at 9.6 per cent, was affected by higher labour and building material costs, while increased prices for takeaway and restaurant meals drove food inflation up by 9.4 per cent.

That high and rising inflation has not stalled retail spending. Australians eager for shopping deals in the Black Friday sales helped drive retail spending to a new high, increasing by 1.4 per cent over November, separate ABS data showed. It’s the 11th consecutive monthly rise in retail spending, taking the annual growth to 7.7 per cent.

But spending on categories not included in the sales slumped. Turnover in food retail, cafes, restaurants and takeaway food recorded just a 0.1 per cent rise over November, the weakest increase for those categories for 2022.

Indeed’s Asia-Pacific economist Callam Pickering said while November may prove to be the last hurrah for shopping, household spending has proven more resilient than the Reserve Bank had anticipated.

“In response, the RBA will have little choice but to hike rates, with a further 50 basis points likely in the first half of the year,” he said.

The bank lifted rates from a record low of 0.1 per cent to 3.1 per cent last year, and the board has been considering a pause in rate hikes in coming months as previous increases take effect.

EY chief economist Cherelle Murphy said there were factors affecting the inflation data including the return of the full fuel excise, and the figure was still below the Reserve Bank’s expectation of 8 per cent by the end of 2022. But a tight labour market could put more pressure on wage growth, and China’s reopening could stoke global inflation.

“The RBA’s 2022 rate hikes were designed to tame inflationary pressure, but there are too many upside risks that will force the RBA’s hand further. It will continue to raise interest rates to cool the economy in the first months of 2023,” she said.

Early data on retail spending over Christmas indicates Australians bucked the burden of higher interest rates to spend freely, but economists are questioning how much of that increased spending is just higher prices versus a resilient consumer.

Data from Westpac shows that between November 1 and December 24, retail sales were up 8.6 per cent compared with the same period in 2021, while Boxing Day sales jumped 15.3 per cent to surpass $1.2 billion.

Rival bank NAB is yet to crunch the numbers on retail spending for the full month of December, but chief economist Alan Oster is highly sceptical of claims about a bumper Christmas season for retail, given weaker spending data in the first weeks of December after Black Friday sales.

“My suspicions are that it’s not great – not because they haven’t spent a lot of money, they have, but whether it’s more than they would normally spend,” Mr Oster said.

“There have been big increases in prices, so in real terms I think [consumer spending] has almost certainly going backwards.”

After the November Black Friday sales, NAB’s data showed that spending was soft in the second and third weeks of December.

“What we know is a lot of the money that probably got spent for Christmas was spent in Black Friday,” Mr Oster said.

Lower savings

NAB will release its retail spending figures in the middle of next week and Mr Oster expects the impact of rising interest rate rises will be “quite aggressive” this year.

His comments mirror those of economist Frank Shostak, who previously told AFR Weekend the 2023 Christmas shopper had lower savings after central banks’ money printing, and would be shopping at the expense of the future. He tipped retail sales would fail to match previous years.

The economists are joined by retail analysts, who have issued downgrades on retail stocks like JB Hi-Fi and Harvey Norman and grown wary of discretionary retail as cost-of-living pressures force shoppers to tighten their belts. Investors are also expecting retailers’ margins to be squeezed as input costs go up, especially for businesses that fail to exercise pricing power – their ability to increase prices in line with costs, to protect profits.

The Australian Retailers Association, which also uses Westpac data, has said pre-Christmas trading was $74.5 billion this year – a record, and 8.6 per cent higher than 2021. It has predicted post-Christmas retail spending to tally up to $23.5 billion, also a record and 7.9 per cent higher than the previous year.

However, its chief executive Paul Zahra acknowledged price increases were hidden in the headline numbers and that cost-of-living pressures and potentially slimmer margins for retailers could emerge in the interim reporting season.

“Some analysts have said, and I broadly agree, that up to two-thirds of increase [in Christmas retail spending] was due to increase in prices and a third was the increase in volume. The sales increase may not be what RBA would like to see, but people have continued to spend and celebrate December as a season of indulgence,” he said.

Retails report strong sales

Mr Zahra said it was too early to say if retail spending data for November, December and January put together (to eliminate skews such as Australia’s newfound love for shopping early for Christmas) would surpass previous years.

However, he expected it would come out higher. This would be followed by a slowdown in spending at some point in 2023, he said.

Anecdotally, retailers have reported strong sales.

Barbeques Galore chief executive Angus McDonald said summer was outperforming the same period 12 months ago, driven by a combination of price increases and higher volumes thanks to new product launches.

“Since Black Friday we have continued to see double-digit growth. That has continued all the way through December and into early January,” Mr McDonald told the Financial Review.

He noted that while the supply challenges of 2021 have largely eased, consumers are more discerning.

“Last year if you could get stock then you would be doing well,” he said. “This year it’s actually now back to delivering a good retail experience and delivering good value to customers.”

Mr McDonald noted that with the jobless rate steady at a 48-year low of 3.4 per cent, consumers still had money to spend.

“Even though there’s obviously uncertainty in terms of consumer sentiment, people still have jobs. “If they’re passionate about something and they’re excited about the product and excited about what that means for them and their lives, there’s still plenty of opportunity for retailers.”

‘Older demographic remains strong’

Chris Kahi, the owner of Sunshine Coast-based apparel retailer Old Man Strength, was surprised by the strength of sales during the festive season.

“We’ve seen amazing sales over the Christmas period. We had originally forecast that the period would be soft due to interest rate rises and uncertainty. This has not been the case,” Mr Kahi said.

“Customer feedback and sales analysis suggests that the older (over 40) demographic remains strong. We are expecting to see Q1 2023 maintain this growth.”

Data from payment technology business Square found that both the number of transactions and the overall spend at Australian retailers using its technology increased during the Christmas period of 2022, compared with the previous year. The number of transactions grew by 29.4 per cent, while the total dollar amount spent was up 23.6 per cent.

Square does not disclose how many retailers it has in Australia, and the data is also influenced by an increase in the number of customers the company added in 2022.

“A lot of analysts expected consumers to dampen their spending this Christmas period, but based on our data it looks as though Aussies have continued shopping during this critical time of year for retailers,” said Ara Kharazian, research and data lead at Square.

“When looking at the data across all industries during the Christmas period, we saw record-breaking sales and growth that suggests continued strong consumer spending.”

Luxury fashion conglomerate LVMH has appointed Pietro Beccari and Bernard Arnault’s daughter Delphine Arnault as new CEOs for its two flagship fashion houses, Louis Vuitton and Christian Dior Couture, respectively.

The appointments mark the luxury empire’s most significant organisational changes in its history. 

Pietro Beccari, who has led Christian Dior Couture since 2018, will succeed Michael Burke to become chairman and CEO of Louis Vuitton. Subsequently, Delphine Arnault will head Christian Dior Couture as the brand’s new chairman and CEO after having served at Louis Vuitton as executive vice president since 2013.

Beccari joined LVMH as executive vice president of marketing and communications for Louis Vuitton before being appointed as chairman and CEO of Fendi in 2012. 

“Pietro Beccari has done an exceptional job at Christian Dior over the past five years. His leadership has accelerated the appeal and success of this iconic Maison,” said Bernard Arnault, chairman and CEO of LVMH.

Meanwhile, Delphine Arnault has been executive vice president of Louis Vuitton since 2013, overseeing all of the house’s product-related activities. The French businesswoman is also a member of the LVMH Board of Directors and the Executive Committee. 

“Under her leadership, the desirability of Louis Vuitton products advanced significantly, enabling the brand to regularly set new sales records. Her keen insights and incomparable experience will be decisive assets in driving the ongoing development of Christian Dior,” Arnault added.  

Meanwhile, Michael Burke will take up new responsibilities, reporting to the LVMH’s chairman. 

“He has extended Louis Vuitton’s lead over competitors and promoted the heritage of Louis Vuitton while anchoring it in modernity,” the chairman said. “I am delighted that Michael will continue by my side to share his experience and talent for the benefit of our companies.” 

In addition to the two major executive appointments, executive VP of Christian Dior Couture Charles Delapalme will take on new role as the label’s new MD and work closely with Delphine Arnault. 

Meanwhile, Stephane Bianchi, chairman and CEO of the Watches & Jewellery Division, will now also oversee Tiffany and Repossi. 

The management reshuffle follows the latest appointment of Bernard Arnault’s eldest son Antoine Arnault as CEO of family holding company Christian Dior SE a month ago. 

Last month, Italian fashion group Prada named former Luxottica chief Andrea Guerra as its new CEO to ease a transition at the helm to the next generation of the founding family.