News

Australia’s largest retail landlord is adding basketball courts, community centres, libraries and swim schools to its tenant mix as it dives deeper into an experience-based shopping trend that drove $12 billion in half-year sales across its malls.

Scentre Group, which owns and manages dozens of Westfield branded shopping centres, has upgraded its full-year guidance per security to 19 cents after experiencing a strong rebound in revenue, occupancy and rent collection.

Scentre’s incoming chief executive, Elliott Rusanow, estimates the group’s malls, like those in Sydney’s Chatswood and Melbourne’s Doncaster, are in proximity to 20 million people in Australia and New Zealand, about 10 million of whom visit once a week.

“We’ve grown customer visitation, portfolio occupancy, rental income and cash collection resulting in strong profit growth for the half,” said chief executive Peter Allen, who will step down from running the group in October.

Operating profit for the six months to June was up 17.5 per cent to $540.5 million, compared with the previous corresponding half-year, and about $12 billion in sales flowed through retailers at its 42 Westfield malls, half a billion more than it reported for the same period in 2019 before the pandemic.

Jarden analyst Lou Pirenc labelled the landlord’s first half result as “well ahead of expectations”, noting that the group is still trading at a 25 per cent discount.

“I don’t think it’s revenge spending because, if it was, it would have been all out there and then slowed down.”

Scentre’s outgoing chief executive Peter Allen

“We believe more evidence of a recovery in rents and superior funds from operations growth to most REITs, should drive a re-rating,” Pirenc said.

Occupancy was up to 98.8 per cent, average rents increased by $5 per square metre, gross rent collection was $1.25 billion, and 585 new merchants were signed up across its centres, with 108 of those new to the portfolio, during the half year.Allen said the uplift in sales across most categories was not a consumer-driven “revenge spending” spree following the end of lockdowns and successive waves of virus variants, but rather a sustained shift in spending despite the threat of inflation and interest rate rises.

“I don’t think it’s revenge spending because, if it was, it would have been all out there and then slowed down. We haven’t seen that. We’re seeing it grow. Our three months sales growth is stronger than our six months sales growth,” he said.

When Scentre Group was first spun out of billionaire Frank Lowy’s Westfield empire eight years ago leaving it all the Australian assets, roughly 10 per cent of stores in its centres were experience-based, focused mainly around restaurants and casual dining.

“Today, 43 per cent of our 12,000 stores are experience-based,” Allen said. Now they extend beyond food to categories such as wellness, health, beauty and sports.

In a bid to consolidate Westfield’s standing as “town centres” and prime locations to visit - where customers are entertained, socialise and shop - the landlord is adding attractions such as basketball courts on the roof of its Chatswood centre, and swim schools at Westfield Warringah and its revamped Knox mall, which is also gaining basketball courts, a community centre and public library.

“Those types of interactions are really creating the destination,” Allen said.

Scentre recently opened a $55 million rooftop entertainment, leisure and dining precinct at its Westfield Mt Druitt mall, which it said increased customer visitations and dwell time.

Scentre shares were up 2.52 per cent in early afternoon trade to $2.85.

Overall consumer prices in the US were unchanged during July, leaving the annual rate lower and providing some relief to the Federal Reserve and the Biden administration.

As earlier months of high inflation dropped out of the latest data, the official annual inflation rate slowed to 8.5 per cent from the 41-year high of 9.1 per cent – a bigger reduction than most economists expected.

Investors betting that the single-month data point could reflect peak inflation swung into the markets, pushing up indices and lowering bond yields on the expectation that the Federal Reserve would now be less hawkish with future rate rises.

Financial markets adjusted their expectations of the Fed’s next move by pricing in an increase in the official funds rate by 50 basis points at the bank’s next meeting in September 20-21, down from 75 basis points last week following strong employment data.

US President Joe Biden jumped on the data, saying zero per cent inflation in July was a good sign but that there could be further “headwinds”.

Super Retail Group has reported a “record” year of sales in its full-year results marked by a strong second-half performance – but its bottom line did not fare as well.

For the year to July 2, the business says sales grew 2.8 per cent to $3.55 billion although tax-paid net profit fell 20 per cent to $244.1 million.

Online sales grew 44 per cent to $601 million with click-and-collect accounting for 55 per cent of online sales — surging 73 per cent to $332 million. The number of active loyalty club members increased by 14 per cent to 9.2 million.

Sports retail subsidiary Rebel’s sales increased 1.3 per cent to $1.21 billion with strong performance registered in basketball and licensed products. While low foot traffic and shipment delays impacted business during the first half, the chain recovered steadily and stocks are now replenished.

Online sales grew 39 per cent contributing $268 million and representing 22 per cent of total sales.

Like-for-like sales for the year in the BCF division rose 4 per cent to $829.7 million, with online sales up 36 per cent to $117 million. Sales were particularly strong over the summer and Easter holiday periods.

June winter sales helped improve Macpac’s revenue by 15.3 per cent to $176.8 million. Key growth was seen in insulation apparel and rainwear categories in Australia as like-for-like sales increased by 12.4 per cent. In New Zealand, due to Covid-related restrictions on tourism, like-for-like sales fell 6.5 per cent.

Macpac’s e-commerce revenue grew 35 per cent to $41 million – representing 23 per cent of sales. The business says wholesale sales in this channel grew 95 per cent since its products were expanded to 200 outlets of BCF and Rebel stores.

Group MD and CEO, Anthony Heraghty, said the business has been focussing on transforming from a traditional brick-and-mortar retailer to an omnichannel retail business.

“The successful execution of our omni-retail strategy, our enhanced digital capability, proactive supply chain management, and an outstanding contribution from our team members were central to this performance,” he said.

“Our solid inventory levels enabled us to capture consumer demand when retail spending rebounded in the second quarter following the end of Covid-related lockdowns.”

Over the next two years, the business says it will make significant investments in leveraging its first-party data by launching a new loyalty program, creating a customer data platform and enhancing its customer analytics.

The retailer has plans to open 30 new stores across its four core businesses in the next financial year and add five new Rebel Customer Experience-format stores.

Rebel has recorded a 1.3% increase in sales to $1.21 billion for the 2022 financial year.

The result was driven by an increased contribution from new rCX format stores and strong performance in key categories including basketball and licensed products.

While like-for-like sales fell by 2.8% for the year, they rebounded strongly in the second half.

The 5.9% fall in the first half was blamed on lower footfall in CBD and large shopping malls from the pandemic, as well as delayed shipments which impacted product availability.

Second half like-for-like sales grew by 0.5%, as foot traffic recovered and footwear and apparel stocks were replenished at the end of the fourth quarter.

Online sales grew by 39% to $268 million, representing 22% of sales, with Click & Collect comprising 41% of online sales.

Super Retail Group CEO Group Anthony Heraghty cited strong performance in Rebel rcX stores, with five stores set to upgrade to the new format in the coming year. 

“Looking forward, over the next two years the Group will make a significant investment to leverage our first-party data by launching new loyalty programs, developing a customer data platform, and building our customer analytics," he added.

"This investment will enable the Group to make increasingly personalised offers to our customers utilising analytically driven data and insights."

Rebel active club membership increased by 2% to 3.3 million in FY22, with club member sales representing 69% of total sales.

During the year, Rebel opened three stores and closed one store, resulting in 155 stores at period end.

Macpac sales increased by 15.3% to $176.8 million during FY22, driven by record June winter sales.

Like-for-like sales grew by 4.4% overall and by 8.5% in the second half.

In Australia, like-for like sales increased by 12.4% reflecting growth in rainwear and insulation apparel sales due to cold and wet weather.

In New Zealand, like-for-like sales fell 6.5% due to the impact of COVID-19 and reduced tourism and travel.

Sales of Macpac product in Rebel and BCF stores, both owned by parent company Super Retail Group, was expanded to over 200 outlets.

The move saw wholesale sales in this channel grew by 95%.

Online sales grew by 35% to $41 million, representing 23% of sales, while Click & Collect comprised 17% of online sales.

Group CEO Anthony Heraghty praised the result in a statement to shareholders.

“I am pleased to announce that the Group has delivered a strong set of financial results with another year of record sales.

"The successful execution of our omni-retail strategy, the Group’s enhanced digital capability, proactive supply chain
management, and an outstanding contribution from our team members were central to this performance."

Active club membership increased by 22% to 0.6 million, with club members representing 72% of Macpac total sales.

Macpac opened ten stores and closed one store, resulting in 85 stores for the financial year. 

At a time when bargains are top of the list for shoppers, analysts are watching fashion jewellery business Lovisa closely.

The Australian Securities Exchange-listed retailer has grown into a vast international network of bricks-and-mortar stores that offer statement pieces at a lower price than many high street jewellery brands.

While the business has grown, it’s also had to face lengthy COVID-19 lockdowns and interruptions over the past two years.

All eyes are on consumer spending in the lead-up to Christmas, and some stock watchers are using brands such as Lovisa as a barometer for consumer spending appetites.

As interest rates continue to rise and inflation affects the cost of everyday items, will younger shoppers still have an appetite for spending on accessories?

How it started: Founded in 2010, Lovisa was launched as a fashion jewellery retailer at a lower price point for consumers than speciality or department stores. The business, which was part of Brett Blundy’s BB Retail Capital, floated in 2014 with shares listed at $2 each.

How it’s going: The shares are up more than 750 per cent since listing, but the business has seen periods of heavy selling over the past few years, including March and April 2020, when pandemic lockdowns hit, and between April and June this year.

Industry: Fashion retail.

Main products: Fast fashion jewellery, in the $5 to $50 price range.

Key figures: Chairman Brett Blundy, chief executive officer Victor Herrero.

The bull case: Despite jitters about slowing consumer spending, recent retail figures have shown consumers still have cash to deploy, including into fashion and accessories. Clothing, footwear and fashion spending rose 1.3 per cent in June, hitting $2.9 billion.

Analysts say Lovisa, with its network of hundreds of stores across Australia and overseas, is well-placed to capture this spending enthusiasm.

“We expect the strong sales recovery and international store rollout to remain significant tailwinds for Lovisa over the medium term, driving solid earnings growth,” Jarden analyst Wilson Wong said in a research note to clients earlier this month.

Wilson Asset Management portfolio manager Oscar Oberg says companies that offer fashion for events are well-placed in this environment.

“It’s now about those companies who are exposed to ‘going out’ apparel – dresses, suits, jackets and that kind of retail,” he told The Age and The Sydney Morning Herald a fortnight ago, citing Lovisa as a potential winner from this trend.

The bear case: Lovisa shares are down 2.9 per cent so far this year and declined to $12.89 in June, amid a broad sharemarket sell-off. They are changing hands for about $19.40 this week.

Company watchers who are more cautious about the stock are asking whether it can maintain sales momentum if consumer spending slows further.

UBS downgraded its rating on the stock to “neutral” this month, noting that a bounce-back in the share price over the past month in the lead-up to its full year financial results makes the risk/reward trade-off less compelling.

Then there are the rising costs of doing business, which are impacting margins for retailers across the board.

“Near-term headwinds for Lovisa include labour and supply chain costs, yet we expect these can be well managed with scale and price optimisation, e.g. promotional bundles, re-ticketing,” UBS analyst Shaun Cousins wrote.

Lovisa is also looking to grow its global store footprint, but has warned investors this has been slower than expected in the first half of the year because of COVID-19 interruptions and labour shortages.

Jarden’s team says it will wait for an update on how new store rollouts are performing.

“We estimate Lovisa added 39 net new stores in 2H22E, which implies 22 net new stores from May to June 2022,” Wong and his team said.

They’re the slick orange-and-white cartons that have become a mainstay in Australian coffee culture. Championed by baristas, chosen by McDonald’s, Starbucks and Muffin Break, and beloved by lactose-avoiding consumers, Milklab’s plant-based products are a common sight in cafes across the nation.

But few coffee drinkers would know that Milklab’s manufacturer is at the centre of one of the most spectacular corporate implosions in recent Australian history.

Milklab’s maker, an ASX-listed company once known as Freedom Foods, is still struggling to recover from revelations two years ago of significant accounting irregularities worth over half-a-billion dollars.

The irregularities, preceded by the sudden resignations of two top executives, forced the company into a nine-month trading halt. Two class action lawsuits and an investigation by the corporate regulator, ASIC, have followed.

Freedom Foods has changed its management team, secured support from a new cornerstone shareholder - the billionaire Perich family, one of western Sydney’s biggest landowners - and rebranded itself as Noumi (pronounced “new me”).

Despite this, the company behind a wide range of dairy and plant-based milk products and health supplements has failed to win back the trust of investors.

“Noumi was a ‘market darling’ as recently as a few years ago,” class action law firm Phi Finney McDonald associate Muhammad Arayne says. “The financial irregularity revelations made in mid to late 2020 genuinely shocked the market and caused the company to lose a substantial amount of trust from investors. The share price collapse ... was catastrophic.”

Noumi shares, currently hovering around 28 cents, are about 90 per cent below a September 2018 peak price of $5.30. With a market value of $78 million, Noumi is worth less than 5 per cent of a company once valued at nearly $2 billion.

Throughout this turmoil, Milklab has been one bright spot for the company, enjoying stratospheric growth and strong customer loyalty among baristas.

But now, even Noumi’s most prized brand, and the company’s future prospects, are hanging on a knife’s edge.

And this week, the company disclosed that a separate legal battle has been launched by French tea and coffee company Sunday Collab over rights to distribute Milklab in Europe, claims Noumi says are “without merit”.

Noumi had already been accused of fraud by its former supplier, Californian almond grower Blue Diamond, which sued Noumi for breaching a licensing agreement between the two parties relating to Milklab.

The pair of companies have reached a settlement of $US35 million ($49 million) – more than the embattled Noumi can afford. So to pay it all off, Noumi wants to sell its stake in a separate company – but this needs shareholder approval.

The future of Milklab rests in the hands of these shareholders, who will vote on whether to approve the stake’s sale at an extraordinary general meeting on Wednesday.

Spilt milk

The first sign something was wrong at Freedom Foods came on Tuesday, June 23, 2020, when then chief financial officer Campbell Nicholas suddenly resigned.

The following morning, CEO Rory Macleod went on leave. Trading on the ASX was suspended, pending a further announcement, but not before shares dropped to a five-year low. An unusually high volume of 21.5 million shares traded hands (there have been no allegations of insider trading).

Then on Thursday of that week, the company released a statement to the ASX revealing that its estimated value of useless assets, $25 million, had blown out to $60 million. A review of inventory levels showed there was more out-of-date stock, some from cancelled orders, than originally thought. Sixty-one staff positions were made redundant.

Almost simultaneously, the company held a conference call. With the CFO and CEO gone, the unenviable task of hosting it fell to then-chairman Perry Gunner.

The most pressing question from investors and stakeholders was: where did things go wrong? The outdated stock and cancelled orders went as far back as 2017. Why wasn’t it picked up earlier?

The company had been shifting stock from five external warehouses into its own facility, the chairman explained that. They knew there was “some amount” of stock that needed to be reworked (for instance, turned into dry powder) but didn’t realise just how much there was.

Over the years, vast amounts of milk had been going off in warehouses, and either no one had noticed or no one had reported it.

But getting rid of it was expensive. Simply put, there was so much milk that had gone off that it was cheaper to write it off than to rework it.

“The difficulty is the cost of getting that milk out of the packages and into a vat ... to allow it to be processed, does not justify the protein or the value of the milk powder that you would obtain from doing it,” he said, according to transcripts of the investor call. “That’s why the ... likely provision has been increased from $25 million to $60 million.”

Household spending in June was up more than 10 per cent compared with the same time last year, as Australia struggles through skyrocketing cost of living.

The latest monthly spending figures, released on Tuesday by the Australian Bureau of Statistics, show household spending increased 10.2 per cent through the year, with a 15.9 per cent increase on services and a 5.0 per cent increase on goods.

Both discretionary and non-discretionary spending increased – not surprising given the rate of inflation is 6.1 per cent.

Discretionary spending rose by 10.8 per cent, driven by spending in recreation and cultural activities, while non-discretionary spending on essentials rose 9.8 per cent, due to the rising cost of transport.

The most significant area of spending was on transport, up 22.7 per cent, driven by higher petrol prices due to the ongoing war in Ukraine and the demand for air travel.

Spending at hospitality businesses like hotels, cafes and restaurants was up 17.1 per cent in what is viewed as a positive return to pre-pandemic levels.

There was also strong growth in spending on clothing and footwear – up 16.3 per cent; as well as a 15.5 per cent increase in recreation and culture.

Jacqui Vitas, from the Australia Bureau of Statistics, said June marked the 16th consecutive month of through-the-year increases in total household spending.“This was off the back of consistent decreases in total household spending from March 2020 to February 2021, as responses to Covid-19 were experienced across the country,” she said.

“Spending categories most impacted from Covid-19 responses – transport, hotels, cafes and restaurants, and clothing and footwear – have now returned to pre-pandemic levels.”

Queensland and Victoria recorded the highest state-based increases in spending through the year, spending 12.4 per cent and 11.8 per cent respectively more.

Trans-Tasman electronics retailer JB Hi-Fi has reported record earnings backed by strong online growth in its full-year results.

The business says total sales grew 3.5 per cent to $9.23 billion while tax-paid profit rose 7.7 per cent to $544.9 million. E-commerce revenue grew 52.8 per cent to $1.63 billion, accounting for 17.6 per cent of all sales.

In Australia, sales remained relatively strong throughout the year however, ongoing customer demand for electronics and home appliances drove sales up by 11.7 per cent in the second half. Sales increased 4 per cent to $6.2 billion while online sales grew 52.3 per cent to $1.19 billion, or 19.2 per cent of sales.

In New Zealand, sales were up 0.3 per cent to $237.76 million of which online sales – up by 56.7 per cent –contributed $39.23 million or 16.5 per cent of all sales.

Sales by JB Hi-Fi’s The Good Guys business reached $2.79 billion (up 2.7 per cent) with online sales up by 53.7 per cent to $397 million, or 14.2 per cent of all sales.

Group CEO, Terry Smart, said the results “reinforce” the trust customers have in the retailer’s brands.

“As we enter an increasingly uncertain retail environment and household budgets come under further pressure, customers will gravitate to trusted value-driven retailers.

“Our ongoing strategy of providing customers with the best value and outstanding service every day will ensure our brands continue to deliver for our customers and remain a destination of choice into the future.”

The group says it will continue to invest in its multichannel strategy across both online and supply chain channels, upgrade its website and expand delivery options for customers.

Meanwhile, the company has appointed Tim Edwards as its new MD of operations in New Zealand.

Baby Bunting has overcome Covid-related trading restrictions and ongoing supply-chain disruptions to post record sales last financial year.

The baby goods retailer says sales grew 8.3 per cent to $507.3 million (with same-store sales up by 5 per cent) while statutory net profit attributable to shareholders rose 14.6 per cent to $19.5 million. Against results for two years earlier, the company says sales grew by 25.2 per cent.

Online sales, including click and collect, contributed 22.2 per cent of total sales, representing a growth of 24.2 per cent to $112.7 million.

The company’s private label brands such as 4Baby, Bilbi and Jengo contributed 45.3 per cent of total sales.

Matt Spencer, CEO and MD of Baby Bunting, said the results were “tremendous” given the uncertain retail conditions across Australia during the first half.

“Our total sales exceeded half a billion dollars for the first time,” he said. “We continued to grow our market share at the same time as we delivered very strong gross profit growth. But we also worked hard to continue to drive further efficiencies in our supply chain and in our buying to ensure we provide great prices to our customers, at a time when value remains so important.”

The same day the retailer announced its results, it opened its first store in New Zealand, at Auckland, and said it plans a second store in Christchurch during the next financial year. The business expects to grow its network in the country and add more than 10 stores.

In Australia, the business will open six new stores in the next financial year taking its network to 70 stores. It plans 110 long-term.

A Baby Bunting Marketplace is expected to launch in the second half of the next financial year which will sell a range of third-party products and first-party drop ship sales.

Luxury lifestyle brand Mulberry has appointed receivers to its independent Australian franchisee, which was owned by the same retailers behind collapsed footwear and streetwear business Sneakerboy.

London-listed Mulberry Group has committed funding and support to keep the business running as usual, including making sure employees continue to work and get paid, customer orders are honoured, and the five outlets in Australia remain open.

Mulberry Company (Australia) Pty Ltd, a subsidiary of Mulberry Group, appointed McGrathNicol as receivers to Luxury Retail No.1 Pty Ltd on Friday morning because of concerns about the ongoing viability of the business.

Mulberry supplied Luxury Retail No.1 which ran five Mulberry branded stores through Sydney and Melbourne, as well as some aspects of local digital sales.

“The receivers are undertaking an urgent financial assessment of the business. We are working collaboratively with all stakeholders, including employees and the Mulberry Group, to secure the best possible outcome for everyone,” McGrathNicol partner Barry Kogan said.

“Mulberry Group intends to support the receivership process, including through the provision of additional funding, so that consumers can continue to shop at Mulberry into the future.”

Mulberry Australia acquired secured debt owed by Luxury Retail to a third party, which is secured by all the company’s assets. Luxury Retail No.1 is an independent franchise and not part of the Mulberry group.

“With the support of the Mulberry Group, the franchise business in Australia will continue to trade on a ‘business as usual’ basis throughout the receivership. Customer orders and gift cards will be honoured in full, staff will continue to be employed and paid, and stores will remain open,” McGrathNicol said in a statement.

“The receivers will shortly commence a public process to offer the business for sale or recapitalisation. The Mulberry Group has confirmed its desire to ensure its brand continues to have a positive presence in the Australian market and Mulberry customers are protected.”

Luxury Retail No.1 is owned by four entities related to its two directors Theo Poulakis and Nelson Mair.

Mr Mair and Mr Poulakis were also directors and owners, through corporate vehicles, of Luxury Retail Group, Sneakerboy and three other entities which had administrators Hamilton Murphy appointed in early July by Sydney-based financier Octet.

Mulberry’s appointment of receivers to Luxury Retail No.1 is separate from the collapse of Sneakerboy and the other entities which went into administration last month.

Before administrators were appointed, Sneakerboy was 50-50 owned by holding companies held by directors Mr Poulakis and Mr Mair. The chain’s operating company Luxury Retail Group was similarly split between Mr Poulakis and Mr Mair, although through four entities, similarly structured to Luxury Retail No.1.

Sneakerboy collapsed owing staff more than $500,000 in superannuation and leave entitlements and bills of more than $17 million to suppliers, including more than $12 million owed to a related entity.

Last month, The Australian Financial Review revealed many former and current staff of Sneakerboy had not been paid their full entitlements before the collapse of the business on July 3.

The Fair Work Ombudsman also confirmed it is investigating Sneakerboy staff issues.

Hamilton Murphy is continuing its investigations into Sneakerboy and on August 1 secured court orders granting it an extension of time before a second meeting of creditors on August 23.

High inflation and rising interest rates will cause households to tighten their belts, with the Reserve Bank of Australia warning an unexpectedly sharp decline in house prices could cause the economy to slow more than anticipated.

But research by the Commonwealth Bank suggests the consumer slowdown may have already started, with evidence households were starting to cut back on non-essential spending.

So far, household spending has proved resilient despite cost of living pressures, with retail consumption volumes 5.5 per cent higher over the year, the Australian Bureau of Statistics said.

The RBA cut its forecasts for household consumption growth on Friday, citing cost-of-living pressures and falling house prices. Consumption growth is expected to slow throughout 2023 and into 2024.

“The near-term outlook for consumption continues to be supported by strong labour market outcomes, though growth is forecast to ease over the remainder of 2022 as households’ budgets come under increased pressure from the rising cost of living,” the RBA’s monetary policy statement said.

Higher prices would be felt most acutely by lower income households, who have smaller savings buffers and will be forced to reduce spending, the central bank said.

“For some of these more vulnerable households, the impact of price rises will be mitigated to some extent by the indexation of social assistance payments twice per year, though price rises will reduce recipients’ real incomes in the near term.”

Larger-than-expected falls in house prices or other asset prices would mean household spending could be even weaker than the RBA is forecasting.

“The magnitude of the decline of housing prices arising from higher interest rates is uncertain, especially given the high level of prices relative to incomes,” the RBA said.

Households dial it back

While the RBA is not forecasting consumption growth to slow until next year, internal credit and debit spending data from CBA shows total spending has been falling since mid-May, when the RBA began raising rates.

The RBA lifted the cash rate target by a further half-percentage point this week to 1.85 per cent. Markets are pricing the central bank will raise rates to 3.1 per cent by the end of the year.

Spending on recreation, eating out and household goods had all eased in recent months, said Commonwealth Bank associate economist Harry Ottley.

“Essential spending categories that are less price elastic have seen spending hold up, with transport, utilities and food all remaining resilient,” Mr Otley said.

“Spending on transport has eased slightly as the price of fuel has declined from recent highs, providing consumers with some relief.”

Mr Otley said the moderation in spending was expected given low levels of consumer confidence.

“With spending on discretionary items already easing, it is likely the increased cost to mortgage holders will put more downward pressure on household consumption in the coming period,” he said.

In another sign activity could be slowing, the number of job ads fell for the second consecutive month in July, a SEEK report showed on Thursday.

There were tentative signs labour demand could have peaked, said NAB economist Taylor Nugent. The decline in job advertisements was broad-based across industries, with the steepest falls in the hospitality and tourism industry.

“Two alternative explanations for the decline in new job ads could be employers giving up advertising for new staff given the labour shortage, or more migrants coming across the international border which may be easing pressures in certain industries,” Mr Nugent said.

Despite the monthly falls, job ads remain elevated at 60 per cent above pre-pandemic levels.

The local boss of e-commerce giant Amazon says Australian consumers are flocking to the site to sign up for subscription deliveries of household staples as the retailer ups the ante on fast delivery in major cities.

Country manager for Amazon Australia Janet Menzies said that despite concerns about slower consumer spending, most product categories saw an uplift in sales during the company’s recent Prime Day sale event - with pantry items, beauty and personal care goods performing strongly.

“I think what is most important [at the moment] is value - and we saw on Prime Day that people are willing to spend,” she said.

Grocery and household staples have been a drawcard for customers on the platform, with Menzies highlighting strong demand for the company’s “subscribe and save” feature, which gives users a small discount for scheduling repeat deliveries of things like toilet paper, dog food and soft drinks.

“We have thought a lot about this program and when it is useful — usually, it’s something that is a consumable. And it started off as everyday essentials in the kitchen, but now you can even get ‘subscribe and save’ on [printer] toner,” Menzies said.

It’s been close to five years since Amazon launched in Australia and while the company’s growth has been gradual, revenues surged throughout the pandemic to hit $1.75 billion in 2021. Its 2022 financials are yet to be filed with the corporate regulator.

Amazon is well-known for its superfast product delivery, with the company pioneering the model of parcels arriving in as little as two hours across the US.

On Wednesday, the company confirmed that years after making its first deliveries, it is now ready to expand free one-day delivery to hundreds of thousands of products in Melbourne and Sydney for customers who sign up to Amazon’s Prime membership program.

It will mean users in eligible postcodes can place an order, on some products as late as midnight, and have it on the doorstep the next day.

The focus on one-day delivery comes as Australia’s grocery retailers look at new ways of bringing stock to customers fast.

As a number of grocery delivery start-ups fall on hard times, supermarket giant Woolworths has been trialling one-hour deliveries through its Metro60 app. Meanwhile, both Coles and Woolworths have also launched business grocery platforms, looking to get a slice of the office supplies market.

While Amazon has contributed only a small part of Australia’s retail spending so far, analysts are watching its expansion closely.

“Web traffic analysis shows that Amazon has made significant progress through COVID - holding on to gains in contrast to peer retailers, where trends have retraced as the economy reopened,” Barrenjoey analysts said in a note to clients last month.

Its team predicts less than 30 per cent of Australian households have memberships for Amazon Prime at this point, meaning the retailer has a lot of room to grow.

Menzies says that from here, Amazon wants to “continue to challenge and raise the bar” for how e-commerce retailers can offer value for money in the Australian market.

Alongside product pricing, consistency of delivery will be a big factor in attracting new consumers.

“The other part of the value is reliable delivery — delivering when we say we do.”

Online marketplace giant Amazon Australia has launched free next-day delivery for Prime members living in Sydney and Melbourne, but has kept its membership fee steady as it seeks to lure more shoppers to its platform.

Amazon made a $500 million investment in its recently opened robotic fulfilment centre in Sydney’s west that spans 200,000 square metres, helping it to meet this next-day delivery milestone.

From the Kemps Creek site, products can reach 80 per cent of the population within a 12-hour drive.

Prime members within the majority of postcodes of the two cities will get free one-day delivery on eligible items, with no minimum spend. This is all about acquiring more customers as quickly as possible as rivals Wesfarmers and Woolworths ramp up their marketplaces.

Australian consumers are demanding what markets such as the US and Britain already have: good prices and fast delivery. But it is not easy, given Australia’s low-density population and costly last-mile delivery.

Amazon Australia country manager Janet Menzies said customers’ feedback was that next-day delivery was “a really important breakpoint”, and hinted that she would like eventually to offer same-day delivery.

“We’re really confident that our customers will respond positively to next-day delivery. For us, it’s all about the value of Prime – it just needs to be great. And I think people expect fast delivery,” she told The Australian Financial Review.

“Never say no, never say no [to aiming for same-day delivery]. But you need the fulfillment network that can set that up.”

Lower membership cost

Ms Menzies said she would look to extend Prime’s next-day delivery offer beyond the major metros in coming months.

It is estimated there are now more than 2 million Prime members in Australia, just a fraction of its global 200 million-plus members, who get access to exclusive shopping events such as the recent Prime Day and to streaming services.

Roughly 20 per cent of the British population has Prime and 45 per cent of the US population are members.

Amazon reached about $3 billion gross transaction value (GTV) in the 2021 calendar year, which includes third-party sales. MST Marquee head of consumer research Craig Woolford estimates that if Amazon achieves its US or British penetration in Australia, it will have $27 billion to $40 billion in GTV.

Prime in Australia costs $6.99 a month, significantly below the US rate of $US14.99. Amazon earlier this year lifted the membership fee in the US and most European markets as it battles higher costs, but has yet to do so in Australia as it builds out its offer.

Amazon has been criticised previously for not having top brands. Last year it signed up Apple.

Ms Menzies said Amazon continued to scout the latest brands and aimed to beat out rivals and get them on the site fast.

She said Amazon could offer customers top delivery speed because it built six fulfilment centres and delivery stations close to where customers lived and worked.

Amazon Flex (self-employed delivery drivers) would continue to grow, and Amazon would keep working with third-party delivery partners, she said.

Amazon also implemented delivery to more than 500 lockers and 400 counters – such as convenience stores and petrol stations – where customers choose where their order is delivered as part of its last-mile delivery offer.

Mr Woolford said Amazon would need to expand its same-day delivery service before lifting the Prime fee, and to achieve this it needed three to four times the delivery capacity it had today.

Amazon would disrupt local retailers over the next decade, he added, and questions remained over whether rivals Wesfarmers and Woolworths could lock in customers before Amazon’s encroachment.

“More importantly, how much cost and capital will they outlay? We are concerned the investment will be bigger than most investors expect,” he said.

How do you get customers back to your store after a two-year disruption? You give them a show.

That is the thinking at David Jones, which will host the first runway show at its Elizabeth St, Sydney, store in 50 years on Wednesday night. Five hundred of the department store’s most valuable customers will attend.

“We know customers want more experiential elements in store,” said David Jones chief executive Scott Fyfe. “When I started in the job, I was committed to bringing more experiences in store, a better assortment of Australian and international brands and improved customer service.”

Mr Fyfe became CEO of the company in October 2020, amid widespread COVID-19 lockdowns. Back then, the idea was to “keep the doors open”.

Now, he said, the business is seeing a buoyant return that he characterises as “screw it” spending.

“In men’s tailoring, particularly, we are seeing bridal parties come in and spend big. Groomsmen who might have spent $1500 on a suit are now spending more like $1800, $2000. It’s like people are saying, ‘screw it.’”

Footwear and apparel in general are performing well, he added.

But with interest rates and the average cost of consumer goods rising, Mr Fyfe is aware that “those headwinds might change”.

So far, he said, hints of a retail downturn have not reached the upmarket chain, which recently refurbished its Bourke St, Melbourne, flagship store and has heavily invested in its Elizabeth St store.

“We know that our customers have extensive savings from the lockdown period,” he said.

“We saw that over Christmas 2021, and we are finding that our consumers are not being impacted by external economic pressures. Actually, people are buying into newness.

“The Australian consumer is very connected with local fashion and that is a key strategy for us.”

Still, foot traffic, Mr Fyfe conceded, has not completely returned.

“We’re not back to 2019 levels in terms of physical retail, but Friday, Saturday and Sunday have been very good for us,” he said, pointing to the return of events and office hours as drivers of sales.

Still, late night shopping is “nowhere near what it was”.

Retail activity lifted just 0.2 per cent in June following the Reserve Bank of Australia’s decisions to lift the cash rate, according to the Australian Bureau of Statistics.

The result was softer than expected and prompted some economists to tip that retail trade had reached its zenith after six consecutive months of growth.

Deloitte analysis shows that though local retail has fared better than anticipated, spending is expected to slow toward the end of the year, and any growth will likely come from price rises, rather than sales volume.

Mr Fyfe dismissed this.

“We are confident about trading into Christmas, especially after the upheaval of the past few years,” he said.

“We have 33 new fashion brands, and we know that DJs is a destination for Christmas. So, we are very optimistic.”

Fine-Day is set to open a pop-up space at David Jones in Sydney, trading for three months from August 13.

The custom pop-up space will be located at the Elizabeth Street store, on Level 2 alongside women’s contemporary fashion and denim.

The curated collection will include its organic cotton and silk sleep range, bed linen in organic cotton and jersey, loungewear and a pet collection.

Fine-Day launched in April 2022, with an online store and flagship site on High Street in Armadale, Melbourne.

Fine-Day collections are pitched as genderless, inclusive, and produced from sustainable materials.

The launch collection was largely produced in Europe from sustainable fabrications, with an organic cotton tee priced at $50 and bath robe at $180.

Fine-Day is owned and operated by BrandBank Group, parent company of French Connection, Kikki K. and Seed Heritage.

Myer is launching donation stations in its Melbourne, Eastland and Fountain Gate stores.

The donation stations are part of its partnership with Moving The Needle, a Salvation Army Australia initiative to reduce waste in the fashion industry.

According to the Salvation Army website, all donated items are individually sorted, evaluated, and placed either in store or into one of its recycling streams. 

“Once donations are received by a store, they are moved to a sorting room where the store team will separate them into clothing categories or season. 

“Each category will be carefully sorted by a team member who will review each item and decide, for example, which pieces of clothing are in saleable condition (clean and undamaged), and which will need to be repurposed.”

“Clothes that have been processed for sale are then priced based on their condition, quality, and original retail value before being displayed on the shop floor for them to find a new owner.”

This move forms part of Myer’s commitment to implementing initiatives that reduce packaging, minimise waste from landfill, promote recycling, and support circular economy schemes. This includes a focus on increasing Myer's recycling diversion rate of 63.6% to minimise landfill.

According to its online report into sustainability, Myer is continuing to improve its packaging standards, which includes a paper reduction project in stores, substituting 70% of soft home packaging to natural fibres, and phasing out plastic shopping bags.

Regarding the latter, the online report states that Myer has decreased plastic bag consumption in stores, with the total number of units ordered down 4.96 million in FY20.

The launch of its donation stations joins over 550 textile drop-off points throughout Moving The Needle’s network.

The initiative will run until October 9.

Retail sales in June registered $34.2 billion in turnover however rising costs of living and inflation will likely impede growth for businesses, according to data released by the Australian Bureau of Statistics (ABS) today.

Seasonally adjusted retail sales are still higher at 12 per cent year-on-year, although compared to May they were up by just 0.2 per cent, a figure dwarfed by the current inflation rate.

Cafes, restaurants, and takeaway food services had the largest rise at 2.7 per cent, followed by clothing, footwear, and personal accessory retailing at 1.3 per cent, and other retailing at 0.5 per cent.

Department store sales fell by 3.7 per cent while food retailing and household goods also recorded poor turnover at 0.3 per cent each.

Ben Dorber, head of retail statistics at the ABS, said results were mixed across the six industries as cost-of-living pressures appear to be slowing the growth in spending.

Australian Retailers Association CEO, Paul Zahra, said the results are not necessarily a “full reflection” of business performance as consumer prices have increased across the country.

“Consumers are paying more for everyday items, while at the same time, business operating costs have increased significantly.”

He cautioned consumers are anxious about the rising costs of living and interest rates which will likely impact spending in the coming months.

Dominique Lamb, National Retail Association chief, said retail businesses face a “challenging” period ahead in this inflationary climate.

“The impact of interest rate hikes will come to a head for many family-run and small business operators, who are struggling to keep up with the rising costs of business and dwindling consumer confidence,” she said.

On a state basis, NSW was the only state where retail turnover fell (by 0.2 per cent) while the NT posted the highest rise (1.8 per cent). Sales in Queensland were down 0.7 per cent), in the ACT by 0.6 per cent, and in both WA and Tasmania, by 0.5 per cent.

Trans-Tasman online retailer Kogan has reported a return to adjusted profit during the first quarter, but not by enough to prevent a 69 per cent slump for the full year to June 30.

Sales for the year were static, up by just 0.1 per cent, to $1.18 billion, while adjusted EBITA was $19.1 million – down from $61.8 million last year and $49.7 million the year before.

Significantly, the majority of its EBITA for the latest year came from New Zealand, where it earned $12.2 million from its Mighty Ape marketplace. The core Kogan.com operation earned $6.9 million, down 87.4 per cent year on year.

However, despite what the company described as tough trading conditions – impacted on both sides of the Tasman by Covid – Kogan’s active customer base has grown to 3,972,000 and its Kogan First loyalty program membership surged by 210 per cent.

Ruslan Kogan, founder and CEO of Kogan, said consumers don’t want to alter their lifestyle but are happy to shift the way they shop in uncertain times.

He said the company is working to become “leaner” and to pass on cost efficiencies to customers through lower prices in response to changes in the macro environment.

Earlier this year, the business said consumer demand did not meet its expectations as it moved through a challenging market condition in its third-quarter results.

Meanwhile, the group’s total stock inventory has been reduced from $227.9 million a year ago to $161.1 million, with $139.2 million worth in warehouses and $21.9 million worth in transit. That has also assisted in boosting its net cash position from $12.8 million at the end of last financial year to $32.1 million.

Kogan’s portfolio of businesses includes Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Travel, Kogan Money, Kogan Cars, Dick Smith, Matt Blatt and Mighty Ape.

Inflation could turn negative by late next year as petrol prices decline and supply chain pressures ease, allowing the Reserve Bank of Australia to avoid being too aggressive on interest rate rises.

Economists expect some major global inflationary pressures to be temporary and Australia’s quarterly headline inflation to be low or negative by the final quarter of calendar 2023.

An expected easing of inflation pressures next year meant the RBA should not lift the cash rate too far above the estimated 2.5 per cent neutral rate, said Outlook Economics director Peter Downes.

The sharp rise in the cost of oil, shipping, freight and manufacturing stems from Russia’s war on Ukraine driving up energy prices, China’s COVID-19 restrictions choking global supply chains, ultra-loose monetary policy and government spending.

“These special factors will begin to reverse,” Mr Downes said.

“If global growth slows and global oil prices fall back to around $US60 a barrel, fruit and vegetable prices fall back, freight rates return to pre covid rates as they are already most of the way there and building costs return to some sort of normality, then the through the year headline rate could be negative by the end of next year.”

Bond traders have reduced the outlook for long-term interest rates in response to central banks worldwide aggressively raising rates towards “neutral” – the theoretical rate that is neither stimulatory, nor restrictive.

The RBA meets on Tuesday and is widely expected to increase the 1.35 per cent cash rate by another 0.5 of a percentage point to 1.85 per cent, with more increases to follow in coming months.

The 6.1 per cent annual inflation rate for the June quarter reported on Wednesday meant a 0.5 of a percentage point rise was likely on for next week, said Commonwealth Bank of Australia economist Gareth Aird.

“We believe the case to move the cash rate by more than 50 basis points at the August board meeting is weak,” Mr Aird said.

“The inflation data did not surprise to the upside.

“And whilst the annual rate increased, the quarterly pulse of inflation did not accelerate.”

Treasurer Jim Chalmers and Reserve Bank of Australia governor Philip Lowe have warned inflation will spike above 7 per cent by late this year, but expect inflation to ease next year.

A negative quarterly headline inflation rate was “not out of the question” later next year if the global price of oil and petrol prices fell significantly, said ANZ economist David Plank.

However, Mr Plank said the RBA would be more concerned about underlying inflation, which ANZ tips to eventually fall below 3 per cent in annual terms by mid-2024. Annual underlying inflation was 4.9 per cent to June 30, the Australian Bureau of Statistics said this week.

Key will be wages

“The real inflation key will be the behaviour of wages if the unemployment falls below 3 per cent as we are now forecasting,” Mr Plank said. In June, Australia’s jobless rate fell to a 48-year low of 3.5 per cent, the ABS said.

It is possible that headline quarterly inflation could turn negative late next year if the oil price plunged, but the RBA’s more important measure of underlying inflation would still be firm, said HSBC Australia chief economist Paul Bloxham.

“The important part is domestic non-tradables inflation, which will remain above target given the tight labour market and likely momentum in wages growth by next year.”

Mr Bloxham tipped the RBA cash rate to hit 2.6 per cent by this December.

The RBA could get “lucky” next year as global inflationary forces recede, if the bank managed to keep a lid on inflation expectations, he said.

While Dr Lowe appears confident much of the supply-side inflation pressures from overseas will ease, he is keeping a close eye to make sure a wage-price spiral doesn’t develop to underpin a new burst of inflation.

He has said it is important to keep a lid on inflation expectations, to deter businesses from rising prices too much and workers making excessive wage claims.

Globally, a big jump in soft commodity prices such as corn, wheat, canola, cotton, live cattle, lamb and pork has driven food inflation. After surging, prices for most of these farm products have declined.