News

A major British outdoor and lifestyle clothing retailer is aiming to take on the Australian market with plans to open four new stores by the end of the year.

Mountain Warehouse will make its Australian bricks and mortar debut at Vicinity Centres’ DFO at Skygate in the Brisbane Airport precinct on July 15, positioning itself as a low-cost family focused alternative to Kathmandu, Macpac, Anaconda and The North Face.

The opening marks the beginning of ambitious expansion plans to bring the brand to stores in Australia, after operating an online presence for the past seven years, annually turning over about $10m.

In the second half of 2024 Mountain Warehouse will also open stores at DFO Moorabbin, DFO Essendon and DFO Uni Hill in Melbourne.

Mountain Warehouse currently caters for about four million customers a year – featuring men’s, women’s, and children’s clothing as well as footwear and equipment. About 30 per cent of its turnover is currently from online sales. The new Australian stores are part of a global rollout of 50 stores in 2024.

London-based founder and chief executive Mark Neale said Mountain Warehouse’s offering was different to its rivals and many products were up to 30 per cent cheaper than comparable goods sold by the opposition.

“Our offer is a bit broader than some of the other guys and its definitely better value for money,” he said. “That’s always been our positioning. It’s more of a family offer. We sell a lot of kidswear. Most of the other guys who you might think of as in our competitive space have pictures of guys with an ice axe hanging off a glacier. It’s about value for money. We have a pictures of a family taking their kids for a walk with their dog in the woods.”

Established in 1997, Mountain Warehouse will have more than 400 stores around the world by the end of the year, mainly in the UK, with about 50 in Canada, a small presence in the US and stores in Poland, Germany and Austria. New Zealand is currently its third-largest market with 24 stores.

For the year ending February 2024 Mountain Warehouse recorded sales of £386m ($738m) and a pre-tax profit £26.2m.

Mr Neale would not make any specific forecast about its new Australian business, which he said will have “the full offer” including a summer range of shorts, T-shirts, thongs and travel-related products such as backpacks.

“We will see how the four stores go and if they get off to a good start we’ll be looking at more next year as well as a distribution centre in Melbourne,” he said. “Six years ago we opened a store in Queenstown New Zealand and we didn’t know whether that would be one-of-one or one-of-many and it went well.

“In six years, including three during the Covid pandemic, we built it out to 24.

“There’s a lot more people in Australia than in New Zealand so we’d like to think we will do more than that.”

Australian cosmetics giant MCoBeauty has attracted global attention for its strikingly similar beauty dupes, but the company has kept the details of its product development process out of the spotlight — until now. 

Although the multi-million-dollar business has faced legal hurdles before for its copycat cosmetics, MCoBeauty has a rigorous process in place to ensure its lipsticks don't cause lawsuits.

This is how MCoBeauty creates its own versions of popular cosmetics from start to finish while keeping itself on the right side of the law, according to its founder and lawyer.

Hang on, what's a dupe?

If you're a beauty beginner, the word "dupe" in cosmetics is short for duplicate, and refers to a more affordable makeup product that looks and wears the same as a higher-end alternative.

It's important to note that "dupe" in the beauty world doesn't mean the same as the traditional definition of the word, which is generally defined as tricking or deceiving someone.

That said, dupes aren't limited to the beauty industry — the word is used to describe cheaper alternatives to more expensive or higher-quality items.

The origin of dupe in this context goes back to about 2008, and was first used in gaming lingo before being adopted in the online make-up and beauty communities, according to KnowYourMeme.

But in the past two years or so, the word has become a catch-all on social media to describe less expensive alternatives of countless products, ranging from water bottles, lounge wear, furniture, cleaning products, kitchen appliances and even cars.

And given the cost-of-living crisis has people being cautious about what they spend their hard-earned money on, it's no surprise that dupes have gone mainstream.

What is MCoBeauty?

MCoBeauty is an Australian cosmetics company, created by Sydney entrepreneur Shelley Sullivan to complement her original foray into the beauty industry with ModelCo, which she launched in 2002.

Ms Sullivan created the beauty brand with "masstige" in mind, which refers to marketing affordable products in a luxurious way — and inspired its "luxe for less" slogan.

MCoBeauty began selling its first products in 2018, and gradually gained traction in beauty circles, but the brand went viral in April 2023 after releasing its own version of a cult cosmetic.

The product in question was "Flawless Glow" — its version of UK cosmetics brand Charlotte Tilbury's "Hollywood Flawless Filter" — and was quickly labelled a dupe, particularly because of its similar packaging.

In the months since, MCoBeauty has earned a reputation as a cosmetics brand that dupes popular products — although the brand says duping is a marketing strategy, not its whole business model.

"This brand is all about luxe for less and providing quality products at a luxe-for-less price. Duping is what we call a pillar of our marketing strategy, and definitely not at the top of our funnel of how we market," Ms Sullivan said.

Regardless, its strategic duping has MCoBeauty on track to record $250 million in sales this year, and the company has since expanded to the United States.

How does MCoBeauty create dupes?

When the ABC sat down with MCoBeauty founder and CEO Shelley Sullivan to find out, she said it began when enough of her customers asked for a product.

"We have a very stringent process that we go through when we decide that we want to launch a product," Ms Sullivan explained.

"Before we even go into design, we have some research done on the product, the formulations, the packaging, the customer base, the outer packaging, everything to do with the product.

"We have a whole product development team of about 10 people, and we have a great external lawyer … and we have a look at the product packaging, and then we go through a process of seeing that … there's no trademarks and there's no patents."

MCoBeauty's external lawyer is Len Mancini, who shared with the ABC what his role looks like in the production process.

"I get shown a product conception, and I will look at that, take it away and conduct a lot of searches," he said.

"I will search registered design databases, patent databases, trademark databases in Australia, overseas, all around the world, trying to work out what exactly it is the original product maker has protected."

But the trademark and intellectual property attorney said the final decision isn't as simple as: if the original brand hasn't protected it, MCoBeauty can get away with it.

"No, it's not like that. Certainly the absence of trademarks comes into that equation of what the final product looks like, because if they're not trademarks, then you're not going to infringe a trademark by putting a product into the market," he said.

Those trademarks, he said, don't just include brand names, but also cover shapes, logos, colours and even packaging.

In simple terms, Mr Mancini's job is to look at a product, and find out how much of it is protected by the original brand so MCoBeauty knows where the legal boundaries are early on.

Retail sales in Victoria and Queensland are lagging the rest of Australia on a per-person basis, while Western Australia tops the spending charts, though households in the west are still coming under pressure.

Retail sales nationally rose a resilient 0.6 per cent in May, but there was little to celebrate for businesses, with the Bureau of Statistics attributing the rise to strong discounting before the new financial year.

Sales were up 1.7 per cent through the year but in trend terms have been stagnant since the start of 2024 as the Reserve Bank of Australia’s 4.25 percentage points worth of interest rates rises weigh on consumption.

On a per-person basis, retail spending was well below a November 2022 peak despite a small increase in May, which indicates nationally sales have been held up by the supersized post-pandemic migration surge.

“Despite a slightly better tone, the May retail results still point to a consumer under intense pressure, strong population growth doing a lot to cushion the hit to retailers,” said Westpac senior economist Matthew Hassan.

ASX-listed online book retailer Booktopia was placed into voluntary administration on Wednesday with restructuring firm McGrathNicol looking for a buyer. Shares in the embattled retailer have been halted from trading since mid-June.

Analysis of ABS data by The Australian Financial Review shows all states except South Australia and Tasmania have recorded falls in per-person retail spending since late 2022.

Mr Hassan said Victoria was “in the slow lane”, which also reflected soft consumer sentiment. Per-person spending in the state was down 4.5 per cent from a January 2023 peak.

Conversely, Western Australia’s booming housing market, state government surpluses, support for households and a strong business sector supported by the mining sector had “performed very strongly”.

“It’s a broad-based supportive environment in the west, and it looks pretty sustainable,” Mr Hassan told the Financial Review.

WA’s per-person retail sales were up 23 per cent since before the pandemic, the highest of the states, though they were still down from a peak of 27 per cent in late-2022. The largest falls have occurred since late last year.

The latest data supports a swath of profit warnings on the ASX as margins get squeezed by input costs such as wages that businesses are unable to pass on through prices, which are also being forced lower by discounting.

“Retail businesses continue to rely on discounting and sales events to stimulate discretionary spending, following restrained spending in recent months,” said ABS head of business statistics Robert Ewing.

“Many retailers started end-of-financial-year sales early, offering larger discounts than usual, and noted that shoppers remain price-sensitive in response to persistent cost-of-living pressures.”

Demand for clothes, alcohol

The 0.6 per cent increase in May beat market consensus of 0.3 per cent and comes after a 0.1 per cent rise in April and a 0.4 per cent fall in May.

JPMorgan Australia chief investment strategist Tom Kennedy said the ABS retail data remained difficult to decipher, though the May result did not alter the bank’s view that the underlying pace of spending would remain fragile.

With the stage three tax cuts kicking in from July 1, the key question for economists is whether the extra cash in people’s bank accounts will be spent or stashed away into savings and offset accounts.

Personal apparel sales recorded the largest rise (up 1.6 per cent) following two consecutive falls in April and March, while household spending on goods rose 1.1 per cent.

Food spending recorded solid growth, driven by a large rise in alcohol (up 6.1 per cent), after a large fall in April (down 7.4 per cent).

“People appear to have returned to usual purchasing habits after opting for cheaper alcoholic products in March, stocking up more than usual in the lead-up to Easter, resulting in a lower growth rate in April,” Mr Ewing said.

A small fall in spending on dining out was attributed to payback from major events such as LIV Golf Adelaide and the AFL Gather Round increasing sales in April.

Cosmetics retailer Mecca has opened the revamped 555sqm Carousel store in Cannington, marking its biggest location in Western Australia.

The store rounded out a five-year expansion initiative to provide the services, brands and experiences customers are looking for, The West Australian reported.

Since 2019, Mecca has expanded its presence in Western Australia with the redevelopment of its Karrinyup, Subiaco, Booragoon and Carousel stores, which paved the way for the entry of 60 additional beauty brands into the state.

Sophie Wood, Mecca GM of retail, hinted at the opening of more stores in the state but did not disclose specific timelines and locations.

“We are always on the look out for new opportunities in terms of property to expand the portfolio,” Wood told The West Australian.

Currently, Mecca has more than 100 stores across Australia and New Zealand along with an online store.

Shein has confirmed it will push through with a three-day pop-up in Perth, weeks after the fashion retailer announced the cancellation of the original event.

The pop-up will open at Centenary Pavilion at Claremont Showground from July 5 to July 7.

The pop-up will showcase Shein’s latest collections, including its autumn-winter apparel and accessories. It will also feature beauty, home, electronics, shoes, and pet outfit collections.

The original event was planned to be held at Lakeside Joondalup on June 21.

“At Lakeside Joondalup we work with a diverse range of retailers, partners and brands to provide our customers with engaging centre experiences,” a Lakeside Joondalup spokesperson told the media.

“This includes short-term pop-up activations with both local businesses and community groups as well as popular brands.

“This activation will no longer be proceeding at Lakeside Joondalup, but we look forward to bringing other new and exciting experiences to our community soon,” the spokesperson concluded.

Australian apparel business Mosaic Brands has appointed a new chief financial officer and company secretary following the resignation of long-running CFO and company secretary Luke (Luka) Softa.

David Clarke has now taken on both leading positions effective this week.

“Luke had advised the board a few months ago of his intention to step down as CFO after nearly 10 years with Mosaic, but committed to remain in the role until a suitable replacement was found,” Mosaic chairman Richard Facioni said.

“This has allowed for a seamless transition with Luke formally resigning today (June 27) and David being appointed. Luke will remain with Mosaic for a period to provide an appropriate handover.”

Facioni then went on to say that Softa’s contribution to the group over the last decade has been immeasurable in both steering Mosaic through rapid growth and the challenges of COVID. 

“The way he has approached this transition over the last few months reflects his broader commitment to getting the right outcomes for the group,” he said. “The board and the entire Mosaic team thank him for his substantial contribution and wish him success in his future endeavours.”

Incoming CFO David Clarke has held a range of senior executive roles in both listed and private companies in the retail, distribution, health and technology sectors. These include Hills Ltd as CEO, Corum Group Ltd as CFO and CEO, Nick Scali Ltd as CFO, and CFO of Diva. 

David has also been the company secretary of Corum Group, Nick Scali and Diva. 

David holds a Bachelor of Commerce in accounting and finance and a Graduate Diploma in marketing and strategy from the University of Otago (New Zealand). He is also a Chartered Accountant and AICD graduate.

“David has a broad and deep skillset in all financial and operational aspects of managing a large organisation and will bring a fresh perspective to the Group,” Facioni said. 

“With Erica Berchtold’s appointment as CEO earlier this year, the group has transitioned to a new and experienced leadership team with a strong understanding of the retail sector to take us forward.” 

The group also announced the retirement of Jackie Frank from the board of Mosaic, having served as a director for the past five years. 

“I wish to express my gratitude to Jackie for her invaluable contribution to the board during her tenure,” Facioni said. “She has provided a unique perspective and has helped navigate the Group through very challenging times. I sincerely wish her the best for the future.”

If department stores are dying, Solly Lew missed the memo.

This week his investment vehicle, Premier Investments, struck a deal that will personally deliver him close to a third of department store Myer and, if it gets across the line, will pave the way for him to return to the Myer boardroom.

It's been a long time coming. For the past seven years, Lew has been stalking Myer, gradually buying up stock through Premier.

It's hardly been financially rewarding. 

Myer's financial performance has been consistently poor, regularly notching up losses per share since, and then raising concerns about its long-term viability.

That has been mirrored in the stock price, a performance that has reflected the sad and sorry tale of Myer's most recent incarnation, dropping to a mere 10c a share shortly after the COVID pandemic gripped the globe and tipped share markets into a deep freeze.

A company with a rich history stretching back to federation, it joined forces with Coles in the 1980s, before being spun off and controversially sold into private equity in 2006.

A history of disappointment

The company's float on the Australian Securities Exchange on Melbourne Cup Day 2009 was a disaster. 

Sold to punters amid a huge amount of hoopla at $4.10, it never achieved its listing price, finishing its debut at $3.88 and has headed south ever since.

"The company's been through the private equity wringer," explains one long-time business associate. 

"Everything that could have been sold was, and since then there's been no significant investment in the business."

Under the proposed deal with Premier, Myer will buy Just Jeans and Jay Jays in exchange for Myer shares which then will be distributed to Premier shareholders.

News of the deal sent the department store's share price soaring, notching up a 25 per cent gain to 81c in just two days.

But what of the future?

"The company has $3.3 billion in annual turnover and a significant footprint but its margins are not good enough," the insider says.

Investment, improving customer service and lifting the performance of the company's loyalty program are top of the list of to-do's once Lew assumes control.

Aiding him in that quest will be Olivia Wirth, currently occupying a dual role at Myer as chair and chief executive.

The former head of Qantas' frequent flyer program – which became a significant earnings generator for the airline – she has been tasked with ramping up the division with offerings both for in-store and online customers.

Full circle

Lew's return to chair the company will complete a four-decade flirtation with the retailer.

Not all of it has been a happy experience. 

Controversial share deals and guarantees including the now infamous "Yannon transaction", which cost Myer significant sums, were investigated by the corporate regulator without any adverse finding against Lew.

But the reputational damage spilled over onto the board in 2002 when then-chairman Stan Wallis successfully campaigned to have Lew dumped.

In the intervening years, he's dived into David Jones and Country Road, where he made massive profits, and been actively involved in managing a range of clothing brands such as Portman, Dotti, Just Jeans, Jay Jays and Smiggle through Premier.

Premier's share price has certainly outperformed Myer, currently sitting just shy of record levels.

But Myer maintains its allure.

"He certainly has a fascination for Myer," his former colleague explains. 

"But with Solly, sentiment never overrides commercial reality."

Retail bosses are hopeful that the income tax cuts and new migrants will bolster consumer spending even if the Reserve Bank of Australia raises interest rates in the coming months.

Higher costs, as a result of stickier than expected inflation and 13 rate increases since May 2022, have put pressure on household budgets and curbed spending, the chief executives of retailers Nick Scali and Harvey Norman have said. But the pullback has not been as bad as feared, they add.

They now hope that tax cuts from July 1, higher immigration and shoppers buoyed by stronger house prices will help cushion the effect of expected rate increases following this week’s strong inflation data.

Interest rates are the highest they have been in more than a decade, and the RBA is now considering whether it needs to lift them again to curb spending. It was not long ago that investors and business leaders were expecting a rate cut this year.

“I don’t think consumer sentiment is great when interest rates are going up, so potentially, yes [a rate rise could damage us], but you do have the tax cuts coming in July, right? It’s hard to read,” Nick Scali boss Anthony Scali said.

The retailer is more concerned about the rising cost of importing goods, which will have to be passed to the consumer.

Mr Scali, who imports all sofas and furniture, said about two weeks ago that shipping companies had doubled their container rates. Retailers and manufacturers were once again battling surging freight pricing and port bottlenecks, he said.

Shipping companies were effectively acting like there was no contract by saying they had no containers at the contracted price, Mr Scali said.

“That’s happening in the UK, that’s happening in the US, and ... in Australia, and it is certainly not going to help inflation. You have to pass it on eventually.”

Harvey Norman executive chairman Gerry Harvey said the household electrical retailer was “pretty strong this month” and shoppers were snapping up end-of-financial-year bargains.

“The next three or four days will be very strong for Harvey Norman,” he said. If rates did go up before Christmas, however, that could “quieten things down a bit”, he warned.

Mr Harvey said the cost of doing business was “horrendous”, citing increased power bills, land taxes and other government charges.

The nation’s largest baby goods retailer, Baby Bunting, reaffirmed lower full-year net profit guidance on Thursday, after issuing a warning last month. New chief executive Mark Teperson said independent retailers were doing it “very tough” and continued to discount to help drive sales.

He said supplier feedback showed some retailers were making late payments.

“More are going under in recent months; the independent sector seems to be under pressure,” Mr Teperson told investors.

Baby Bunting’s comparative store sales for the second half to the end of April fell 5.6 per cent, but this was not as bad as analysts had feared. Sales for this month and the previous one improved dramatically.

On Thursday, ANZ chief executive Shayne Elliott told an investor briefing economic growth had slowed, consumption was soft, and inflation was stubbornly above target.

“For many people, times are incredibly tough,” he said, pointing to Foodbank, which is delivering 65,000 meals a day in Melbourne.

Only three in every 1000 ANZ home loan customers are in financial hardship, but Mr Elliott expects this number to rise.

Although 79 per cent of ANZ home loan customers were ahead on their repayments, and mortgage offset balances were growing, Mr Elliott said there were customers without home loans who were struggling.

He said the bank expected financial stress to increase over the next 12 months.

A controversial fashion brand has made a last-minute decision to cancel a highly anticipated pop-up store just weeks before a tax on fast-fashion retailers is set to begin.

The three-day Shein event was set to take place at Perth’s Lakeside Joondalup Shopping Centre, decked out with a live DJ, beauty bar, photo booth and giveaways from June 21.

The brand created a Facebook event boasting the event, encouraging savvy shoppers to browse the “SHEIN AIR-themed” pop-up shop.

It would have been the first pop up shop the brand has had in Perth.

But the company decided to pull the plug on the three-day event just days before it was to go ahead.

“At Lakeside Joondalup, we work with a diverse range of retailers, partners and brands to provide our customers with engaging centre experiences. This includes short-term pop-up activations with both local businesses and community groups as well as popular brands,” a spokesman from the shopping centre said.

“This activation will no longer be proceeding at Lakeside Joondalup, but we look forward to bringing other new and exciting experiences to our community soon.”

It is not yet known why the event was cancelled, but Shein has said it is determined to ensure the pop-up does take place at a different venue.

“Shein is committed to providing the best pop-up experience for our Perth customers and will provide further updates in due course,” a Shein spokesman said.

The cancellation comes just days after the federal government introduced a four-cent levy that retailers are forced to pay on every fast-fashion clothing item sold from July.

The Perth pop-up was not the first in Australia, with stores previously popping up for limited times in Brisbane, Melbourne and Sydney.

Despite its fast fashion model being subject to criticism, Shein is growing in popularity, with market research company Roy Morgan finding that the brand had almost 800,000 shoppers each month in Australia only for clothing and accessories.

That puts the ultra cheap Chinese owned online-only brand “on track to reach a billion dollars in annual sales, which is set to grow now that Shein has expanded into categories beyond apparel,” according to Roy Morgan.

Australian department store Myer has approached Premier Investments Limited to explore a potential combination with its Apparel Brands business.

The deal is subject to ASX, ACCC and Australian Taxation Office engagement, with the combination of Myer and Premier’s Apparel Brands business being via an all-scrip merger. In effect, Myer would acquire Premier’s Apparel Brands business - which includes Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E - in exchange for the issue of new shares in Myer to Premier. 

Premier added that “sufficient” cash will also be contributed alongside Apparel Brands.

Myer has indicated that it expects Century Plaza Investments Pty Ltd and its Associates would be represented on the board of Myer if the proposal proceeds. Century Plaza has advised Premier that it will propose that chairman Solomon Lew join the board of Myer as a non-executive director in that case.

Lew has indicated that he would also be prepared to take an active role as a non-executive director of Myer if the transaction proceeds given his extensive retail experience, that Century Plaza would become Myer’s largest shareholder and that Century Plaza’s interests would be aligned with other Myer shareholders.

The deal will also involve the separation of Myer from Premier. Premier would distribute all of its shares in Myer to Premier shareholders. As a result, Premier would cease to own shares in Myer. 

After the proposed transaction, Premier shareholders would become Myer shareholders directly, whilst also retaining their existing Premier shareholding. 

Apparel Brands has a retail network of 717 stores across Australia and New Zealand, generating revenues of $845 million in FY23. 

Myer identified opportunities from a combination of the businesses to deliver a step-change in Myer’s market position and generate substantial strategic and financial benefits.

These include scale, revenue and growth opportunities, cost and revenue synergies across supply chain, sourcing, property and brand management, and the leveraging of Myer’s loyalty program and e-commerce platform across an enlarged customer base. 

It will also add to the expansion of Myer’s exclusive brands and private label portfolio.

In line with this approach, Myer has decided to retain ownership of its current brand portfolio, which includes iconic brands Sass & Bide, Marcs and David Lawrence.

An Independent Board Committee, led by Myer executive chair Olivia Wirth, including all of Myer’s independent non-executive directors except Premier’s nominee director, has been formed to consider the proposed combination with Apparel Brands. 

“Against the backdrop of a changing retail landscape, Myer has commenced a thorough review of its strategic direction and growth opportunities, focused on increasing profitability, improving returns and driving sustainable earnings growth for our shareholders,” Wirth said. 

“While Myer has one of Australia’s strongest retail brands, store networks and loyalty programs, there is a significant opportunity to reinvest in our product offering, customer engagement capabilities and further optimise our supply chain to achieve our full potential. 

“As part of this review, Myer is exploring both organic and inorganic investment opportunities that align with our strategic focus areas to create value for Myer shareholders. It quickly became clear that the idea of a combination of Myer and Apparel Brands offered significant potential synergies and prospects for growth, evidently warranting further examination.”

Ksubi has opened its first Australian flagship store in Melbourne, marking the streetwear brand’s return to the land Down Under where it was born.

The 140sqm store is located at 321 Little Bourke Street.

Ksubi collaborated with Melbourne creatives on exclusive in-store offerings, which include a limited-edition Melbourne city tee, designed by local contemporary artist Mayonaize.

The store will also showcase local DJs in Ksubi’s creative community with weekly music programming from 3pm to 6pm on Saturdays and Sundays.

“In recent years we have been focused on solidifying our brand internationally – opening stores in Miami, Chicago and on Carnaby Street in London,” said Craig King, Ksubi CEO.

“This year was designated as the one to bring the energy and passion that we have fostered overseas back to Oz. There’s no better place to begin that journey than the home of fashion, Melbourne.”

The store is set to launch the Ksubi x Patty Mills collection on June 25.

Australia’s peak retail body, the Australian Retailers Association (ARA), has welcomed the Reserve Bank of Australia’s (RBA) decision today to again hold cash rates at 4.35% following subdued retail trade data.   

ARA Chief Industry Affairs Officer Fleur Brown said retailers continue to battle the dual headwinds of a spending downturn coupled with high costs of doing business.  

“Whilst interest rates have remained on hold since November, most Australian household budgets remain under significant pressure,” Ms Brown said. 

“April’s retail sales continued to soften, with most discretionary categories remaining in decline – making it all the more important to avoid another cash rate increase.

“Changes to interest rates typically have a lag effect on sales and we’re still experiencing the impacts of interest rate increases last year,” she said.

With June’s cash rate decision now in the books, the RBA will meet again early August.  

Retailers are hopeful an interest rate reduction may be on the horizon, after the Bank of Canada and the European Central Bank recently cut interest rates for the first time since the pandemic

Spending on clothing, footwear and accessories has plummeted by 2.5 per cent in April 2024 compared to April 2023 - the largest percentage fall in any retail category - according to new data from the Australian Bureau of Statistics (ABS).

The plummet in fashion was followed by 1.3 per cent falls in both household goods and department stores. Household goods fell by $79 million year-on-year, while department stores fell by $25 million.

This is all despite overall sales growing by 1.3 per cent in April 2024 compared to the same month last year. This lift was driven by food retailing, cafes and other retailing, which includes services such as hairdressing. 

Other retailing recorded the largest lift year-on-year at 4.7 per cent, or $252 million.

In month-on-month terms, fashion retailing sales fell by 0.7 per cent, followed by a 0.5 per cent fall in food retailing - which includes supermarkets. Other retailing hit the highest growth at 1.6 per cent, with household goods up by 0.7 per cent.

Department stores remained flat month-on-month with a 0.1 per cent lift.

This monthly increase follows a 0.4 per cent fall in March 2024 and a 0.2 per cent rise in February 2024.

“Underlying retail spending continues to be weak with a small rise in turnover in April not enough to make up for a fall in March,” ABS head of retail statistics Ben Dorber said.

“Since the start of 2024, trend retail turnover has been flat as cautious consumers reduce their discretionary spending.

“The relatively earlier Easter and the different timing of school holidays across the country meant we saw some added volatility in turnover in March and April.”

“Looking across the past two months, we see weak underlying spending in most parts of the retail industry.”

Australian Retailers Association (ARA) CEO Paul Zahra said the continued decline of discretionary categories is a concerning indicator that a retail recession could be on the horizon.

“Other retailing is the only standout performer in April, and that’s typically because beauty products are the last category to be affected by economic downturns,” Zahra said. 

“Whilst we had an earlier Easter than usual in 2024, spending across the two months has significantly softened across discretionary spending categories, with food and takeaway bolstering overall sales figures.  

“Department stores, household goods and clothing, footwear and accessories remained in decline across both March and April, which is a worrying sign for retailers.

“Household goods have suffered significantly. The category recorded once-off sales growth in November during the Black Friday sales – but has otherwise remained in decline for more than 12 months.” 

“The ongoing cost-of-living pressures, interest rate ramifications and increased cost of doing business make it a very challenging period for those in the discretionary retail sector, particularly for SMBs.”

Meanwhile, the National Retail Association interim CEO Lindsay Carroll said April retail trade had gone backwards in real terms, given that the 0.1 per cent increase to sales can be tied to inflated prices. 

Carroll said the 0.7 and 0.5 per cent fall in clothing, footwear, and personal accessory retailing and food retailing, respectively, reveal “dire spending constraints” on households.

“Retailers were hoping for a shot of relief from the Federal Budget to float them through following months of low consumer spending, only to be underwhelmed by the provisions made for business owners,” Carroll said.

“The subsidised energy costs and instant asset write-off extensions, while all welcome, have failed to take into account the high cost environment businesses are currently operating in.

“ABS data also shows that consumers are waiting for cheaper deals, a move many retailers can't afford. This has led to reduced inventory, which creates a knock-on effect for suppliers.

“Policy makers need to consider the contribution of retail owners to the Australian economy and help create business environments that nurture investment and growth.”

All states and territories recorded overall growth year-on-year, led by Northern Territory (up 3.7 per cent), Tasmania (up 2.7 per cent), Queensland (up 2.2 per cent), South Australia (up 1.7 per cent), Western Australia (up 1.6 per cent), and ACT (up 0.9 per cent), with New South Wales and Victoria hitting modest growth of 0.8 per cent and 0.6 per cent respectively. 

It was mixed in monthly terms, with Queensland, Victoria and the ACT experiencing trading falls of 0.2 per cent, 0.4 per cent and 0.3 per cent respectively.

Carroll said the upcoming Queensland State Budget gives the State’s policymakers the opportunity to support businesses that are doing it tough.  

“We urge the Queensland State Government to address skyrocketing insurance premiums, reduce supply chain complexities and subsidise high transportation costs; taking excess pressure off Queensland businesses.”

Australian retail sales increased by a mere 1.3 per cent to $35.7 billion in April, according to Australian Bureau of Statistics (ABS) data.

On a month-on-month basis, sales rose by just 0.1 per cent in April after falling 0.4 per cent in March.

The highest year-on-year growth was in the ‘other retailing’ category, which includes cosmetics, sports and recreational goods, up by 4.7 per cent.

Food sales emerged with the second highest growth of 1.9 per cent, along with cafes, restaurants and takeaway.

“Underlying retail spending continues to be weak with a small rise in turnover in April not enough to make up for a fall in March,” said Ben Dorber, ABS head of retail statistics, referring to the month-on-month figures.

He noted that, according to retailers, alcohol spending dropped as consumers brought forward their purchases into March opting for cheaper alcoholic drinks.

National Retail Association interim CEO Lindsay Carroll said the April retail trade had gone backwards in real terms, given that the 0.1 per cent month-on-month increase in sales could be tied to inflated prices.

Clothing, footwear, and accessories sales suffered the largest decline of 2.5 per cent, according to the ABS data.

Household goods fell 1.3 per cent, marking its fifth consecutive month of decline. Department store sales also decreased 1.3 per cent.

“The relatively earlier Easter and the different timing of school holidays across the country meant we saw some added volatility in turnover in March and April,” said Dorber.

Across all regions, the NT had the highest sales increase of 3.7 per cent, followed by Tasmania at 2.7 per cent and Queensland at 2.2 per cent.

WA’s sales rose 1.6 per cent while ACT went up 0.9 per cent. NSW and Victoria grew 0.8 per cent and 0.6 per cent, respectively.

“The ongoing cost-of-living pressures, interest rate ramifications and increased cost of doing business make it a very challenging period for those in the discretionary retail sector, particularly for SMBs,” said Paul Zahra, Australian Retailers Association (ARA) CEO.

Australia's competition watchdog has approved Sydney-based pet chain PetO's acquisition of more than 60 new stores and vet clinics, allowing it to emerge as a third major player in the industry.

Under the deal approved by the Australian Competition and Consumer Commission (ACCC), PetO will absorb the Best Friends, Our Vet, My Pet Warehouse and Pet City brands.

That will see it expand from its current 17 stores around the Sydney region to 58 across much of the country, as well as adding 25 veterinary clinics, in a move the company says will establish it as a "clear and credible third player" in the market.

That market is currently dominated by Petbarn and Petstock, the latter of which is now controlled by Woolworths, which picked up a 55 per cent controlling stake in the company in December.

The ACCC green-lit that $438 million deal at the same time Petstock and Woolworths agreed to divest the same 41 stores and 25 vet clinics PetO has today acquired, after claims of anti-competitive behaviour when Petstock originally bought those stores (and didn't notify the ACCC of the acquisitions).

Bunnings Warehouse has also expanded into the market, launching a pet range last March, just a few months after a survey estimated Australians spent a collective $33 billion on pets in a single year.

Fashion retailer Country Road has launched an independent investigation after staff complained that the organisation did not adequately handle their sexual harassment and bullying complaints.

Country Road Group said it took complaints of harassment, including sexual harassment, very seriously following reports that some employees felt unsafe at work and had failed to receive adequate support from the company.

“Having received feedback from some team members regarding the handling of their complaints, our parent company Woolworths Holding Limited has taken prompt action, including the commissioning of an independent investigation to look into this matter,” a spokeswoman said.

“This independent review is currently in its final stages. The outcomes are expected to be shared with Country Road Groupteam members in June. It is critically important to us that our workplace is one where all team members feel safe, valued and included.”

Woolworths Holdings chief executive Roy Bagattini flew to Country Road’s head office in Melbourne in March to hear complaints from staff members about unwanted touching of female staff, bullying and racism, according to The Australian. Staff reportedly felt angry about the company’s failure to listen to complaints.

In an email to staff, Bagattini acknowledges some employees were dissatisfied with the way their sexual harassment complaints had been handled.

“Specifically, team members felt their feedback had not been heard and the process to address the complaints [was] far too long,” he wrote according to an excerpt of the email published by The Australian.

“It is imperative that these issues are explored further to ensure that the culture we are all so proud of is not undermined.

“I have authorised the commissioning of an independent review by an external consultancy to investigate the handling of team member complaints.”

The Country Road Group owns the Country Road, Mimco, Trenery, Politix and Witchery brands. Woolworths Holdings sold the upmarket department store David Jones last year to free up the ground to invest in growing its fashion brands in Australia and South Africa.

Before that sale, David Jones and Politix signed enforceable undertakings with the Fair Work Ombudsman to backpay more than 7000 employees within two months after reporting the underpayments in 2020.

The retailers agreed to pay more than $750,000 in interest and contrition payments after admitting to underpaying thousands of employees $4 million. Workers were underpaid minimum wages, evening, weekend, overtime and public holiday penalty rates.

Nine Entertainment, owner of this masthead, on Monday also announced an independent review of its newsroom culture as staff anger escalated over the company’s handling of a sexual harassment complaint against former television news boss Darren Wick, as well as the anonymous complaints of other women made through the media.

Nine chief executive Mike Sneesby addressed staff on Monday afternoon and sent an all-staff email which acknowledged the serious allegations against Wick. He said the review would be handled by an external firm.

Sneesby also said the “alleged serious failings of leadership in television news clearly tells me more work needs to be done to ensure we have a safe and inclusive workplace throughout Nine”.

Australian retail sales rose 1.2% in April 2024. To adjust for the noise of the timing of Easter we also look at the combined March-April results which shows sales growth of only 1.3%. Department stores and fashion have had the most notable slowdown over the Easter trading period. Supermarket sales are also soft considering data suggests higher inflation in March-April. We forecast subdued retail sales growth trends to continue to June 2024, with a mild pick up for the back-half of calendar 2024.

What we’re seeing and hearing in retail

• End of season clearance starts early: Retailer David Jones went on sale a week earlier than last year. Other retailers have followed with deeper promotions offered in late May and early June, adding risk to gross margins.
• Wages decision from Fair Work Commission at 3.75%: The announced the minimum wage decision for FY25e will result in total wage rate growth of 4.25% including superannuation, ahead of likely sales growth in FY25e.
• Weather conditions: April was warmer and dryer than last year while May was also warmer and wetter. This may be adversely impacting fashion sales.

Sub-sector insights

• Supermarkets: Supermarket sales fell 0.2% YoY in April vs March growth of 4.2%. Sales growth for March-April was 2.0% and ABS CPI for Food & Beverages was 3.6% for the same time period. Volumes are in decline.
• Liquor: Liquor sales fell 7.4% in April, compared with 5.4% growth in March. The two months combined sales fell 0.9%. Liquor volumes remain under pressure as they revert to pre-pandemic levels.
• Takeaway food: Takeaway food rose 1.9% with cafés and restaurants lifting 4.1%. On an Easter adjusted basis both were up low single digits.
• Electronics: Electronics fell 0.5% in April, an improvement on the drop in March of 6.6%. Adjusted for Easter, electronics are lower 3.7% vs the combined Easter period in the prior year.
• Hardware and furniture: Hardware sales rose 4.1% in April. Sales were up 1.4% on a combined March-April basis. Furniture sales were down 0.4% in April and fell by -3.4% across the two months.
• Recreational goods: Recreational goods rose 3.7% in April but are up just 0.8% on an Easter-adjusted basis for March and April combined.
• Department stores: Department stores fell 5.1% in April and were 1.1% lower on an Easter adjusted basis. Sales have turned negative for the sector over the past two months. David Jones started sales a week earlier this year. We have heard that Kmart’s sales trends have slowed recently.
• Fashion: Clothing fell 1.8% and footwear and accessories were up 0.8%. Easter adjusted clothing was -2.5% and footwear and accessories rose 0.7%. Foot Locker revealed negative comp sales in Australia during the three months to 4 May 2024. Our feedback is that Nike sales are weaker.
• Online retail: Online retail grew 18% in food and 9% in non-food. Easter adjusted these were 14% and 4% higher. This is the first decent period of growth for online non-food since early 2023

Designer label Dion Lee has appointed voluntary administrators in the latest high-profile business to come under pressure amid difficult economic conditions.

The fashion house, which has six stores in Australia and one in the US, is now under the control of insolvency firm dVT Group administrator Antony Resnick, who will continue running the business as a going concern as he urgently “assesses all options” relating to the US business.

“We are in the very early stages of our administration process and our focus right now is on speaking with the Australian and US-based team and getting across all the relevant operational and financial data,” Resnick said in a statement.

Resnick said the Dion Lee brand, founded in 2009 by one of Australia’s best-known fashion designers, has become a globally recognised and credible high-fashion label.

“It is regularly worn by cultural icons and influencers. It is noted in the industry for its unique designs, all of which should attract both local and international investor interest,” said Resnick.

Lee attended Newtown School of Performing Arts and then TAFE NSW Fashion Design Studio. He debuted his first collection at Australian Fashion Week in 2009 at the age of 23, has showcased at London Fashion Week and has been showing at New York Fashion Week since 2013.

Lee’s clothes were beloved by celebrities the world over and in Australia, including the likes of Nadia Bartel. In February, Lee received a major boost when Taylor Swift wore a corset he designed to the Super Bowl, where she cheered on her boyfriend, Kansas City Chiefs’ player Travis Kelce.

His pieces have also been worn by Meghan, Duchess of Sussex, Kylie Minogue and Dua Lipa. Lee has designed the uniforms of the Opera House, where he opened Australian Fashion Week in 2018.

“There is no doubt as to the high creative regard in which it is held,” said Resnick.

“It is too early to comment in any detail on its current financial position other than to say our intention at this me is to operate the brand as a going concern.”

The administrators will convene a creditors’ meeting and prepare a creditors’ report in the coming weeks.

Lee skipped New York last season to show in Shanghai, ostensibly to reach into the Chinese market.

But all that could be in doubt following Thursday’s developments, key to which was the partnership Lee had with the Cue clothing company, run by the Levis family, which had a significant stake in Lee’s brand.

According to reports, the withdrawal of Cue’s investment exacerbated the voluntary administration of Lee’s business.

In a statement, a spokeswoman for Cue said that “after a recent strategic review, a decision has been made by the Cue Group to focus on our local Cue and Veronika Maine operations”.

Hailed as one of the country’s biggest design talents and sometimes compared favourably to Alexander McQueen, Lee is also a past winner of the Australian Fashion Laureate and the National Designer Award.

The administrators dVT group, Cue and Dion Lee have been contacted for comment.

Four years on from buying online marketplace Catch, there’s suggestions that Wesfarmers could be reassessing the future for the business that was supposed to enhance the digital and e-commerce capabilities of its operations, including Kmart.

The Perth-based conglomerate continues to put Catch in the category of businesses which will help the company’s future earnings growth.

But after years of losses, could managing director Rob Scott be making the call to cut his losses? There’s a view in the market that may be the case.

Mr Scott is known for his pragmatic and hard-nosed approach to deals that have not worked out for the company, swiftly backing out of the Bunnings UK expansion plans after it became clear that the business was not going to plan. But the challenge for Wesfarmers with Catch is that it’s already been integrated into the company’s online retail business, so how does it unscramble the egg?

Even if Catch was on the block, what party would be the buyer? The obvious answer would be its founders Gabby Leibovich and Hezi Leibovich that sold Wesfarmers the business in the first place for $230m in 2019. But other than that, many around the market scratch their heads.

Catch made a $41m loss for the six months to December.

Four executives in Bunnings’ management team have departed the hardware chain in a move that was described as a “reshaping” rather than a restructure.

Chief commercial officer Ben McIntosh, chief transformation officer Leah Balter, and GM of corporate affairs Maria McCarthy have exited the company. Jen Tucker, the director of merchandise, also decided to leave following a family bereavement.

Other management shuffles include the appointment of Ryan Baker as chief operating officer. Current CFO Rachael McVitty will take over from Baker as chief customer officer.

Michael Howard, who is currently at Wesfarmers following a 16-year career at the Officeworks business, will be the new chief financial officer.

Bunnings MD Mike Schneider told the Australian Financial Review that the changes are part of a “reshaping” rather than a restructure and that it is “not a cost thing”.

The reshuffle of the executive ranks was designed to bring the commercial and customer teams closer together, he added.

Bunnings operates from 387 locations and expanded through the acquisitions of Beaumont Tiles and Adelaide Tools, the latter rebranded as Tool Kit Depot.