News

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.

HanesBrands has entered into a definitive agreement to sell the intellectual property and certain operating assets of the company’s global Champion business.

Authentic Brands Group will acquire the business for a transaction value of $1.2 billion, with the potential to reach up to $1.5 billion through an additional contingent cash consideration of up to $300 million based on achievement of performance thresholds.

The agreement, which has been unanimously approved by the HanesBrands board of directors, is the conclusion of the company’s previously announced evaluation of a range of strategic options for the global Champion business.

Chairman Bill Simon said upon completion of the transaction, the company intends to drive down debt and focus on innerwear brands such as Hanes, Bonds, Maidenform and Bali.

"Following a thorough review of options for the global Champion business with the support of our financial and legal advisors, we are pleased to have reached this agreement with Authentic Brands Group that we believe maximizes value for Champion and best positions HanesBrands for long-term success.

"Importantly, we believe this transaction will enable the company to accelerate its debt reduction while positioning HanesBrands to deliver consistent growth and cash flow generation through a focused strategy on advancing its leading innerwear brands and optimizing its world-class supply chain.”

CEO Steve Bratspies confirmed the transaction was the culmination of a long-term effort by the team.

"Over the past three years, we have taken necessary actions to enhance the company’s operations and financial performance – returning to historical gross margins, reducing our cost structure, lowering our debt levels, and generating consistent cash flow. The successful completion of this transaction further simplifies our business, deleverages our balance sheet and enhances the Company’s operations and financial performance.

"As we begin the next chapter for HanesBrands, we believe we’re in an even stronger position to further extend our leadership in innerwear, pursue new cost reduction opportunities as we ensure we have the right operating structure in place, and advance our multi-year flywheel to drive strong shareholder returns.”

The transaction remains subject to customary closing conditions and is expected to be completed in the second half of 2024. Subsequent to the closing, HanesBrands will provide certain transition services for Champion, including operating the business in select regions through a transition period.

On a trailing 12-month basis as of the end of the first quarter 2024, the global Champion business generated approximately $75 million of adjusted EBITDA. 

Macy’s witnessed its first-quarter net income plunge 60 per cent year over year to $62 million on net sales that dipped 2.8 per cent to $4.8 billion.

“As we have previously noted, the investments being made will take their toll on the bottom line,” said Neil Saunders, GlobalData MD.

“Some of this is down to the lower productivity of the business overall, but some is also a function of higher impairment and restructuring costs.”

Earlier, the department store chain said it will shut 150 stores but expand its Bloomingdale’s and BlueMercury businesses under a three-year strategy to achieve “sustainable, profitable growth”.

During the quarter, the company’s comparable sales declined 1.6 per cent on an owned basis and fell 0.4 per cent on an owned-plus-licensed-plus-marketplace basis.

Comparable sales of its first 50 locations, including within stores Macy’s plan to retain, rose 3.3 per cent on an owned basis and inched 3.4 per cent higher on an owned-plus-licensed basis.

Meanwhile, Bloomingdale’s comparable sales increased 0.8 per cent on an owned basis and climbed 0.3 per cent on an owned-plus-licensed-plus-marketplace basis.

BlueMercury’s comparable sales jumped 4.3 per cent on an owned basis.

“All that said, the numbers are encouraging, and they underline why Macy’s is right to cut out the deadwood of underperforming stores and to make investments in locations that have a future,” said Saunders.

“The forward challenge is to ensure that this investment and focus continue across the balance of the year. In our view, there is still a significant amount of work required to correct all the problems in stores.”

For the full year, Macy’s forecasts net sales of $22.3 billion to $22.9 billion.

Chanel has announced the departure of Virginie Viard as the company’s creative director, ending her time overseeing the placement of the fashion house’s logo buttons and handbag chains.

“Chanel confirms the departure of Virginie Viard after a rich collaboration,” officials shared in a statement with Vogue Business on Wednesday. “She was able to renew the codes of the house while respecting the creative heritage of Chanel.”

“Chanel would like to thank Virginie Viard for her remarkable contribution to Chanel’s fashion, creativity and vitality.”

Viard’s five-year stint came after the death of her predecessor Karl Lagerfeld in 2019. Lagerfeld successfully grabbed headlines with hemlines and extravagant clothes for more than 35 years.

The label’s founder, Coco Chanel, dominated haute couture for six decades since she began the company in 1910.

Viard’s departure follows lukewarm reviews of her recent collections. While Chanel has remained highly profitable, with revenues rising by 16 per cent to $US19.7 billion ($29.5 billion) in 2023, its red carpet heat has cooled compared to brands such Loewe, Balenciaga, Schiaparelli and Valentino.

Even the profile of brand ambassador and Barbie star Margot Robbie failed to enhance the appeal of Viard’s haute couture Chanel creations. The hashtag #freeMargot was a familiar sight on social media in 2022 and 2023, with followers encouraging Robbie to leave her Chanel contract following less than flattering reviews of her red carpet appearances.

“I think that Virginie created some beautiful collections and obviously lived and breathed Chanel,” says Naomi Smith, fashion director of Elle and Marie Claire. “With some of her early collections she really tried to give her designs a youthful approach by tapping into French music and cinema culture.”

“You have to salute her for taking on the top job after Lagerfeld. That’s no small task.”

For 25 years, Viard had been Lagerfeld’s constant companion in the studio, having started as an intern 30 years ago.

“She is my right hand and my left hand,” Lagerfeld told Elle in 2018. “Our relationship is essential, doubled by a very real friendship and affection.”

Viard’s collections as creative director were characterised by a shift away from Lagerfeld’s cinematic runway shows, with some critics questioning the appeal of details and silhouettes to younger audiences.

The 2025 Cruise runway show held in the French city of Marseilles last month featured hooded swimsuits with loose black ties, lurid check shorts worn beneath dresses and logo kangaroo pockets on tunics.

These bold choices failed to dominate, or even enter the fashion conversation as successfully as the frequently quoted Coco Chanel and Lagerfeld.

“I hate being in the spotlight,” Viard said while working alongside Lagerfeld. “I like to think of myself as the one who helps his vision come alive.”

Pierpaolo Piccioli having announced his departure from Valentino in March, rumoured to make way for former Gucci designer Alessandro Michele, is an obvious choice as the fourth creative director at Chanel.

Piccioli has enhanced luxury label Valentino’s reputation and revitalised accessories sales, with the red carpet support of Florence Pugh, Rihanna and Lady Gaga.

While Piccioli would be a perfect fit, recent rumours that Hedi Slimane is departing Celine place him in the running for the coveted role. With his ultra-thin silhouettes Slimane has accelerated profits at Dior Homme, Yves Saint Laurent and Celine during his varied career.

Slimane was also a favourite of Lagerfeld.

When Slimane created ultra-skinny jeans at Dior Homme in the early 2000s, Lagerfeld lost almost 41kgs to successfully tackle the top button.

“A new creative organisation will be announced in due course,” according to the official statement.

The founders of Australian minimalist clothing and lifestyle brand, Assembly Label, are preparing to hand over the keys to their $47 million-a-year revenue business.

Street Talk can reveal Daniel Oliver and Damien Horan, who established the fashion retailer in 2011 with a menswear line targeted at Sydney’s beachside suburbs, have tapped KPMG Corporate Finance to run a sale process. Non-binding indicative bids are due this month, sources said.

While it may have flown under the radar of the Zegna-suited private equity parade, Assembly Label has built a loyal following among its target clientele, thanks to no-frills timeless designs, natural materials and relatively affordable prices.

In fact, all of its 19 stores trade full-price basis with “high frequency of repeat customers”, while three surplus stores and the online offering help it move discounted stock, according to early-stage marketing documents seen by this column.

Come June 30 balance date, it expects to have doubled revenue to $47.2 million, while EBITDA is growing at 11 per cent to 15 per cent. A typical customer spends $145.40 on a shopping trip at Assembly Label, up from $103.50 three years ago.

Switzerland-based luxury goods company Richemont has announced several changes to its board and management team after reporting record sales for the year ended March 31.

Group sales increased by 3 per cent (up 8 per cent at constant exchange rates) to €20.6 billion ($33.5 billion). Operating profit was €4.8 billion, up 13 per cent at constant exchange rates.

By region, sales growth was led by Asia Pacific in value terms (up 10 per cent at constant exchange rates) and by Japan in percentage terms (up 20 per cent at constant exchange rates). The Americas came in slightly ahead of Europe in absolute terms, with the US becoming the group’s largest individual market.

The jewellery maisons segment, which includes Buccellati, Cartier and Van Cleef & Arpels, reported combined sales of €14 billion, representing a 12 per cent increase at constant exchange rates.

Sales of the specialist watchmakers segment edged up 2 per cent to €3.8 billion, while the ‘other’ business area saw a 1 per cent sales improvement and a €43 million operating loss overall.

In January, the company completed the acquisition of 70 per cent of Gianvito Rossi. It also announced the acquisition of Vhernier earlier this month.

Richemont has appointed Nicolas Bos, CEO of Van Cleef & Arpels, to the re-established role of CEO of Richemont, effective June 1, who will oversee all the maisons, functions, and regions in his new roles.

Bos joined Richemont in 1992 and became CEO of Van Cleef & Arpels in 2013. He has also been overseeing Buccellati since September 2019.

In addition, Bram Schot was named executive deputy chairman of the board, effective September 11. Jérôme Lambert will continue as COO starting June 1.

David Di Pilla’s HMC Capital has taken a major stake in Baby Bunting after the country’s largest children’s products retailer’s shares slid following a profit warning.

HMC’s Capital Partners Fund 1 said it had a 10.3 per cent holding in Baby Bunting late on Friday, after hovering below the disclosure threshold for some time. Sources close to the transaction said HMC acquired just over 5 per cent last week.

It is the fifth big holding in that fund. HMC owns stakes in Lendlease, GrainCorp and Ingenia Communities through its Capital Partners Fund 1, as well as a holding in Sigma Healthcare, where it was instrumental in engineering a reverse listing of Chemist Warehouse. If approved by the competition regulator, that transaction would create an $8.8 billion listed pharmaceutical retailing and distribution giant.

HMC has also agitated for change at other companies in the fund. It is pushing, alongside Tanarra Capital and Allan Gray, for a broad overhaul of Lendlease, and suggested that it could back a structural separation of GrainCorp’s infrastructure assets.

HMC declined to comment on Baby Bunting at the weekend.

Baby Bunting shares fell 22 per cent on one day alone last week after the company reported worse-than-expected sales falls over the year, warning its customers were “more sensitive than many other groups to the widespread cost-of-living pressures”.

Over the past 12 months, Baby Bunting shares have fallen almost 33 per cent. In February, the company slashed its first-half dividend to 2.7¢ after its statutory net profit fell 67 per cent to $2.7 million for the six months to December 31.

Baby Bunting is the country’s largest specialty maternity and baby goods retailer with 74 stores in Australia and New Zealand. It has plans for rapid growth and has spent considerable effort expanding online. But HMC operates two listed real estate trusts and has considerable expertise in retail properties. With its significant stake, HMC is expected to push Baby Bunting into improving its store network.

RBC Capital analyst Wei-Weng Chen said Baby Bunting was in a “trading environment characterised by lower customer demand, elevated levels of competitive discounting and increased input costs”, which had led to revenue growth turning negative.

“We believe continued discounting in Baby Bunting’s core product categories and economising within the customer base will continue to constrain gross margins in the near term,” he said, adding margins were expected to recover next year.

In its most recent update, HMC Capital Partners Fund 1 said it had recorded net returns of 46.5 per cent over the 12 months to March 31, helped by a surge in Sigma’s share price and improvements at Ingenia. “The fund continues to deploy into two undisclosed investments and is actively assessing further investment opportunities,” it said then.

Property firm Stockland has reported a 4.3 per cent drop in apparel sales for the third quarter of FY4 across its town centres, with a moving annual total (MAT) of $388 million.

The apparel category also had a 3.4 per cent drop in MAT sales from the previous quarter.

This was the largest drop by volume, but is second-place to homewares sales, which recorded a 9.1 per cent drop in sales to $55 million.

Meanwhile, food catering and food retail both increased year-on-year and quarter-on-quarter, with catering up 5.5 per cent on last year and 5.9 per cent on last quarter, with food retail hitting 9.6 per cent and 11.7 per cent respectively.

Despite the slump in apparel, department stores and discount department stores recorded a combined MAT growth of 2.8 per cent on both the last quarter and same time last year to $661 million. Supermarkets hit the highest growth at 5.6 per cent year on year to $1.7 billion.

Across the entire portfolio, MAT sales were up 3.4 per cent, with comparable MAT specialty sales growth of 1.3 per cent.

Stockland claimed this was underpinned by more than 70 per cent exposure to essentials-based categories, which remain strong, while sales in discretionary categories continue to moderate. 

“Our Commercial Property portfolio has achieved strong results, with leasing spreads accelerating to 42.0%1 in our Logistics portfolio and continued positive leasing spreads of 3.5%2 in our Town Centres portfolio,” Stockland MD and CEO Tarun Gupta said. 

“The skew towards essential-based categories has positioned our Town Centres portfolio well, delivering +3.4%3 total MAT growth.”

Furniture retailer Nick Scali is entering the UK market through acquiring Anglia Home Furnishings, trading as Fabb Furniture, for £3.5 million ($6.7 million).

Nick Scali intends to pay $1 million to exercise the option to exit the existing distribution centre arrangement and inject up to $11.5 million of working capital.

After the acquisition, Nick Scali said it plans to invest in the existing Fabb Furniture network, which will include store refurbishments and rebranding, setting up a new distribution centre, and opening new stores.

The rebranded and refurbished store network will transition to the Nick Scali product range.

“The acquisition provides us an immediate entry point into the large UK market with a 21-store network across key locations, a scaled platform to establish the Nick Scali brand and product offering in an attractive new market,” said Nick Scali CEO Anthony Scali.

“As we did when we acquired Plush, we believe we can leverage the Nick Scali buying power, combined with our supply chain and logistics capabilities, to deliver significant gross margin uplift for the UK business.”

Nick Scali raised $46 million through an underwritten institutional placement and $4 million through a conditional placement, to fund the acquisition and additional investments.

The company expects to close the transaction in mid-May, subject to customary conditions.

Online-only retailers Amazon, Shein and Temu are disrupting Australian retail to the tune of $8 billion in combined annual sales.

This is according to new data from Roy Morgan, which showed that the trio has driven an overall online spending increase of 12 per cent in the last six months compared to six months earlier.

In the year to March 2024, there was around $60 billion spent online in non-food categories. Despite a flat retail market overall, online spending in the six months to March 2024 was almost $32 billion – up 12 per cent on the six months to September 2023, which was then up $28 billion. 

This level of increase was not seen in the offline retail spending figures for these periods.

Speaking on Amazon's surge, Roy Morgan’s retail, social and consumer trends expert Laura Demasi confirmed that the US-born business has doubled its customer base in Australia over the last three years.

“Year-on-year, Amazon sales are up 6 per cent, and in the last six months to March 2024, it also enjoyed exceptional growth of 17 per cent on the previous six months,” Demasi said.

“Currently, 3.4 million Australians shop on Amazon in an average month, helping the online giant reach $5.6 billion in sales in Australia.”

Demasi added that Amazon now commands almost a tenth of all the retail dollars spent online in Australia. The online retailer is now among the top five retailers in the country for non-food categories - not far behind Kmart, Bunnings and Big W. Its biggest categories are books and electrical. 

The cost-of-living crisis has also created the “perfect storm” for the significant rise of ultra-cheap Chinese players Shein and Temu. According to Roy Morgan data, both have two million Australian shoppers each month. 

“Temu particularly has caught everybody by surprise coming literally out of nowhere to win 1.4 million Shoppers in an average month, putting it on track to earn $1.4 billion in sales,” Demasi said. “Incredibly, Temu now has as many or more customers as some of our biggest national retailers.”

Research shows that much of Shein and Temu’s success in Australia is the result of massive media investment and social media marketing. Demasi said this has driven unparalleled levels of brand awareness.

“Temu is reported to have spent $3-$4 billion on marketing in 2023 globally,” Demasi said. “As a result, now 91 per cent of online shoppers are aware of Temu and 70 per cent of Shein, motivating huge numbers of people to trial them.”

Women's clothing is by far the biggest category for both Shein and Temu, according to Demasi, with more than half a million people buying on Temu each month and more than 700,000 on Shein. Young families make up nearly a third of Shein shoppers, with large households making up less than a quarter. Large households also make up 22 per cent of Temu shoppers, while older households are the largest cohort for Temu at 23.5 per cent.

Demasi said both pureplay retailers pose a direct threat to established retail brands, and not just discount stores, with research showing that shoppers, on average, are twice as more likely to shop on Shein and Temu compared to local retailers such as The Reject Shop, Best & Less, David Jones and Mecca. 

For Mecca in particular, the average Australian choosing to shop on Shein is 261 per cent more likely to do so.

Solomon Lew’s Premier Investments has upped its stake in department store Myer to 31.37 per cent following a slow and steady creep up since March 2021.

This is up from 29 per cent reported in March 2024, and 26 per cent in late February.

Premier Investments owns six apparel brands including Peter Alexander, Just Jeans, Portmans, Dotti, Jay Jays, Jacqui E, as well as accessories retailer Smiggle.

According to analysts at investment bank Citi, in a recent note to clients last month, Premier could creep up on department store Myer and take control in less than four years without making a takeover bid.

The note revealed that Premier “is likely to take control at some point” if its share acquisition patterns persist. 

“If PMV continues to creep up the share registry at 3% every six months (regulatory maximum), a controlling stake could be attained in three and a half years."

According to Citi analysts, if Myer was taken over by Premier it would expect a potential sales and margin uplift as Premier replaces underperforming products in Myer with its higher-margin range, which could amount to a circa 2 per cent of combined operating profit.

Around 26 per cent of shopping centres with a Myer store house four or fewer Premier brands - which include The Just Group brands as well as Peter Alexander. This increases to 36 per cent which houses three or fewer brands.

“We estimate that there could be ~$10 million of EBIT uplift from introducing the higher margin Premier products into Myer, or ~2% of combined FY24e EBIT.”

Analysts also expect a distribution centre consolidation between Premier’s leases in Melbourne - excluding Truganina - and Myer’s Ravenhall NDC, as well as harmonisation of supplier terms, and the expansion of Myer’s vertical integration and associated margin benefits. 

“We estimate at least $25 million in potential synergies,” City analysts said.

Ultra-cheap Chinese fashion retailer Shein’s local operation has raked in nearly $1 billion in sales and tripled its profits in 2023 as cost-of-living pressures drive budget-conscious young parents to the fast-fashion behemoth to fill their wardrobes.

According to documents filed to the corporate regulator, Shein’s revenue hit $978.9 million and generated a 307.7 per cent lift in profits to $10.6 million last year, making it one of the biggest clothing retailers of the country since its entry into the Australian market less than three years ago.

Roy Morgan retail and consumer trends expert Laura Demasi said the growth of the ecommerce player, which has become a global phenomenon for selling huge volumes of clothing priced at a few dollars, had taken the Australian market by surprise.

“Few in the retail scene and more broadly in business would have ever predicted that a retailer of this nature – ultra-cheap, fast fashion from China – would have established a foothold of this magnitude in Australia,” she said.

“They come in at a time when retail is under immense pressure, and then they buck the trend and go in the opposite direction and grow. That is extraordinary.”

Roy Morgan, which has been tracking the growth of Shein as well as rivals Temu and Amazon Australia, estimates that 800,000 Australians are shopping with Shein a month. In a few short years, an estimated 70 per cent to 90 per cent of online shoppers have become aware of Shein and Temu, with 20 per cent of online shoppers having tried Shein at least once.

“The brand awareness is pretty extraordinary,” said Demasi. “[Shein has] about the same awareness that The Iconic has. The only [businesses] that have higher brand awareness are David Jones, Myer, Kmart – their brand awareness is like 90 per cent, just to put that into context.”

Women’s clothing comprises the majority of Shein’s sales, with customers flocking to the online site for its breadth and range of products and free and fast delivery.

Key demographics that make up Shein’s customer base are families with children aged under 16, which represent just over a third (34.2 per cent) of shoppers despite only being 23 per cent of Australia’s population. This demographic has also pulled back more significantly on discretionary spending such as clothing, making Shein appealing as an affordable option.

“This is a cohort in the population which is most under pressure right now. They are always under time pressure, so the convenience of online shopping will always be attractive to parents of young children. Particularly right now, they’re under pressure financially,” Demasi said.

Another key demographic for Shein is those who live in larger households of five people or more, making up 23.3 per cent of Shein shoppers, according to Roy Morgan.

“Five years ago, this economic climate looked different; I don’t know if we would have seen this phenomenon. It’s definitely created a landscape where a platform like Shein with an offer that we’ve never really seen before, really ultra-cheap clothing, has thrived,” said Demasi.

However, despite Shein’s popularity, one in 10 shoppers say they wouldn’t shop there again amid concerns about low quality and ethics.

The retailer, which according to ASIC documents has five Australian employees, paid $4.56 million in tax in 2023, up from $1.13 million the prior year, with $16 million cash in the bank.

It has listed a coworking space in Melbourne as its registered office, and senior branding specialist Jie Ji is listed as the company’s sole director.

Shein did not respond to requests for comment.

Shein was founded in China in 2008 and became the world’s largest fashion retailer in 2022. The company is headquartered in Singapore. The combined net worth of its four founders – chief executive Xu Yangtian, Molly Miao, Gu Xiaoqing and Ren Xiaoqing – was estimated at nearly $US40 billion ($62 billion) in late 2022.

Key to the company’s success is the speed of its algorithms, which pick up shifting consumer tastes and preferences and adjust supply chains almost instantaneously using artificial intelligence.

Shein has attracted criticism for its poor labour conditions in factories it partners with, overproduction of poor quality garments and the use of cotton from a Chinese region accused of using forced labour.

The Chinese giant, which was initially looking at an IPO in the US, is reportedly days away from confirming it will float on the London Stock Exchange.

The rapid growth of Temu, the online megastore that sells general merchandise including kitchen appliances, electronics, tools, car accessories and novelty items, has also forced Shein to start expanding its range of products outside women’s clothing and is courting brands such as Colgate-Palmolive and toy maker Hasbro, Reuters reported.

“We expect their revenue to grow into the future purely because they’re selling more and more types of categories,” said Demasi.

Annual growth in retail sales has fallen to its lowest level since the pandemic as cash-strapped households tighten their belts, but economists expect tax cuts on July 1 to breathe new life into consumer spending.

Retail sales grew by just 0.8 per cent in the year to March, after spending unexpectedly contracted 0.4 per cent last month in seasonally adjusted terms, the Australian Bureau of Statistics said on Tuesday.

“Outside of the pandemic period and introduction of the GST, this is the weakest growth on record when comparing turnover to the same time in the previous year,” ABS head of retail statistics Ben Dorber said.

Investors pared back expectations of a rate rise following the release of the data. Markets now price just an 25 per cent chance of a rate rise by September, down from 47 per cent on Monday.

Economists agreed the persistent weakness in household spending made the prospect of another interest rate rise less likely. The RBA is banking on the softness in the household sector to translate into an easing in domestic inflation and a broader economic slowdown.

But that process is taking longer to play out than the central bank had expected, with surprisingly strong March quarter inflation figures last week leading markets to price in the probability of another rate rise, after previously forecasting rate cuts.

Fiscal stimulus to boost spending

JPMorgan economist Jack Stinson said he expected real household spending to pick up over the rest of the year, as household finances recovered thanks to higher wages and government support.

The stage three tax cuts, which come into effect on July 1, are expected to deliver a 1.4 per cent to 1.5 per cent increase in real household disposable income. Treasurer Jim Chalmers has also flagged additional cost-of-living support in the May budget.

While inflation is proving surprisingly persistent, Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said the tepid retail sales figures confirmed consumer demand was very restrained.

“Considering the brisk pace of population growth, this is a very soft trend,” Mr Langcake said.

However, he agreed the broader outlook for consumer spending would improve this year as real wages continued to picked up.

“But for now, strong price inflation for essentials like health and education and higher rent and mortgage costs are still putting the squeeze on household budgets and discretionary spending.”

Purchases of household goods such as furniture and appliances have experienced the sharpest downturn in sales volumes since the RBA first raised rates in May 2022, falling 3.2 per cent over the past year.

Spending on clothes has also fallen over the past year, down 0.4 per cent, while transactions at department stores were 0.2 per cent lower.

While spending on food increased 2.2 per cent over the past 12 months, this partly reflects inflation, which has caused the price of supermarket staples to rise.

Citi chief economist Josh Williamson said the weakness in discretionary spending meant further price falls in the retail components of the consumer price index should be expected.

“The RBA board now has more space to deliver a balanced message next week, that is, it can continue to state that it ‘is not ruling anything in or out’,” he said.

The ABS said some of the weakness in sales in March owed to consumers cutting back after a Taylor Swift-fuelled spending splurge in February.

Clothing and accessories spending fell 4.3 per cent last month after surging 4.9 per cent in February.

Victoria and NSW, the only two states where Swift performed the Australian leg of her Eras tour, recorded the sharpest falls in spending of any state in March.

Australian suiting brand M.J. Bale is now B Corp certified, securing a maiden score of 84.2. 

M.J. Bale’s score is 4.2 points above the qualifying score of 80 and more than 30 points above the median score of 50.9 for all ordinary businesses.

Run by global non-profit organisation B Lab, the B Corp certification covers five key areas across environmental social governance (ESG), including governance, workers, community, environment and customers.

The menswear label scored highest in environment, with a score of 24.6, which includes a boost of 5.7 points in land/wildlife conservation.

It also scored high in workers at 22.4, followed by community at 17.7, governance at 16.9, and customers at 2.3.

“On behalf of all stakeholders, including our staff, board and network of partners, I am incredibly proud that we have attained the B-Corp certification,” M.J. Bale founder and CEO Matt Jensen said. 

“The certification is not an end in itself; we consider it more a baseline for us to continue to improve in all aspects related to our corporate governance and relationships with staff, community, environment and customers.” 

Founded in 2009, M.J. Bale has an 86-store national network, including shop-in-shops in David Jones and Myer. 

The brand is the Official Tailor to the Australian Test cricket team, Subway Socceroos, Wallabies, and the Kangaroos. 

In 2021, M.J. Bale became the first Australian fashion brand to be Climate Active-certified as carbon neutral for both products and organisation. It is currently renewing both its Climate Active certifications. 

In the same year, M.J. Bale produced what is understood to be the world’s first methane-reduced wool at its Kingston partner farm in Tasmania, and in conjunction with Sea Forest Tasmania. The commercial trial, which ran for 300 consecutive days, saw 48 Merino sheep fed a food supplement containing asparagopsis taxiformis, a native red seaweed proven by the CSIRO to reduce methane emissions in ruminant livestock by more than 80 per cent. 

The 15-year-old brand joins 8,000 other B Corp certified businesses across the globe, with over 1,000 of those in Australia and New Zealand. B Corp certified businesses in Australia and New Zealand’s fashion sector include KMD Brands, Modibodi, P.E Nation, Bassike, Kowtow Clothing and Boody.

B Corp scores are revised every three years as part of a recertification process. 

Wesfarmers-owned hardware giant Bunnings and food producers with large market power could be brought under a compulsory version of the Food and Grocery Code of Conduct set to be overhauled later this year.

But an inquiry led by respected economist Craig Emerson has downplayed calls for winemakers to be protected by the code, finding they did not readily fit into a scheme designed to cover supply of “groceries”.

“Many suppliers of grocery products are particularly vulnerable to the supermarkets’ market power because these suppliers do not have other avenues to sell their products at scale,” Dr Emerson said.

“In contrast, wine is sold in liquor stores across Australia, and in some states, wine is not available in supermarkets. Furthermore, around 60 per cent of Australian wine is exported.

“For all these reasons, the review considers it is not clear that there is a compelling case for adding wine to the products protected under the code [and] there are similar issues with other alcoholic beverages.”

Bunnings, however, controls 70 per cent of the retail horticulture market, more than the 65 per cent share of supermarkets controlled by Woolworths and Coles, prompting suppliers to raise similar concerns about its buyer power.

“By volume of units sold in their stores, plants are second only to tins of paint,” Greenlife Industry Australia said in its submission to the review of the food and grocery code being conducted by Dr Emerson, a former Labor minister and a columnist for The Australian Financial Review.

Bunnings disputes Greenlife’s claim and believes its share is closer to 30 per cent of the nursery market.

Code coverage of Bunnings would only cover its nursery division because that is the only area where it holds market-distorting power by being the only or main buyer to many suppliers across the country.

Dr Emerson concluded the case had not yet been made to expand the code to other retailers such as Bunnings, though he left the question open to more consultation, allowing Bunnings’ suppliers to argue the case.

He suggested Bunnings and its suppliers work together to form a voluntary code of conduct or similar document that gives suppliers similar standing as those covered by the compulsory code.

“The final report of this review will consider this specific issue further,” he said. The report is due to be handed to the government on June 30.

Poor conduct by chicken processors

An interim report being released on Monday also raised the prospect of producers sitting between farmers and supermarkets being brought under the code.

Family-owned Baiada Poultry and the publicly listed Ingham’s Enterprises supply about 70 per cent of Australia’s meat chickens, while about 80 per cent of chicken meat comes from about 700 chicken farmers.

“There are no fundamental issues of countervailing power between processors and supermarkets, and in fact in terms of farmer negotiation, processors are effectively acting as proxies for the supermarkets,” the Australian Chicken Growers’ Council said in its submission to the inquiry.

“That does not stop supermarkets ‘frightening’ meat poultry processors daily with increased demands (e.g. RSPCA accreditation, ‘swap’ to another processor etc).”

Dr Emerson said he had heard from farmers about examples of poor conduct by processors, but said a mandatory code “could result in it being unwieldly and imposing unnecessary compliance costs on an extended range of parties”.

That said, he called for submissions on what provisions should be added to the code to ensure that farmers who deal with aggregators or processors do not miss out on the protections provided in the Code.

Marquee Retail Group, which owns Colette and The Daily Edited, has collapsed into administration, citing an unexpected sales decline since October.

The company’s board of directors has appointed Domenic Calabretta, Mitchell Ball, and Richard Lawrence of Mackay Goodwin as voluntary administrators. 

Marquee said its unplanned downturn in sales from October 2023 to March 2024 was a result of rising inflation and interest rates. That was compounded by ongoing debt arrangement with the ATO, which dates from the Covid-19-induced drop in sales.

The firm will remain business as usual and aims to keep all stores open, with no plans to lay off staff at this stage. It is working towards a Deed of Company Arrangement and exploring the potential sale of the business as part of strategic options.

“Our decision today is about securing the future of the Marquee Retail Group and its employees, while emerging on the other side of Voluntary Administration,” said chairman of the board Bernie Brookes.

Marquee acquired fashion accessories and jewellery brand Colette by Colette Hayman in September 2020 and luxury fashion and accessories label The Daily Edited in December 2022.

During an interview with Inside Retail last year, Brookes said he was planning to expand both brands as well as look for acquisitions to fit under the Marquee Retail Group umbrella.

At the ripe young age of 79, retail billionaire Solomon Lew is making one of his biggest bets on growth, announcing a plan to split his retail empire into three separately listed companies.

Following a strategic review of Lew’s Premier Investments vehicle, he announced on Tuesday that he would spin off kids stationery giant Smiggle and pyjama chain Peter Alexander in calendar 2025, with the two businesses to be primed for growth via international expansion.

Lew’s legacy brands, including Just Jeans and Portmans, will remain inside the Premier Investments vehicle, which many analysts have suggested will eventually consider a merger with department store giant Myer, in which Premier holds a 29 per cent stake.

Lew emphasises that any such deal is not on the horizon. While Premier supports Myer’s new executive chairman Olivia Wirth, and Lew believes the management team can lift the performance and profitability of the business, he says Myer’s focus needs to be on fixing itself.

Frankly, Lew’s got enough on his plate, keeping the Premier retail businesses running in a trying macroeconomic environment, while juggling the likely demergers of Smiggle and Peter Alexander.

Having pre-announced much of Tuesday’s first-half result, there were relatively few surprises, and one pleasant one. EBIT from the retail businesses came in above guidance at $209.8 million, gross margin dipped slightly, but the cost of doing business also dropped, an impressive result given the cost pressures other retailers have struggled to combat.

The second-highest EBIT and sales result in the company’s history underscores Premier’s skills in playing the macroeconomic cards it is dealt.

The stock surged 9 per cent in early trade on better margin control, before settling about 2 per cent higher. In the past 12 months, Premier shares are up more than 35 per cent.

The bigger focus for the market is Lew’s plans to split off Smiggle and Peter Alexander.

Many in the market expected the businesses would be lumped together; Citi put a value of about $3 billion on the brands.

But Lew says the fact Premier is looking to set up separate entities reflects the fact these businesses are on different growth trajectories and run to different rhythms.

Smiggle, for example, already has a well-established international presence in Asia and Europe, and is building its presence in the Middle East and now Indonesia via wholesaling agreements.

Peter Alexander, meanwhile, is at the start of its international expansion and announced on Tuesday that it would open up in the British market later this year, ahead of the critical Christmas trading period.

While the Lew family will retain major shareholdings in Smiggle and Peter Alexander, and Lew’s history says he will be a hands-on presence in both businesses, he is also keen to ensure that the next generation of management stars inside Premier are given their chance to shine.

Judy Coomber, managing director of Peter Alexander, and John Cheston, managing director of Smiggle, might be the best retailers the public has never heard of.

Premier and Lew will have plenty of time to test the appetite of the market for two new listed retailers, but the reception should be pretty good.

Fund managers have done well out of backing the nation’s best retailers to turn small-cap retailers into mid-cap and large-cap companies; think Brett Blundy and team at Lovisa, generations of good managers at JB Hi-Fi and, to a lesser extent, the team behind Universal Stores.

Clearly, the market will want to see the details of Smiggle and Peter Alexander’s structure and numbers. But Citi’s estimate of annual growth of between 7 per cent and 10 per cent, with half driven from international expansion, helps explain why these two spin-offs will create interest.

Peter Alexander’s growth in the first half, at 6.7 per cent against small falls in Premier’s other brands, is particularly eye-catching.

Zimmermann, the luxury women’s fashion brand acquired in August by private equity firm Advent International, swung to a loss last year despite a surge in sales.

Revenue rose from $382.5 million to $506 million in the 12 months to June 30, according to returns filed with the Australian Securities and Investments Commission. But rising wages and material costs pushed Zimmermann to a $27.3 million loss.

Advent acquired a 70 per cent stake in Zimmermann from Milan-headquartered Style Capital last year in a deal that valued the company at up to $1.75 billion.

The deal pushed Nicky and Simone Zimmermann up the Financial Review Rich Women List. The sisters, who founded the company in 1991 and control the remaining 30 per cent of the business, are now estimated to be worth $361 million.

Accounts filed with the corporate regulator by Zimmermann’s parent entity, Oceania (TopCo) Pty Ltd, show the fashion house sold $233.2 million in goods in stores, up from $178.6 million, and around $62.3 million online, up from $59.3 million. Wholesale revenue rose from $154.7 million to $211 million in the year to June 30.

There was also a $90 million earn-out provision from the acquisition of shares in Zimmermann International, an entity owned by Oceania, and associated with the sisters, according to the documents.

Oceania swung to a net loss of $27.3 million, compared with a profit of $2.5 million one year earlier. The group paid dividends of $500,000 last year to its shareholders, according to the filings. In 2022, dividends were $9.5 million.

Zimmermann chief executive Chris Olliver did not respond to a request for comment. Mr Olliver, who is married to Nicky Zimmermann, will remain the company’s CEO despite the deal to sell a significant stake to Advent.

The investment by Advent – which has a portfolio of retail assets including Brazil’s Skala Cosmeticos and perfume brands Parfums de Marly and Initio Parfums Prives – will help bolster Zimmermann’s growth in markets such as China and the Middle East. It also plans to expand its product categories and accessories, and strengthen its online offer. Zimmermann’s Sydney store will get a facelift and double its existing space.

Advent owns other consumer brands around the world including BareMinerals, Buxom and Laura Mercier, which are headquartered in the United States.

The private equity firm, which has $US95 billion ($145 billion) in assets under management, is one of the world’s largest buyout shops, behind giants Blackstone, KKR and TPG Capital. The Australian Financial Review reported earlier this month that it planned to establish an Australian office after acquiring Zimmermann, its first local asset.

The transaction was the third major deal for a big Australian brand last year. French skincare giant L’Oreal agreed in April to acquire luxury cosmetics brand Aesop, which was founded in Melbourne, for an enterprise value of $US2.53 billion, while tanning brand Bondi Sands was sold to Japanese cosmetics giant Kao Brands for $450 million.

Zimmermann employs 900 people and has stores in Paris, London, Shanghai, as well as in Cannes, Rome and Naples.

The retail sector is not expected to return to healthy levels until the middle of next year as consumers remain reluctant to part with their dollars in the face of stubborn inflation and high interest rates.

Despite the lure of bargains and deals during last year’s Black Friday sales, retail turnover for the December quarter grew at half the rate recorded during the same period last year, prompting KPMG to lower its forecasts for recovery in the sector, which has been in a “retail recession” for 12 months.

“We’re coming out of it, but we’re coming out of it slowly,” said KPMG national retail and consumer lead James Stewart.

“In reality, we probably bottomed in some respect last year. But the issue is the pace of the momentum coming out of it. It is just taking a while, and it’s going to take longer than what I think people would have hoped.”

KPMG’s previous retail health index report from September predicted a “modest acceleration in trading conditions”. But an incremental lift of 0.17 index points for the December quarter suggests “the overall health of the retail sector remains poor” and that “a balanced outcome by the end of 2024 may be at risk”, according to the December report.

In the second half of last year, consumers prioritised value for money, favouring “everyday low pricing” retailers such as Kmart and Bunnings and turning to online retailers like Kogan.com.au and Temple and Webster to find better deals. Meanwhile, the likes of Myer, Nick Scali and Kathmandu have flagged a hit to sales and profits.

Many retail executives had expressed optimism of a lift in consumer spending power in the second half of the year, thanks to the looming stage 3 tax cuts and the stabilisation and potential slashing of interest rates. Deloitte Access Economics predicted in December that the second half of 2024 would represent a “turning point” for the economy.

However, businesses will continue to contend with higher operating costs spanning electricity, fuel, manufacturing and packaging, and wages, as well as reluctant consumers.

“Anecdotally, a lot of retailer CEOs we engage with are realistic that the market is probably going to be a slow growth market for a little while,” Stewart said.

He said consumers were poised to potentially benefit from a retail recession as retailers are having to discount more heavily to encourage cashflow into the business, which puts margins under pressure. Tech retailers such as JB Hi-Fi and Harvey Norman are cutting prices to close sales with bargain-hungry shoppers.

Despite the current conditions, Stewart said food and household goods businesses would be fairly resilient as people still had to eat, and a flow of migrants coming to Australia increased demand for furniture.

“I don’t think any category will end up bruise-free, but inside each category you’ll have better performers than others, because of their business model and the way they go to market,” he said.

Consumer confidence was expected to remain gloomy until inflation eased or interest rates came down, he said.

The Reserve Bank has warned that borrowers will face tough conditions for the rest of the year, and force more to cut their spending or even rely on charity, before higher wages and interest rate cuts provide some relief in 2025.

February had the largest fall in unemployment, which has cast doubt on economists’ hopes of a winter interest rate cut by the Reserve.

The Albanese government has signalled that combatting the cost of living will be a key focus in its May budget.