5 August 2011 - Inside Retail

Inside News & Views on the World of Retail
Issue 1871 | 5 August 2011
Pandora’s bubble bursts
ROBERT STOCKDILL
Not so many months ago, the name Pandora caused mass market jewellery retailers to break out into a sweat.
It was a fast-growing brand based on a charm bracelet concept seen as having a tsunami-like effect on the mid-market
chains when it entered a new country.
In Australia alone, the brand was sold in 577 retail stores ranging from small, family-owned jewellers through to companybranded flagships, like one in Sydney's Pitt St Mall where the company pays an estimated $10,000 per sqm rent.
But basing an entire brand based on a fad is always a risky business and this week, just 10 months after raising $2.1
billion in a Scandinavian IPO, Pandora is in chaos, its share price losing 70 per cent of its value in just two days.
Its CEO walked the plank with immediate effect and the company’s board has announced a strategic review of the
business - a review it says will take up to 18 months to complete. In retailing, that’s a suicidal time-frame.
Perhaps the most surprising aspect of Pandora’s sudden fall from grace is the degree of negativity directed at the
business - and not just from shareholders who bought
into the myth that charm bracelets would feed their
investment income for years to come.
In Australia, several former stockists posted scathing
assessments of Pandora’s faults on Inside Retail’s
website the day after we posted the news.
“It couldn’t have happened to a more ignorant group,”
wrote one former Pandora reseller whose account,
like many others, was cancelled due to the company’s
decision to aggressively roll out its own stores.
“The writing was on the wall two years ago. Customers
got sick of Pandora; its sales hinged around $30 beads
and not much else. Couldn't Pandora see this? Five
years of collecting sales figures paints a perfect picture...
(but) they didn't listen,” wrote the retailer who identified
himself as John.
“Greed took hold of Pandora, nothing else. I'm real happy - our company made money out of Pandora and plenty of
it. Amazingly, Pandora purchased all our Pandora stock back when they closed our account. We moved on to a better
product (Trollbeads), producing good sales and significantly better service.
“What Pandora was unable to understand was that the 15,722 clients we established over the years remained our
customers, not Pandora's. To date 50 per cent of these customers have been converted to alternative products,” wrote
John.
Several other ex-retailers have told Inside Retail similar stories, and customers in the core young women target
demographic have similar criticisms, suggesting Pandora failed to develop its core charm products and broader range,
yet increased prices and simply lost its mojo.
To be fair, Pandora management concede these criticisms have merit.
It says the trigger for its woes came in a decision to increase prices to recover higher material costs.
In a statement issued this week, the company said the cumulative effect of global price increases of around 15 per cent
on top of price increases already implemented in the US and UK in 2010 “has had a negative volume impact on our salesout in an environment where consumers are becoming increasingly value conscious”.
Read daily breaking news online: insideretail.com.au
5 August 2011
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The company acknowledged it “lacked focus on maintaining low entry points in the 2011 price increase”,
had too few attractively-priced products in recent product releases, and too many slow-selling products in
its collection.
In other words, Pandora failed to adhere to one of retail’s most basic mantras: offer the right product at the
right price at the right time’.
It also admitted it had not struck the right balance between branding and sales promotion initiatives.
Pandora’s sales fell in all four of its major markets - the US, UK, Germany and Australia which, combined,
represent 70 per cent of its group revenue. Australian dollar revenue fell 19.9 per cent year on year with a
worsening of a decline the previous year, although the strong dollar helped recover about a quarter of that
back home in Denmark.
Germany’s sales were down 20.1 per cent, the UK’s down 10.2 per cent. US sales were up 12.1 per cent,
but down when converted to Danish currency.
In product terms, Pandora has discovered that charm bracelets are a fad. In every major market, sales of
charms and charms bracelets have slid, with the trend most notable in the US.
Future plans
Pandora’s declared ‘action plan’ to address its issues are a mixture of the sublime and obvious: no prices
will be increased in 2011 or 2012 and the recommended retail price of around 60 items will be lowered to
provide a better entry level into the brand’s range.
There will be an “absolute focus on instore space management in existing stores”, a review of future
collections to ensure the right sizing of assortment and price points and ‘fitness for purpose’ sales and
marketing programs introduced.
But at the same time, Pandora apparently still sees itself expanding its way out of its current strife: some
118 concept stores will be opened between now and Christmas and the company will now develop “a more
aggressive approach” to emerging markets.
Investors are optimistic the strategy will work, even if customers and resellers remain unconvinced.
“I still have great confidence regarding the future prospects for Pandora," asserted Christian Frigast, managing
partner of private equity company Axcel, the largest shareholder in the business, with a 32 per cent stake. "Of
course it was a surprise for Axcel. Now we have to look forward and bring the company back on track.
"We still believe that Pandora is a very sound company. However, the next 18 months will be very critical
and of course we expect lower growth rates,” he told an interviewer from Forbes.
Pandora dates back 30 years to a small jeweller’s shop in Copenhagen. In 1989 it established a manufacturing
operation in Thailand where the majority of its employees are based and where it now has four factories.
Pandora’s international expansion began in earnest after the launch of the charm bracelet concept in 2000.
It entered the US in 2003 and Australia in 2004.
It claims to have 1600 unique jewellery designs sold through more than 10,000 retailers worldwide including
420 company-branded stores.
Australian Retail Outlook 2011 - just published
Australian Retail Outlook features interviews with Australian retail
CEOs including Luxottica’s Chris Beer, Myer’s Bernie Brookes, Super
Retail Group’s Peter Birtles and Robins Kitchen’s Warwick Parer.
By
For more information and to order: www.retailbooks.com.au or 02 9901 1800
5 August 2011
3
Productivity Commission - the findings
ROBERT STOCKDILL
The Productivity Commission’s much anticipated report on the retail sector spans a whole 461 pages.
But while it’s a treasure trove of up to date data about the nation’s retail playing field, its core is a mere three
and a bit pages of draft recommendations. Given the spirited debate of the last six months it almost feels
like an anticlimax.
Only a few of the core recommendations of the report have been seen in print to date, although the full
document is available for downloading or reading online, in full or by chapter, here.
The draft recommendations, subject to a further round of submissions which close on September 2,
followed by a round of public hearings, are as follows:
Online retailing and taxation issues:
* The ABS should monitor and report online spending by Australians both onshore and offshore.
* There are strong in-principle grounds for the Low Value Threshold (LVT) exemption for GST and duty on
imported goods to be lowered “significantly” to promote tax neutrality with domestic sales. “However the
government should not proceed to lower the LVT until it is cost-effective to do so - that is, at a minimum,
the tax revenue should exceed the full costs of collecting it”.
* A task force should be established by government charged with investigating new approaches to the
processing of low value imported parcels, particularly those in the international mail stream, with a view to
preparing for significant improvements and efficiencies in handling. After the task force completes its work
the LVT could be lowered while remaining cost-effective.
Planning and zoning regulation:
* State and territory governments should broaden zoning within and surrounding activity centres to facilitate
new retail formats locating in existing business zones.
* Local governments should significantly reduce prescriptive planning requirements to facilitate
new retail formats locating in existing business zones and ensure that competition is not needlessly
restricted.
* Government should not consider the viability of existing businesses at any stage of planning, rezoning or
development assessment processes. Impacts of possible future retail locations on existing centre viability
(but not specific businesses) should only be considered during strategic plan preparation or major reviews.
* Local governments should facilitate more as-of-right development processes to reduce business
uncertainty and remove the scope for gaming by competitors.
* State and territory governments should ensure third-party appeal processes within planning systems
include clear identification of appellants and their grounds for appeal and allow courts to award costs
against parties found to be appealing for purposes other than planning concerns. (In other words,
there should be penalties for using the planning process for slowing down a rival development.)
* State and territory governments should reduce the compliance costs associated with planning systems
and development approvals.
Retail tenancy leases, retail trading hours, workplace laws:
* The Council of Australian Governments should ensure all current National Retail Tenancy Working Group
projects are fully implemented.
* Retail trading hours should be fully deregulated in all states except on public holidays.
* The Fair Work Ombudsman should address the difficulties experienced by employers in calculating
applicable award wage rates through better promotion of its existing services and where necessary by
making refinements to existing systems.
* The Australian Government should, “within the context of the current system and consistent with the
maintenance of minimum safety net provisions for all employees”, examine retail industry concerns about
the operation of the fair Work Act. Steps should be taken to allow negotiation of more flexible working
agreements that improve overall productivity.
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There was one final recommendation that reads like something from a Politicians’ Guide to Common Sense:
“Governments must prioritise efforts directed at the review and reform of regulations that are unnecessarily
burdensome and reduce regulatory inconsistency across jurisdictions where that affords net benefits to
business and the community.” Good luck getting that one adopted.
Since the report was released on Thursday afternoon, no lobby group or stakeholder, retailer or otherwise,
has reacted with anything other than a predictable restatement of their original position.
The way the commission addresses the GST on the offshore internet sales issue is both logical and
sensible, despite the fact no interest groups will be happy. Most retailers want the threshold reduced
immediately, but the commission recognises the issue is far more complex and needs to be planned.
Forcing the various parties involved to map an affordable solution is an essential first step in reducing
the threshold.
The commission found that reducing the threshold to $100 would raise an additional $470 million from
about 15 million parcels, but would cost consumers and business about $715 million, far exceeding the
revenue raised.
Retailers would argue that’s a cost that should be born by consumers, not the government, but does that
swing the pendulum of unfairness in the other direction, giving domestic retailers artificial protection?
The commission argues that even a reduction to $900 would have little impact on revenue - $15 million
more tax would be collected at a cost of $8.6 million.
“On a simple arithmetic analysis, such a threshold appears feasible. But this would leave 99 per cent
of parcels with no tax and duty collected, making little difference to tax neutrality and failing to address
concerns about ‘level playing field’ competition.
“The current Australian processing system (particularly for mail) was never designed to cope with processing
volumes of this magnitude and it is clear that it simply could not cope with a dramatic and sudden lowering
of the threshold to a level that would be required to achieve tax neutrality.”
A key factor to remember in this discussion, however, is that the Productivity Commission’s role is to focus
on productivity - thus it is concerned with net cost to the community as a priority over protecting one
particular industry interest group, ie: retailers.
Finally, elsewhere in the commission’s report it points out that bank data from June 2008 to February
2011 demonstrates 90 per cent of purchases from overseas websites were valued at $200 or less. Threequarters were valued at less than $100. (They used data from sales where no card was present during the
transaction.)
There are no real surprises in the Productivity Commission’s draft findings. Nor will there be any surprises
in the comments from retail groups, landlords, consumers or politicians in response. Inside Retail doubts
the final recommendations will differ from those released on Thursday, leaving the ultimate decision up to
the government.
And here, one needs to remember the vast majority of the Productivity Commission’s valuable work is
ignored by governments because, having recognised a need to reform a sector of the economy and
ordering a review, implementing the independently concluded, well-reasoned solutions usually involves
too much political risk.
Camper beds down in Australia
EMILIA TERZON
Spanish footwear label, Camper, is growing its Australian presence with new stores, online expansion and
an equity investment in local operations.
The company launched a local online store this week, which will be followed by a fifth Camper store in Australia
early next year at Brisbane’s Wintergarden shopping centre, which is currently undergoing mass renovations.
Miguel Fluxa, CEO of Camper, said the company had been considering investing directly in the Australian
market for some time.
Camper, which operates directly in the European and American market, has been managed by a distributor
since arriving in Australia 13 years ago.
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“Our partner here has done very well and we’re happy with that model, but we’d like to move in for a joint
venture. The time was right,” said Fluxa.
Camper will be implementing the 50-50 operation in Australia as well as China this year.
“We hope we will grow and will be able to give more support to this market,” he said.
Fluxa told Inside Retail on his visit to Sydney that the Australian market was growing increasingly attractive
for Camper.
“Some markets react well and sometimes they don’t. There seems to be a certain affinity with our designs
in Australia,” he said.
The Brisbane store, which will be slightly larger than the relatively petite Sydney flagship, may be followed
by further stores in Sydney and Melbourne.
“Melbourne does particularly well for us. The shoppers are a bit more European and into design,” said Fluxa.
Camper has been operating in Australia for 13 years, but has had a retail presence for a decade. The brand
sells around 50,000 pairs of shoes
in the country annually, much of
which is wholesale.
Fluxa said he expects that number
to double in coming years,
especially when considering the
launch of the online store offering
free shipping across Australia and
New Zealand.
“It has every single style available
on the site and will be especially
great for the New Zealand market,”
he said.
Fluxa was in town for the refresh of
the Sydney QVB store, which is the
latest to take part in an ongoing
initiative by Camper.
The ‘Together’ concept invites designers from across the world to design retail spaces for the footwear
label that are then implemented in up to five of the brand’s 150 stores worldwide.
The QVB store, the first in Australia to included in the concept, is by Japanese designer Tokujin
Yoshioka, and features a statement wall of “red blossoms” hand-stitched from pink and red leather.
“We think this design fits very well here – it’s colourful, fresh, and quite interesting for the beautiful building
the store is situated in,” said Fluxa.
The initiative one day hopes to commission an artist for each individual store, but until then, limiting
numbers to five gives the brand diversity while watching costs.
“It’s an extravagant exercise and we do try to be careful in terms of cost. It takes a lot of effort and a lot of
money.
“It’s about differences. Sometimes more or less so – sometimes even too much if you make a mistake.
“I think people recognise it and appreciate it, especially when you are in London or Los Angeles where
there are five or so stores and all of them look different.”
Other recent marketing initiatives include two ‘Casa Camper’ hotels in Barcelona and Berlin opened in the
last decade, as well as co-sponsorship of the Emirates Team New Zealand entry in this year's Volvo Round
the World Ocean Race.
Fluxa said initiatives such as these hopefully see the brand, which produces about 4 million pairs of shoes
worldwide each year, grow, despite ongoing recession in its European heartland.
Camper’s “toughest year” was in 2009, when the brand grew just one per cent, however, 2008 and 2010
saw more than 10 per cent.
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Camper went international in 1992 but has 130 years of history behind it.
Fluxa is a fourth generation family member managing the footwear entity, which his great-grandfather
started from scratch.
“He went to England – nobody knows why – and came back with some machinery and started up a factory
and started making shoes,” said Fluxa.
Fluxa’s grandfather continued this tradition, but it wasn’t until his father started up the Camper brand
officially in 1975 that the family business really took off.
He said that Camper’s appeal derived from middle-band price points mixed with individual style, reliability
and durability.
The devil’s in the detail in retail sales data
June’s headline 0.1 per cent fall in retail sales clouds the real trends within Australian retailing.
While the overall fall is as close to ‘no change’ as you can get, the devil is in the detail.
The impact of plummeting department store sales has had such a significant effect on the overall figures
it’s easy to think every category is suffering. But that’s not the case.
Nor is it true that the whole of Australia is in the doldrums: Sure if you trade in South Australia, the ACT or
NSW you’d have experienced an average downturn in the order of 0.8 per cent, 0.7 per cent or 0.5 per cent
respectively.
But on the other side of the island, Western Australia posted a 0.5 per cent gain and NT the rise was 0.6 per
cent. Queensland rose 0.2 per cent, Victoria fell 0.1 per cent and Tasmania failed to move.
By category there were even starker differences: Department stores fell an alarming 3.2 per cent in contrast
to footwear and accessories, which rose 3.1 per cent. Clothing fell 1.5 per cent as many apparel chains
continued to do it tough, relying on discounting to maintain momentum.
Electrical goods and electronics fell 1.8 per cent in a category heavily hit by ongoing deflation and a scarcity
of new products to stimulate the market. But pharmaceutical, cosmetic and toiletry goods rose one per
cent and ‘other recreational goods’ by 1.5 per cent.
Floor coverings, furniture and textile sales rose 0.6 per cent but hardware, building and garden supplies fell 0.5
per cent.
Food is also an area with mixed results.
On a seasonally adjusted basis, supermarkets and grocery stores boosted sales by 0.4 per cent, 'other
specialised food retailing’ by two per cent. Liquor sales were down one per cent. At the same time, takeaway
food sales fell 0.9 per cent and cafes, restaurants and catering services by 0.5 per cent.
On an annualised basis, retail sales were up 1.7 per cent in the year to June 30 over the prior year, a modest
growth by any means. Intriguing, thus, to note Woolworths’ food and liquor sales were up four per cent over
the same time period and Coles’ food and liquor by more than six per cent.
Early indicators suggest July was no less tough a month for Australian retailers with no significant
improvement in store.
Franchise arguments deepen
The Franchising Council of Australia is seeking to use the changing of the guard in South Australia’s state
political leadership to scuttle state-based franchising laws.
Steve Wright, CEO of the Franchising Council of Australia (FCA), told Inside Retail the council was in the
process of writing to Jay Weatherall, who has been anointed as the next SA Premier, to repeat its concerns
about SA “going it alone” in the proposed introduction of franchising laws in SA.
Wright said a change of the guard is imminent in South Australian politics with Mike Rann, the Premier
of nine years, to hand over the reins to Weatherall. He said this change provided the Government with a
chance to rethink its costly, retrograde proposal for state-based franchising laws that would be out of step
with every other jurisdiction.
“A state conference in Adelaide last weekend for the franchise sector that included franchisors, franchisees
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and suppliers, affirmed its simple message for the SA State Government that the franchising sector does
not want state-based franchising laws,” said Wright.
“The conference confirmed the position it expressed in after which an emphatic petition was put to the
Premier, Mr Rann but that petition fell on deaf ears.
“We can only hope the new regime improves on its listening capability. SA lags the rest of the country in
business confidence and bringing in new franchising laws will make this situation worse, not better.”
Wright said the WA franchising community delivered a message against state-based franchising laws
very strongly to the WA Government and it rejected the move by backbencher, Peter Abetz, to bring in
franchising laws similar to those being talked of in SA.
“The Franchise Council of Australia will be reminding all SA MPs of this in the
weeks ahead of the conclusions of a Parliamentary inquiry into the proposed
Abetz legislation.”
Tom Koutsantonis, SA Small Business Minister, told the franchising conference
he intended to introduce new franchising laws in SA that would include a
complaints investigation power for a new Small Business Commissioner’s
office to be established by the government.
Steve Wright
Koutsantonis said the commissioner would have the power to levy fines of
up to $50,000 for breaches of legislation protecting small businesses and
franchisees.
Wright said the Commonwealth and other states have considered and rejected
the very moves Koutsantonis intends to implement and at a time when state laws were being harmonised,
SA’s franchising proposals represent a major step into the past.
His position was backed by a panel of experienced franchisees attending the conference. The franchisees
were from Cartridge World, McDonald’s, Mortgage Choice, Bakers Delight and Safetyquip.
The franchisees said new state-based laws would simply make it harder to do business in SA, adding an
extra layer of costs and complexity with rules and regulations that were inconsistent with other state and
national regulations.
One of the biggest factors for this debate relates to rental prices, with franchisees charged higher rents by
some landlords, who Wright said were at the same time facing pressure to keep occupancy rates low so
they can meet fees and advertising levies for the franchise itself.
The FCA says it aims to create a level playing field for franchise systems through the development of a retail
tenancy code of conduct.
The code of conduct would "tackle the problem of excessive rental increases in the major shopping
centres, and unreasonable behaviour in relation to options at the other end of term arrangements for sitting
tenants," said Wright.
Milton Cockburn, executive director of the Shopping Centre Council of Australia (SCCA), has described the
code as a “media stunt”.
Cockburn said the FCA “is hypocritical in seeking a retail leasing code” to manage rental problems at a
time when they were furiously resisting moves in SA, as well as WA, for state based franchise regulation.
He said that there were clear inequalities in occupancy costs between franchisees and non-franchisees,
however, the FCA’s calls to solve this problem through reduced rents from landlords or a compromise of
standards, like fit out requirements, was illogical.
Cockburn said there was no consideration of franchises reducing fees for franchisees or of the implications of
investors in retail property accepting a lesser standard of living “in order to subsidise franchisors’ business models”.
“When the FCA - which, despite its claims, represents franchisors, not franchisees - accepts the same level
of regulation imposed on retail landlords, its lobbying might be taken seriously,” said Cockburn.
“The FCA’s time would be better spent putting its own house in order and taking steps to resolve the
substantial problems for franchisees which parliamentary inquiries in two States, and nationally, have found
to exist in the franchising industry.
“Creating media diversions won’t help those franchisees,” Cockburn said.
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Kmart dodges the issue
JARED DICKSON
Spin doctoring is not solely the preserve of politicians. Wesfarmers has shown reasonable skill in recent
years announcing new strategies to create positive headlines for businesses that are about to report poor
trading results.
It is a good strategy, because the journalists who filed positive stories on the announced strategy are then
more forgiving or even ignore the poor results that ensue.
Kmart has used the ploy several times to escape more critical analysis of its results and in the Wesfarmers
fourth quarter and full 2011 financial year sales results the discount department store chain spun its way
out of strife again with a pre-results light touch media effort.
Just enough to escape uncomfortable questions on its continuing under-performance without offending
Australian Stock Exchange rules on the release of information that might impact on share prices.
Kmart has been reporting static or declining sales and market share for the past decade.
Even when Kmart posts improved
sales as it did in the 2011 financial
year with a bare 0.3 per cent increase
on a comparable store basis, the
gains are flattered by the poor
performance of the previous year, in
the current example, cycling against
a 0.1 per cent decline in 2010.
Total sales for the 2011 financial year
were flat at $4 billion but declined by
0.8 per cent to $907 million for the
fourth quarter and down 0.1 per cent
on a comparable stores basis.
Kmart’s fall may not have been
dramatic, but it was a poor result
when compared to struggling Photo:Jessica Angelina
stablemate, Target, which increased
its total sales by 2.9 per cent in the same quarter with like for like store sales showing a gain of 2.7 per cent.
In the same quarter, Woolworths' Big W posted total sales growth of five per cent and an increase of 2.8
per cent on a comparable store basis, notwithstanding that its full 2011 financial year result reflected a
decline compared against 2010 figures.
Kmart claims sales were “broadly flat for the year”, with the chain selling more products, particularly in
apparel and home, but at lower prices - a strategy that may flag a fall in 2011 earnings, which are yet to be
announced.
The higher volume of sales at everyday lower prices claim was the theme Kmart ran a fortnight ahead of the
Wesfarmers results announcement, with Guy Russo, Kmart’s MD, claiming that prices have been slashed
by more than 30 per cent in the past two years.
Russo said Kmart is selling 500 million items a year now compared with 430 million a year ago, lifting sales
of denim jeans, for example, from less than 200,000 annually to a million pairs now.
The everyday low prices strategy aims to define Kmart’s retail offer and establish an effective market
positioning against Big W and Target and a buffer against other competitors, including the soon to launch
Masters Home Improvement chain.
The low prices strategy relies on direct sourcing from Bangladesh, India, China and other south east Asian
producers, which also means fewer branded lines and a quality perception issue.
However, despite a number of initiatives over the past two years, Kmart has not gained any traction, with
its lower prices strategy yet to translate to market share gains or the larger transaction baskets that similar
strategies achieve in supermarkets.
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Kmart will be under the microscope if it does not lift revenues and improve earnings in the year ahead in
economic conditions that conventionally would have been ideal for discount department stores.
Selling more products may be an achievement, but Kmart needs sales impetus without conceding profits,
and Russo conceded recently that around 25 per cent of the chain’s 13 million customers each year leave
stores without buying anything - a high figure for a value offer destination store.
While Kmart continues to struggle for growth, Target’s staggers are also a concern for Wesfarmers, with the
apparel oriented discount department store suffering a 1.2 per cent fall in total sales for the 2011 financial
year with the same percentage decline in like for like store sales.
Target’s sales were $3.8 million for the full year after fourth quarter sales fell by 2.9 per cent despite the
inclusion of the Easter sales period.
Launa Inman, Target MD, said difficult and erratic trading conditions continued in the fourth quarter after
an improved outlook in the previous quarter.
Inman said there was a noticeable weakening in sales in June, and conditions are expected to continue to
be difficult into the first half of the current financial year.
“Within this environment the customer response to the launch of our online store at the end of February has
been pleasing," Inman said.
“At this stage the online offer is focused on childrens apparel, baby and nursery items and selected
bathroom ranges with additional categories to be added over the coming months.”
The new initiatives might provide more sales for Target, but the company has been doing it tough ever
since it moved to direct sourcing and has gained little impetus from new stores and a refurbishment
program.
Wesfarmers posted a 5.3 per cent increase to $47.8 billion in 2011 financial year sales on the back of the
turnaround in the Coles food and liquor business and the Bunnings Warehouse chain.
Richard Goyder, Wesfarmers CEO, described the retail division’s sales performance for the year as “solid,
given the backdrop of declining consumer confidence, significant price deflation and adverse weather
conditions experienced during the period”.
“A highlight of the result was the continuation of the strong sales momentum in Coles and Bunnings,
building on strong results from the previous year,” Goyder said.
“As households have experienced higher costs of living and an increased propensity to save, all of the
group’s retail businesses have worked hard to provide genuinely better value and an improved customer
offer.
“Coles’ food and liquor comparable store sales growth of 6.3 per cent for the year, following five per cent
growth last year, reflects the pleasing customer response to changes made throughout the business to
build trust in Coles’ value, quality and service,” Goyder said.
“Bunnings’ total sales for the year were up 5.7 per cent, building on 10.4 per cent growth last year, and
takes into account the deflationary impacts of the range re-set work.
“The result reflects the re-investment of productivity gains in lower prices, category expansion and the
continued focus on growing the store network to position the business for future growth.”
Officeworks achieved 4.4 per cent growth in total sales for the latest year, underpinned by strong transaction
growth.
Headline food and liquor sales for the financial year were $25 billion, up 6.3 per cent on the previous
corresponding period and for the fourth quarter were up 5.3 per cent to $6.2 billion with price deflation of
0.3 per cent, driven by a series of price cuts.
Ian Macleod, Coles MD, said he was encouraged by the underlying comparable sales growth achieved
through increased supermarket transactions and a bigger basket spend.
“Coles has developed a series of efficiency programs across the business, lowering our cost of doing
business and creating a savings pool which we have used to re-invest in the form of lower prices, improved
quality and better stores and service,” McLeod said.
“Our customers have responded positively to our ‘Down Down’ campaign to reduce shelf prices on the
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products they buy most against a backdrop of rising costs of living that has adversely affected consumer
sentiment and industry sales.
“Coles has worked hard to reduce the total cost of the weekly shopping basket by cutting prices of staple
grocery items, such as milk and bread, to offset the impact of floods on prices of fresh produce, including
bananas and field tomatoes.
The supermarket renewal program continues at pace, with 38 supermarkets refurbished during the quarter,
including the Emerald and Fairfield stores that had been closed since January as a result of the Queensland
floods.
McLeod said the liquor market remained challenging in the fourth quarter given weaker discretionary
spending but despite the tough market conditions, Coles experienced encouraging growth in its 1st Choice
stores and intends to continue our investment in these larger formats as customer purchasing patterns
change.
Coles Express sales, including fuel, for the financial year were $6.7 billion, an increase of 8.5 per cent on
the previous corresponding period largely due to higher global fuel prices. Total sales for the fourth quarter
increased by 14 per cent to $1.8 billion.
Comparable fuel volumes increased by 2.3 per cent during the financial year and by 2.4 per cent during the
fourth quarter.
Ready to take on the challenge of a major new competitor in the marketplace from Woolworths Masters
Home Improvement chain, the Bunnings Warehouse chain posted a 5.7 per cent lift in total sales for the
latest financial year to $6.8 billion, including a 6.1 per cent increase in revenues in the fourth quarter.
Bunnings Warehouse full year store on store growth was three per cent after absorbing 2.2 per cent sales
deflation as a result of range re-set work and price re-investment ahead of the Masters Home Improvement
entry into the market.
John Gillam, Bunnings Warehouse MD, said the work is the catalyst for significant longer term value
creation in terms of increased customer value, simpler customer choices, optimisation of selling space,
and stronger supplier relationships.
Gillam said the focus in the business continues to be on positively evolving the customer experience,
category expansion and enhanced merchandising, growing the commercial offer, and investing productivity
gains in lower prices to drive volume.
“The business is positioned for further sales growth, supported by a well embedded strategic agenda
aimed at delivering customers the best offer.”
Total sales for Officeworks for the financial year were $1.5 billion, up 4.4 per cent on the previous year with
fourth quarter revenues up 1.1 per cent to $360 million.
Zegna expands
Luxury fashion brand, Ermenegildo Zegna, is expanding, with a new flagship store in Sydney’s Westfield.
Accessible from Castlereagh St, the store is the brand’s third in the Oceanic region, with only one other
Australian store in Melbourne that opened 10 years ago.
The Westfield Sydney boutique will be directly managed by the brand’s head office and will act as a launch
pad for a new soon to be released licensing collection of pens and watches.
Paolo Zegna, president of Zegna Group, said it was a “delight” to be launching the brand’s second Australian
store at Westfield Sydney, as the two brands share common goals.
“Westfield and Ermenegildo Zegna share a common desire to contribute towards Sydney’s luxury retail
by raising the bar on the quality of instore shopping experience, by an ever more discerning Australian
consumer,” he said.
“We will operate the Sydney store directly, thereby boosting our brand’s retail development even further and
giving greater prestige to our presence in one of the most beautiful and international cities in the world.”
The store, which has a façade designed by architect, Peter Marino, and features more than 330sqm of selling
space, is described as "the ultimate men’s emporium, where the full range of Zegna products and services will
be made available".
5 August 2011
11
Zegna offers many diffusion lines under its brands, including a handmade couture collection, exclusive
made-to-measure services, traditional Italian tailoring, and casual collections.
The Sydney flagship also offers a sport range and the more “fashion conscious” Z Zegna collection.
The collections are displayed across different areas in the store designed to create “a virtual journey
through the Zegna world”. Customers begin on the ground floor and follow through to the second floor,
ultimately reaching the luxury room where there is an area featuring a personal shopper and in-house tailor.
The Sydney flagship is the latest addition to 560 Zegna stores, of which around 300 are company-owned,
in 80 countries around the world. It had an overall turnover of 963 million euro in 2010.
Zegna said that the brand, which is also distributed in Australia via David Jones stores as well some multi-brand
dealers, was opening in Sydney as part of a strategic growth plan in this regional Asia pacific network.
He said that growth in the market celebrated a long history with the country, as Zegna has a tradition of
sourcing merino wool from Australian farmers and producers since the 1930s.
5 August 2011
12
BIRD ON RETAIL
BY JON BIRD*
Breaking the rules of retail
Almost half of all retail brands may disappear amid the current wave of market disruption, according
to a book released this year called ‘The New Rules of Retail’, by US authors Lewis and Dart. Alarmist
or not, it’s a wake up call to our industry to recognise that things have dramatically and irreversibly
changed.
According to the book, winners in the new era will share three characteristics: experiential superiority,
distributional superiority, and control of the value chain. In simple terms, the writers argue persuasively
that retail survivors will deliver first and foremost what Michael Dart called in a television interview, “a
phenomenally addictive experience with consumers”.
They will also be there whenever and however shoppers want to buy (eg via store, web, mobile), and will
aggressively control every aspect of the product they sell from its creation to point of sale.
It’s an elegantly simple argument that plays out when you examine some of the world’s current retail
success stories, like Apple and US apparel retailer J.Crew.
The old guard didn’t acknowledge the new rules, and that’s one of the reasons they are failing now. To take
just one high profile example, David Jones has progressively dumbed down the instore experience they
were once famous for (where did the service go?), diluted its “no other store” positioning with constant
percentage-off promotions and advertising that could be confused with discount department stores, and
has been sluggish to embrace online. DJ’s has played by the old rules – cut costs, slash prices, stick to
physical bricks and mortar and ignore the increasingly global and digital playing field.
In contrast, successful contemporary retailers have little regard for the old rules of retail… sometimes
because they didn’t even know that there were rules that existed in the first place.
A great (albeit niche) example is a business recognised at the recent Retail World Awards – The Wedding
List Co. Eight years ago, Karaline and George Loiterton came back to Australia from the UK with an idea
– to start up a specialist wedding registry. The brands they approached didn’t want a bar of it. Why would
couples want to go anywhere but David Jones, they asked? Friends and family told them they were crazy.
And when the Loitertons went further to say that the service would go online from day one, the considered
view was that they were certifiably insane.
Today, The Wedding List Co. is a successful retailer with four bricks and mortar outlets and a thriving
online presence. Experiential superiority is evident in its physical stores. They are places that make the
future bride and groom feel truly special, with fabulous (and often exclusive) brands on show in elegant
surroundings, personal and attentive service, and champagne on hand to ease the tension and elevate the
experience.
Distributional superiority is there also in an innovative website that hosts 95 per cent of The Wedding List
Co. transactions, often from guests who live in countries as far-flung as Ireland and the US.
The Wedding List Co. is not immune from the vagaries of the current retail climate, for example, tough
customers who compare their prices with overseas websites, but at least they are providing a unique and
value-added service.
It’s time to run the ‘new ruler’ over your retail brand. Is the experience you deliver “phenomenally addictive”?
Are you a true 24/7 multi-channel retailer, and is each of those channels world-class? And are you in control
of your value chain? If so, you deserve to be rewarded. If not, maybe you need to throw the old rule book
out the window.
* Jon Bird is CEO of specialist retail marketing agency IdeaWorks (www.ideaworks.com.au). Jon is also Chairman
of Octomedia, the publisher of Inside Retail. Email jon.bird@ideaworks.com.au. For more retail insights and
inspiration, visit www.newretailblog.com.
5 August 2011
13
THIS WEEK ONLINE
Retailers shut out of tax summit
Retailers have been "ignored" in the upcoming taxation talkfest, says ARA chief Russell Zimmerman.
The Australian Retailers Association said it was disappointed that Australia’s largest industry sector has
not received an invitation to a forthcoming Tax Forum where businesses and industry organisations were
invited to discuss directions on tax reform. Click here
Rejected Woolworths chief seeks new role
Woolworths' most experienced executive is to leave the company after 10 years in senior roles.
Greg Foran was assumed by most observers to be in line to replace Michael Luscombe in the CEO role
when he retires on September 30. But in April the company's board instead named one of his juniors, Grant
O'Brien, to take the top role. Click here
Westfield confirms World Trade Centre mall plan
Westfield will manage the new shopping centre at New York's World Trade Centre (WTC), as the company
returns to the site after the terrorist attacks almost 10 years ago.
The world's biggest shopping centre owner has agreed to form a joint venture with the Port Authority of
New York and New Jersey to develop the retail precinct of the new WTC. Click here
Metcash extends Franklins offer
Metcash says it has agreed with South Africa's Pick 'n Pay to extend the closing deadline for its bid to buy
the Franklins chain of grocery stores in Australia.
The extension is necessary as the competition watchdog the Australian Competition and Consumers
Commission, is taking court action to block the deal on the grounds it would give Metcash too much
strength in the wholesale grocery distribution market. Click here
Myer to offer free shipping online
Myer will launch free shipping to customers who prefer to shop online, Fairfax reports.
The move is part of a strategy aimed at taking the fight back to offshore online retailers which many local
retailers argue operate with an unfair advantage by not having to collect GST on purchases valued below
$1000. Click here
Adventurewear retailer leaves retail giants red-faced
Kathmandu has stunned market this morning revealing a 26.3 per cent boost in Australian sales in the year
to July 31.
Sales in New Zealand were up 18 per cent. Click here
Perth Airport seeks retail tenants
Perth Airport owner Westralia Airports Corporation is seeking proposals from retailers wishing to tender for
'a high quality specialty retail outlet' at the International Terminal.
The company wants a retailer selling travel accessories, fashion accessories, a travel pharmacy
concept, children's travel/toys/clothing, confectionery/chocolate and will consider other categories.
Click here
New CEO for Deals Direct
DealsDirect Group has appointed seasoned executive Simon Kelly as its new CEO.
Kelly, who has held senior leadership roles at both Goodman Fielder and Aristocrat Leisure, commenced
his new role this week and joins the business at "a pivotal time in its evolution", following Ellerston
Capital’s cornerstone investment earlier this year. Click here
5 August 2011
14
INTERNATIONAL
BY ROBERT STOCKDILL
Malaysian mall opens Tokyo Street
Pavilion Kuala Lumpur, one of Kuala Lumpur's premium downtown shopping centres, has opened a new
Japanese shopping precinct.
Tokyo Street, on level six, joins Centre Court, Connection, Couture Pavilion, Gourmet Emporium and Seventh
Heaven as a specialist in-mall precinct, offering what centre management describes as "a 360-degree retail
experience".
The precinct houses a mix of Japanese food and beverage, retail, and services brands. It was chosen in
response to growing interest in Japanese food, lifestyle, fashion, art and culture among Malaysians.
"Inspired by Asakusa, a district in Tokyo that blends the urban cosmopolite feel with the rich
heritage and traditions of Japan, Tokyo Street welcomes visitors with a giant lantern, the same
way as the iconic landmark of Asakusa, the Senso-ji Buddhist Temple," Pavilion management said
in a statement.
Speaking at the official launch of Tokyo Street, Datin Cindy Lim, deputy chairman of Pavilion KL said: "We
are proud that Tokyo Street, a vibrant, must-visit destination for locals and tourists can only be found at one
place in Southeast Asia... in Malaysia and at Pavilion Kuala Lumpur." Tokyo Street is 100 per cent leased
with 32 brands, of which 70 per cent are making their Malaysian debut.
Pavilion KL wants Tokyo Street to be recognised as a prime tourism destination in Bukit Bintang and is
targeting 70 per cent local custom, 30 per cent tourists.
Coach heads for Hong Kong listing
With sales in mainland China soaring, US luxury retailer Coach is to list on the Hong Kong sharemarket.
It will become the first US-traded company to launch a secondary listing in Hong Kong, the Chinese
SAR.
Coach expects mainland China sales to soar 62 per cent in the current financial year and its listing is more
of a marketing move than a means of raising additional capital for expansion: no fresh stock will be sold,
and no shares issued.
Coach chairman and CEO, Lew Frankfort, told an analyst briefing this week that his company plans about
30 new stores in the mainland, a market offering the company its greatest geographic growth opportunity
worldwide.
"We are now projecting sales of between US$280 million and $300 million for 2012, up from our previous
guidance of $250 million," he said in the telephone conference call. In the year to June, sales topped $185
million, the year before $108 million.
US airports reinvent the retail model
Airport retailing used to be about fast food, travel accessories and bookstores. Not any more.
There's been a widespread expansion of duty free offers - from electronics retailers through to brand name
luxury goods stores - hoping to lure cash from travellers' wallets, the world over.
But in the US, a new breed of airport retailer is emerging - taking flight from underperforming shopping
centres seeking an environment where large numbers of consumers still congregate and shop. They've
realised that airport customers represent a captive market - having turned up at terminals early to pass
through increasingly congested security screenings, they're caught inside enclosed buildings waiting for
their flights to board. What better way to spend time than shopping?
"Airports are becoming, really, a service facility, like a shopping mall," explains Jose Gomez, senior VP with
Spanish fashion retailer Mango, which now has two stores at San Francisco International Airport and one
on the drawing board for Orlando.
"After security, you're locked up," Gomex told Associated Press.
5 August 2011
15
Brandless homewares and stationery chain Muji, of Japan, is testing the waters with two airport stores in
the US, and Sean John, the US rapper also known as Diddy, Sean Combs, or even P. Diddy, has opened
a store in Atlanta International Airport. Victoria's Secret now has seven airport stores in the US (and one
licenced in Sydney).
Fast-fashion brands Zara and H&M are starting to roll out stores in airports, following in the footsteps of
more mid-level brand names like Desigual.
Aiding the trend is a move by traditional shopping centre operators, like Westfield, taking on retail management
contracts with airport companies who recognise the special nature of retail tenancy management.
Airport retail space is traditionally more expensive than mainstream mall space, but retailers acknowledge
sales turnover is higher as well - especially when a flight is cancelled or delayed. That's when travellers
become shoppers, inevitably more out of boredom than need.
Centre management experts warn that retailers considering an airport foray need to be mindful that some
of the rules are different to traditional centres.
For example, aisles have to be clear of obstructions and wider to allow people to negotiate with baggage
trolleys or suitcases on wheels.
Product range has to be more carefully evaluated to optimise sales - for example, airports offer an
opportunity for selling out of season lines due to the foreign destinations of shoppers.
UK department store pioneers 'click and collect' concept
British department store, House of Fraser, is to open a new format click and collect store in Aberdeen,
Scotland, next month, RetailWeek reports.
It is nine years since the retailer had a store in Aberdeen and it says the new store will be an enitrely new
concept forming part of a broader multi-channel offer.
Given the average size of a House of Fraser is 100,000sqft, the 1500sqft store planned for Hammerson's
Union Square shopping centre will attract considerable attention from rivals.
RetailWeek speculates the store is a test for a concept that can be rolled out in regional locations where the
company has strong retail sales but no store presence.
South Korean giant sets foot in Vietnam
South Korean discount retailer E-Mart has formed a joint venture with Vietnam company, U&I, which is set
to open 52 convenience stores and supermarkets by 2020.
E-Mart thus becomes the second Korean retailer to make a major investment in Vietnam, following on the
heels of Lotte Mart.
With an initial investment of US$80 million, the JV will progressively ramp up the commitment to in excess
of $1 billion, with the Korean partner bank rolling about four fifths of the commitment.
French hypermarket chain Big C, which has a strong presence in nearby Thailand, also plans to double its
Vietnam store network from 15 to 29 by 2013.
Big C has signed up for a 14,200sqm hypermarket in the basement of the new US$35 million MegaMall in
Hanois, set to be Vietnam's largest shopping centre.
Malls are still relatively new to Vietnam, as is the hypermarket concept, which is so far suited only to major
cities.
According to government data, Vietnam’s retail sales increased 22.6 per cent in the first six months of
2011.
But inflation in the fast-growing nation is running rampant at around 20 per cent, the highest rate in Asia,
albeit from a low base.
Foreign investors continue to eye the country depite being wary of the inflation data.
AT Kearney downgraded Vietnam from 14th to 23rd place in its emerging retail market rankings, a long way
from the top ranking of 2008.
5 August 2011
16
Baker on property
BY MICHAEL BAKER
Yesterday's heroes
Amid the self-interested clamor surrounding the Productivity Commission’s enquiry into the retail
industry, it would be hugely surprising if the commission can drive goverment to come up with any
sound policy on the basis of its ruminations.
Realistically, after being played on like the second violins
in an orchestra by the various interest groups, it will be
almost impossible for the commission to get anywhere
near the bottom of what’s going on.
Before this arguably wasteful investigation even began
though, the property side of the retail business had
been feeling underappreciated and on the defensive.
This melancholy isn’t just because so many fingers
are pointing in the direction of landlords for allegedly
contributing to Australia’s high retail price regime.
It is also because the industry currently feels under siege
from the internet. Not just threatened in an economic
sense, but vaguely unfashionable too, like a beauty
queen looking on while her successor gets crowned.
Yesterday’s heroes. Everything is “online this” and “daily
deals that”. Whatever happened to the solid old virtues
of a bricks and mortar shop?
There’s a lot of evidence they still work very well.
A cross-country comparison shows that the productivity of Australia’s physical retail space is unrivalled
among developed countries. You can argue that’s because Australia’s retailers are exceptional, but no one
is going to believe you, and you risk being laughed at.


5 August 2011
17
Rather, retail property development and management skills, along with prescriptive planning regimes, seem
to be more plausible explanations.
Estimated sales per sqm generated from Australian retail space were nearing US$5500 in 2010, using
the average exchange rate for the year. By comparison, US retail real estate generated less than half
that much. The
UK, Germany and Canada fell somewhere in between.
The strong Australian dollar doesn’t alter the story. If the Aussie dollar were still buying only 80 US
cents, the productivity
of Australian retail space would be roughly at par with that of the UK and
Germany and 75 per cent higher than in the US (see chart 1.)
There is a broad relationship between high sales densities and the supply of retail space per capita (see


chart 2). Germany,
with less than 1.5sqm per capita, has the least retail space and sustains the second
highest sales density after Australia – about $4400 per sqm.


Australia and the UK both have less than half the space per capita of the US, and their average sales
densities are higher than that of the US by a long way.
Canada, which has space per capita falling between the US on the one hand and Australia, UK and Germany
on the other, not surprisingly has an average sales per sqm in between the two extremes.
Clearly, planning systems leave their mark. All else being equal, constrained retail supply raises sales densities,
and in Australia it raises them highest of all. What Australian retailers can’t understand is why it raises occupancy
cost ratios as well.
With productivities so high in Australia by international standards, it can be argued that higher occupancy
cost ratios are justified and are in fact just the market doing its work. Retailers can generate more profit
dollars from the same profit margin than their counterparts overseas. Property owners would also argue
(or at least they should if they are not already) that retailers are paying a premium for locations that are not
just highly trafficked but are also relatively protected from competition compared to their peers abroad.
Of course, Australian retailers hate to think of themselves as operating in a less competitive environment
but the data on retail space speaks for itself.
By rights, yesterday’s heroes – the retail property owners – should be today’s as well.
* Michael Baker is a retail and property analyst and consultant. He can be contacted at Michael@mbaker-retail.
com or www.mbaker-retail.com
5 August 2011
18
PROPERTY
Yields remain low
A post GFC flight to quality and security by investors is seeing a focus on super prime properties that has
kept yields down close to pre-GFC levels according to Burgess Rawson.
“The premium end of the market appears to be holding its pre-GFC values at sub seven per cent yields while
the next tier offers some good buying opportunities, but at a significant yield gap,” said Shaun Venables of
Burgess Rawson.
Demand for blue chip tenants such as Woolworths and Coles remains strong. With a limited number of
quality freeholds changing hands each year, investors are still prepared to pay premium prices for the
security of a national household name.
“Investors feel more comfortable owning commercial investments occupied by brand name tenants, not only
for the obvious added income security but also in the confidence that the company has done considerable due
diligence on the property and its location before making what is usually a long term commitment,” said Venables.
In addition, brand name tenancies are usually located in close proximity to each other – either in a prime
location or a shopping centre – limiting the reversionary leasing risk if the property ever became vacant.
A key trigger in the market for quality tenants is income. When an income bracket goes beyond $300,000 a
year, the focus on the tenant becomes even more important, and length of lease is critical.
A recent Burgess Rawson auction saw a well located and strongly trading McDonald's in metropolitan
Sydney sell on a 4.7 per cent yield on a relatively short lease.
While it was sold to the McDonald's corporate entity, there were “plenty of under-bidders” who pushed the
price to $3.35 million in their attempts to secure their piece of a major corporate brand.
Importance of branding is evident in other areas of the market where a Woolworths branded Caltex petrol
station can sell for a yield differential of up to two per cent below a similar Caltex-only branded property.
The perception of branding extends to other sectors, with a retail Bunnings selling for a lower comparative
yield than a Bunnings trade. Both are strong brands but the retail strength of the Bunnings name would
normally attract greater interest than Bunnings Trade, which is still in its infancy as a national name, even
though they are both ultimately owned by the Wesfarmers entity.
Within time, as the Bunnings Trade name becomes more familiar and gathers strength, the yield difference,
which is perhaps at 0.5 per cent, may close ensuring a good buying opportunity today.
Despite this, a Bunnings Trade on the Gold Coast was last month sold by Burgess Rawson for $4.5 million,
equating to a tight 7.5 per cent. This is considered a strong result, being largely attributed to the lower
price spectrum, placing it within reach of investors who may otherwise not be able to afford a Wesfarmers
backed investment - for example, as with a traditional larger retail Bunnings store.
The yield gap of brand versus non-brand is further evidenced by regional properties because many
metropolitan buyers will only consider regional investments if they are tenanted to a national brand.
“Three years ago the yield differential between a national brand and a well tenanted property was negligible
as banks were keen to lend and the euphoric pre GFC market resulted in bullish price assessments,” Simon
Staddon of Burgess Rawson in Sydney said.
Staddon said competition for property in the sub $20 million market remains strong and increases strongly
right down to the sub $1 million bracket.
Burgess Rawson advises investors to undertake due diligence on any property and to analyse the
lease, covenant and business strength overall while considering the strengths and weaknesses of the
location.
“There are tremendous opportunities out there with plenty of strengths offering excellent yields that are
being overlooked by fickle buyers because they may not appear to tick all the boxes. These opportunities
are being snapped up at discounted prices by those able to identify a properties strengths beyond the
logo,” Staddon added.
5 August 2011
19
Interest for FNQ centre
The Australian Prime Property Fund Retail (APPFR) and Westfield has appointed Jones Lang LaSalle's
Simon Rooney to conduct an on-market sale of Cairns Central shopping centre in far north Queensland.
Rooney is looking to sell either a 100 per cent interest or 50 per cent joint venture interest, the later requiring
the incoming purchaser to nominate either APPFR or Westfield as its preferred joint venture party.
APPFR and Westfield may also bid for each other's 50 per cent interest.
Cairns Central is a strong trading, fully enclosed regional shopping centre with a total GLA of 52,725sqm.
The centre is anchored by a two level Myer department store, Target, Coles and Bi-Lo supermarkets, sixscreen Birch Carroll & Coyle cinema and JB Hi-Fi, along with five mini-majors and 174 specialty stores.
It is located in the centre of the Cairns CBD and is the largest regional shopping centre in Far North
Queensland and anchored by the only department store in the region.
Rooney said the centre's strategic location and unmatched anchor tenant offering in the region enabled it
to be a major beneficiary of a significant pool of retail expenditure, generated by both a significant tourism
market and a densely populated catchment.
"The Cairns Central offering is a rare and attractive opportunity to acquire a 100 per cent interest or enter into
a joint venture opportunity with either Lend Lease or Westfield, in a secure regional shopping centre," he said.
“Major regional holdings, particularly the quality of Cairns Central, have and continue to be tightly
held and highly sought from offshore investors andwithin the localinstitutional investment community,
as demonstrated by the strong interest shown in the recent Northland, Westfield Doncaster, Lakeside
Joondalup and Westfield Whitford City sale processes, over the last two years.
"Cairns Central is a modern, strong trading and highly impressive regional asset and provides core investors
with a well managed shopping centre investment opportunity, the calibre of which will generate strong
market interest both domestic and offshore," said Mr Rooney.
For the year ended December 2010, the Tropical North Queensland region attracted close to 2 million
international and domestic tourists, with an estimated visitor expenditure of over $2.2 billion. In addition to
tourism expenditure, the Cairns Central benefits from resident total trade area retail expenditure of $2.7 billion.
It sits in a growing catchment area of 229,290 residents and is forecast to increase at 1.5 per cent per annum.
West end boom
After a 12 month search, retailer and service provider, API Locksmiths, has found a CBD home at 414 La
Trobe St in Melbourne.
This retail location will be used as API's flagship showroom.
API Locksmiths GM, Tony Cook, said the location provided a launching place for its fleet of service vehicles.
"It also gives us a showroom and retail outlet that is easily accessible to the population at the western end
of the city,” Cook said.
CBRE retail leasing agent, Zelman Ainsworth, negotiated the 191sqm deal with API. Ainsworth said an
increasing number of retailers are now seeking a presence at the western end of the CBD as rents within
the retail core of the CBD had been rising to unprecedented levels.
“Retailers like API Locksmiths have discovered the opportunity and value in establishing a larger retail foot
print at the western end of the CBD to capitalise on the growing demands from residents in the city area,”
Ainsworth said.
The residential population within the Melbourne CBD is at a record level at over 98,000 and is continuing to
grow faster than any other capital city in Australia.
CBRE senior manager, Max Cookes, said that, despite the tough retail trading conditions recently reported
in Australia across the fashion apparel sector, there is no doubt essential services have held strong.
"In addition, the Melbourne CBD has proven to be quite resilient from the negative market sentiment
with record rental levels being achieved in both the retail core and secondary retail locations within the
Melbourne CBD,” said Cookes.
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South African retailer, Pick ‘n Pay, is now facing massive losses on its exit from the
Australian market by selling or closing the Franklins chain. The company has agreed
to extend the cut off date on the sale agreement they struck with Metcash Trading
in July last year to September 30, as the Federal Court muddles over the $215
million acquisition that the Australian Competition and Consumer Commission has
so strenuously opposed. There are potentially two other bidders for the Franklins
business - a Canberra consortium and Spar Australia - but both would want to pay
Pick ‘n Pay less than half what Metcash has on the table and face major hurdles
in convincing landlords that they will be a viable operator. Such convincing will no
doubt require sizeable bank guarantees rather than promises alone.
The fact that Metcash is the only exit option for Pick ‘n Pay that offers any
joy is reflected in three extensions of the sale agreement and, interestingly, no
discussion of a revisit of the deal based on the Franklins supermarket chain’s
$18.1 million loss for the year to February 28, 2011 and 3.9 per cent sales decline
to $827.2 million for that period. Between 2001 and 2011, Pick n Pay invested
$289 million in Franklins and racked up accumulated losses, of more than $120
million. Rival bids to Metcash won’t meet accumulated losses let alone offset
any of the original investment and capital expenditure after a disastrous 10 year
foray in the Australian market.
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Does Gerry Harvey have something to hide? Controversial newsletter Crikey asked
the question this week, a theme quickly picked up by other columnists. Shares in the
electrical and home furnishings franchisor hit a 52-week low of $2.13 earlier this week
in the absence of any announcement on fourth quarter or 2011 year sales, down a
third or more from January's $3.24. Harvey Norman was originally scheduled to release
its figures last week, based on the 2010 sales release on July 26. "So where are the
numbers, Gerry? Coles, Woolies, David Jones and other retailers have updated the
market and taken their medicine," challenged Dyer. "Time for you to have a moan, or
are they really poor?"
Australia is not the only country in the world where the disparity between local
retail prices and those charged online offshore is gaining widespread publicity. In
New Zealand, however, it strikes at the core of the national religion: rugby. There is
outrage over the cost of the new All Blacks clobber, replicas of the white-collared
jerseys the players will be wearing when they wrestle the World Cup off South Africa
later this year. It carries a local price tag of NZ$220 (that sounds far worse than
AU$177). The same jersey can be bought online from the US for just A$85 ($NZ105).
So you have to be a white collar worker to afford to buy one locally or a credit card
holder to buy it online. Rebel Sport NZ MD Rod Duke got some handy publicity
telling Radio Sport on Thursday he was "furious" about the price and had a "great
deal of sympathy" with rugby fans, blaming maker Adidas.
Curiously, and without wanting to suggest any bias in the reporting of the above news,
Retales acquired an All Black branded t-shirt last year from a company-owned Adidas
store for a snip at around A$25. In Barcelona. Hardly the spiritual home of rugby union,
which suggests a serious misjudgement in stock ordering - or reflects the global power
of the All Black brand. Reluctantly we'd have to assume the former.