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7
Mar-18
Wednesday

NRF discovers old news...

11
Sometimes we get amazed.  The National Retail Federation commented that private brands are making a resurgence and proving to be a powerful differentiator. NRF mentions companies like Amazon, Brandless, ALDI and Trader Joe's, who “are using private brands to build relationships with customers in unprecedented ways”.  We just want to clarify that some of the smartest operators have been doing this for decades and we have been advocating the essential importance of exclusive brands for the last 10 years.  Businesses like Aldi and Marks & Spencer have been built around high quality, private brands. So, sorry NRF, you have just discovered some old news…
6
Mar-18
Tuesday

The US economic outlook remains strong

21
Fed Chairman, Jerome Powell told lawmakers this week during testimony on Capitol Hill that "US economic outlook remains strong".  The Wall Street Journal reported that US Consumer Sentiment index has reached its second-highest monthly reading since January 2004.  According to the Journal, US households have been upbeat about the economy in recent months, with growth supported by rising incomes and low unemployment. The recent package of tax cuts also has boosted most workers’ take-home pay.  Makes you wonder what has been added to the water in Canberra, because some Australian politicians have begun advocating tax increases, to “balance the books”.  What about spending a bit less?  Business and most people in Australia already pay plenty of tax.
5
Mar-18
Monday

Kaufland is definitely here

15
AFR reported that the German supermarket chain is building up its executive team in Australia (and sending them to Germany for training).  So far, two locations have been secured for Kaufland: in Adelaide and in Melbourne.  Kaufland operates large footprint outlets (20,000 sqm).  It should be noted that Kaufland’s parent, Schwarz Group, also owns the discount chain Lidl.  If Lidl starts opening stores in Australia, this will be the next nail in the coffin of the local operators.

China’s growth target below 7% this year

11
Reuters reported that China aims to expand its economy by around 6.5% this year, the same as in 2017.  In the past some experts expressed a view that China needs at least 7% growth for their financial system to function well.  Interesting to see how this stress will be managed.  Combined with US trade friction, China is sailing through increasingly stormy waters.

More pressure on Euro

12
According to Reuters, Italian voters delivered a hung parliament on Sunday, flocking to anti-establishment and far-right parties.  This cast Italy into a political gridlock that could take months to clear.  According to NAB, “There is a highly uncertain landscape that this election has thrown up.  It adds to a period of uncertainty and is euro negative in the near-term at least.”
3
Mar-18
Saturday

Kohl's gets creative with space sharing

13
USA Today reported that Kohl's (a US department store with over 1,000 outlets) will shrink the floor plans of about a dozen of its larger stores, and lease space to German discount grocer ALDI as part of a test to cut costs and drive more traffic to its stores. Kohl's could also extend the test to include other grocers or other types of retailers.  Sounds to us like a better (and less risky) idea David Jones’ plans to have another go at their own grocery department.

US has unleashed a flurry of economic activity

9
The Star Tribune in Minneapolis (US) commented that Best Buy reported its biggest holiday sales season in 14 years, and booked a 9% same-store sales increase in the fourth quarter. The electronics retailer fended off competition from Amazon and other online rivals, as confident consumers snapped up smart home systems, new video games, and other gadgets.  Personalities at the top aside, the US Government seems to have succeeded in unleashing a flurry of economic activity.

Tax reduction flow on effect

7
Australian politicians continue to debate the pros and cons of tax reductions.  In the meantime, the National Retail Federation published results of its survey, indicating that about half of consumers who expect a tax refund this year will put the money into savings and 35% will pay down debt. Our simplistic analysis tells us that the 15% (that remains) will result in additional spending.

US company's share buy backs surge

5
The Wall Street Journal reported that US companies are buying back their shares at an aggressive pace. Announced buybacks have surged since the US passed a $1.5 trillion tax cut in December, exceeding $200 billion in the past three months. Some of the biggest buyers include Cisco Systems, at $25 billion, Wells Fargo, at about $21 billion; and PepsiCo, at $15 billion.  Clearly, these companies know something that convinced them that buying their own stock is a good investment. A clue for the market?