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20
Aug-18
Monday

Annual spending hits four-year high

21
A Business Sales Indicator report released by Commonwealth Bank shows that spending was up across all industry sectors by 1% in July, pushing annual spending growth to a four-year high of 10.4%. The report indicates that retail deflation (i.e. lower prices) across a range of good and services has resulted in very stable spending so far in 2018, rising approximately 1% every month.    

Tiffany & Co partners with Alibaba

15
Tiffany & Co has joined Burberry, Maserati, Hugo Boss, and La Mer on Alibaba's invite-only Luxury Pavilion. According to a post by The Hustle, after initially resisting the allure of Alibaba and Amazon due to their failure to crack down on counterfeiting, the ultra-luxury jeweler succumbed to the allure of gaining access to the growing Chinese luxury market. Alibaba's strategy to be the "gateway to China" seems to be paying off, enabling the marketplace to succeed in a challenging luxury market that has proved elusive even to Amazon.

Nordstrom continues to shine

17
The Seattle Times reported that Nordstrom surpassed its own forecasts, posting a profit of U$162 million, up about 46%, on U$4.07 billion in sales, up 7.3%. Comparable sales were 4% up.  Executives attributed the performance to strength across the board for the last quarter.  Most retailers would see this as an excellent result, but for a department store in 2018 we see it as truly remarkable.
17
Aug-18
Friday

Artificial Watson

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Under the heading of 'Spin Doctor', The Wall Street Journal commented that in 2012 IBM pitched its artificial-intelligence system Watson as a breakthrough weapon in the fight against cancer. Billions of dollars later, it has had a limited impact on patient outcomes, and more than a dozen IBM clients or partners have stopped or scaled back their projects with the platform.  We have researched the AI area in depth and our findings can be found in the article covering Retail Directions' keynote address to the Online Retailer conference in Sydney in July 2018 (https://lnkd.in/gEDg75q).  AI demystified.  

Kogan's expansion

12
Australian e-commerce operator, Kogan.com Ltd published impressive results, massively increasing revenue, profit, and its customer base.  The business put through close to A$500 million (although the revenue was actually around $410 million), making a gross profit of $80 million and EBIT of $21 million, more than double of EBIT the year before. Good to see an e-commerce operator who actually makes money.  Kogan has now expanded from its consumer electronic space into other verticals, including travel and insurance.  About 44% of profit comes from Kogan's exclusive brands, confirming the conventional wisdom that those retailers who manage to master private labels have a solid competitive advantage.

Macy's getting better

21
The Associated Press reported that Macy’s raised its annual profit forecast and sales are expected go up by 2.5% on like-for-like basis. The Cincinnati department store chain delivered its third straight quarter of higher profits, earning U$166 million for the quarter, against $111 million the year before. Sales were around $5.6 billion, so not a great result, but the trend is right.  Interestingly, Macy's shares dropped by 12% on the day of the results announcement, perplexing analysts.
16
Aug-18
Thursday

Beacon Lighting puts the spotlight on profit

11
Also from the ASX, Beacon Lighting Group has posted record net profit after tax of $19.6 million in FY18, a 17.7% increase from FY17. In its announcement, the retailer attributes the results to record-level store sales and strong trading by its commercial and international businesses, its wholesale globes business and its Roadway and Massons for Light businesses. Full-year group sales rose 9.7% to $236 million.

Nick Scali posts record profits

9
A results announcement lodged with the ASX shows that furniture retailer Nick Scali has posted a 10% increase in net profit after tax to $41 million in FY18, up from $37.2 million in FY17. The strong result was driven by a 20% increase in gross margin to 62.7% and an 8% rise in total sales to $250.8 million, helped by ten new store openings across FY17 and FY18, up from $232.9 million in FY17.

The power of the spin doctor

26
An article in the AFR covers Coles' recently reported results, which show the grocer's strongest sales growth for two years and a return to profit growth for the first time since 2016. However, 'strongest' doesn't necessarily mean strong.  The increased sales combined with improving gross margins and cost savings helped Coles deliver only a modest 3% profit growth in the June-half after a 14.1% fall in earnings in the December-half and a 13.4% decline in profits in 2017. A comment has been made that the improving momentum is positive for sentiment ahead of its $20 billion demerger from Wesfarmers, which is expected to be completed in November. We feel that this is just putting a spin on lacklustre results.
15
Aug-18
Wednesday

Crypto-currencies woes

14
The Wall Street Journal reported that Bitcoin, the most widely used digital currency, this week fell below $6,000 for the first time since late June.  A broad investor retreat has pushed the market for digital currencies down 70% from its January high, reflecting user frustration over their modest inroads into commerce and a general shakeout in speculative investments.  We have warned repetitively that this bubble will burst, sooner rather than later.

Wesfarmers net profit tumbles 58.3%

24
Reuters reported that Wesfarmers Ltd posted a 58.3% drop in full-year profit. The results are mainly caused by its failed Bunnings venture in the UK, which forced the retailer to take a A$1.65 billion loss in fiscal 2018. Net profit for the retail-to-mining conglomerate fell to A$1.20 billion for the 12 months to June 30, compared with A$2.87 billion last year.

Amazon opens huge Sydney warehouse

11
TechRadar reported that Amazon Australia has now opened its second fulfilment centre in Moorebank, Southwest Sydney, close to the M5 motorway, Sydney airport and ports. At 43,000 square metres of indoor space, the new warehouse is nearly twice the size of the Melbourne fulfilment centre. The large space makes room for a wider product range, allowing “thousands of small and medium-sized Australian businesses” to use Amazon’s fulfilment program “to more easily access customers across the country”.