This article is from the Australian Property Journal archive
SPECIALTY Fashion Group, owner of some of Australia’s oldest fashion brands including Katies, will close more than 300 stores across the country as the challenging retail environment forces the hand of yet another operator.
The group currently operates 1,019 stores Australia-wide. Among its brands are Katies, which was launched in 1954; Millers, established in 1993; Rivers; Crossroads; Autograph; and City Chic.
Its Millers brand has over 350 stores in Australia and 28 in New Zealand.
Chairman Anne McDonald said the closures are part of SFG’s store rationalisation strategy.
“Store rationalisation is a key and immediate focus. We have a large store portfolio comprising 1,019 stores as at the end of September 2017.
“Whilst we have made some progress in optimising the store portfolio, we are taking actions to more quickly reduce our store footprint, with an immediate focus on loss making stores on ‘hold over’ leases,” she said.
The current network of stores will be cut down to around 700 by year 2020.
McDonald said it has been a challenging year for SFG and, indeed, many Australian retailers with a significant bricks and mortar store presence.
“This is coming from two principal sources – subdued consumer confidence impacting discretionary expenditure and increasing competition, both from international and online retailers.
“Trading conditions have continued to be challenging in the first quarter of FY18.” McDonald said.
Retail expert, Simpson & Forsyth’s co-founder and director, Steve Simpson said the announcement reflects the “unchartered waters” condition the retail sector finds itself in, with landlords and retailers having to rapidly respond to one disruption after another.
“We are rapidly moving into a watershed moment.
“There are so many variables for retailers to contend with, flat wages growth, weak consumer spending, online retailing, the arrival of Amazon…
“Will it have an impact on the retail sector? The answer is yes, of course. To what degree? Your guess is as good as mine.
“What this does do is that, it sends a message to landlords that we are entering into unchartered waters in regards to where rentals may be heading in the future,”
He said landlords need to be sensible, otherwise a tenant will vote with their feet and walk.
“Retailers will not maintain a store that only breaks even or makes a negligible profit to their bottom line.
“Those days are long gone,” Simpson said.
SFG’s outgoing CEO Gary Perlstein said there is no escaping the fact that trading conditions have been challenging, and continue to be so into the new financial year.
“The group is striving to be agile in navigating these conditions and is accelerating our change program.
“In a tough retail environment, we are transforming the business for the long term, concurrently with a focus to deliver the right shorter term operating performance.
“Product selection, quality and the shopping experience (whether the physical store or online store) are crucial to what our customer wants, and for our brands to succeed in an evolving retail environment. Some brands have performed well this year. Others are working relentlessly to further transform their offers to deliver to the expectations of the modern customer.
“In this environment, a disciplined approach to controlling costs and allocating capital to our most profit generating brands is imperative,” Perlstein said.
SFG’s announcement follows Myer which announced earlier this month that it would be closing up to 19 department stores.
Last week Amazon unveiled a $700 million plan for Australia in a launch to attract retailers.
Speaking at the recent Australian Property Institute National Property Conference, m3property research manager Casey Robinson said Amazon is not expected to significantly disrupt the Australian retail market and cannibalise the sector like it has done in the United States, however landlords and retailers should not be complacent.
Although Robinson said higher yields and risk premiums are just some of the concessions investors might come to demand, given the risk Amazon and the wider online retail market poses for bricks and mortar retail, as investors will need to weigh up the risk and return on a centre-by-centre basis.
Released earlier this month, the Australian Market Expectations Survey by Urban Property Australia and Situs RERC showed 41% of the 276 respondents, which includes landlords, fund managers, valuers, investment bankers, private investors, real estate agents, REIT analysts and others, believed that Myer and David Jones would be impacted most by Amazon.
This was followed by Harvey Norman and The Good Guys, then JB Hi-Fi, and a smaller amount nominated discount department stores Target, Big W and Kmart.
Last month Macquarie Group published a report of shopping centre landlords exposed to more store closures, reflecting the trends in the United States, in the face of subdued consumer spending, flat wages growth, online retailing and Amazon.
In the US, Sears said it was closing 43 stores – in addition to the 265 it announced earlier this year. JCPenney released a list of 138 stores it will close in 2017 and Macy’s said it would close 100 stores.
Across America, 4,000 shops closed in 2016 and 8,000 more expected to close in 2017, according to Credit Suisse.
Meanwhile a report by Green Street Advisors earlier this year found of 1,070 malls in the US, more than 330 are classified “at risk to close”. Credit Suisse estimates around 20-25% of the 1,110 malls will close by 2022.
Australian Property Journal
