Electronics retailer JB Hi-Fi has once again been the star of the latest earnings season. Photo / Greg Bowker
Electronics retailer JB Hi-Fi has once again been the star of the latest earnings season. Photo / Greg Bowker
Australian's addiction to sneakers and the resurgence of vinyl records have helped two retailers defy the doom and gloom among shopkeepers to post healthy profits.
Three weeks into the current profit season – when most of Australia's sharemarket-listed companies reveal their earnings – there are signs retail might be startingto recover.
Footwear retailer Accent Group unveiled a 22.5 per cent increase in full-year net profit to A$53.9 million ($56.8m) and announced ambitious expansion plans.
Australians' love for (some might say obsession with) sneakers helped Accent to another record profit with the sale of brands such as Vans, Nike, Dr Martens and Skechers.
The company, which owns the Hype, Platypus and Athletes Foot chains, defied the retail sector gloom and boosted sales by 13.4 per cent to A$796.3m in the 12 months to June.
Accent Group now plans to take on the Rebel chain of sports goods and clothes by launching a chain of sportswear shops selling budget-priced clothing and running shoes.
The new retail concept, dubbed PIVOT, will sell branded sports and street wear at half the price of products sold in Accent's. Importantly, it will be selling different products to those sold in its other stores. By selling sneakers for A$90 to A$100 a pair it will avoid cannibalising its customer base of fashion-conscious consumers.
JB Hi-Fi has once again been the star of the latest earnings season, with the electronics retailer reporting a profit rise of over 7 per cent. Probably more impressively, it increased total sales to 3.5 per cent to A$7.1 billion.
Year after year this company produces strong results and defies market expectations and this year was no exception, despite the tough conditions of low wages growth and poor consumer confidence.
Domino's Pizza Australia has missed earnings guidance and reported a 6 per cent drop in profits in its full-year results and the parent company of department store David Jones announced it had written off A$437m from the store's valuation.
For JB Hi-Fi and other retailers, Amazon hasn't proved to be the disaster that many observers – including this columnist – expected. This is in part because despite all the hype and the promises, Amazon's offer to Australian shoppers is very limited.
But for JB Hi-Fi it's also because chief executive Richard Murray continues to do a very good job of staying ahead of retail trends and adapting the chain's mix of products to changing customer demands.
Take the high-margin sale of CDs and DVDs, once the company's mainstay but which continue to plunge, dropping by 8.3 per cent in the Australian business in the past financial year.
Instead, Murray has shifted the merchandise mix to hardware and services, such as headphones, fitness trackers, games consoles and internet-enabled technology which grew a healthy 4.1 per cent.
Sales of vinyl records are booming. "The growing area is vinyl which [shows] people like to own things and touch and feel, and I think that does sometimes get lost in the conversation," he told news.com.au.
JB Hi-Fi's strong results continue year after year without much help from the internet. The company's online sales were only 5.5 per cent of total sales. In Australia online sales make up 10 per cent of the total retail spend. This suggests there is plenty of scope for the company to keep growing by improving its online offering.
Given that consumer electronics make up about a fifth of Australia's retail spend, it looks as if there is a lot of upside for JB Hi-Fi in this rapidly growing market segment.
These two results might provide a glimmer of hope for retailers, but before we call an end to Australia's retail recession, supermarket giant Coles' earnings provide a cautionary note.
Coles' supermarket earnings rose 2.2 per cent to A$1.2b as sales rose 3.2 per cent to A$30.1b.
So far so good, but when we look more closely the results aren't so great.
Coles chief executive Steven Cain said budget-conscious consumers were trading down to private-label groceries, despite record low interest rates and recent tax cuts for lower income earnings.
All up, the supermarket chain – which also owns liquor outlets, petrol stations and an online business – reported a 9.1 cent drop in full-year profit to A$1.43b, with Cain saying the supermarket is entering the most competitive period in its history.
The fact that sales at the supermarket are increasing thanks to cash-strapped shoppers hunting for bargains does not bode well for retail, particularly those parts of the market which rely on discretionary spending.
Coles' results suggest there isn't much cash left over at the end of the week, after household staples such as rent, electricity and food have been paid for.
It also makes JB Hi-Fi and Accent's strong earnings reports all the more impressive.
