MANY RETAIL LOSERS BUT SOME ONLINE WINNERS AS MELBOURNE SHUTDOWNS TAKE EFFECT

·         ELI GREENBLAT

• AUGUST 4, 2020
• The Australian

JB HI-FI, MYER, KMART AND TARGET ARE AMONG THE STORES PREPARING TO SHUT DOWN ACROSS METROPOLITAN MELBOURNE AND SHIFT TO DIGITAL OPERATIONS ONLY AS BUSINESS STARTS COUNTING THE COST OF THE TOUGHER LOCKDOWN TO BATTLE THE CITY’S OUTBREAK OF COVID-19.

HOWEVER OTHERS INCLUDING BUNNINGS AND BABY BUNTING WILL REMAIN OPEN IN A LIMITED CAPACITY AS THE CITY BRACES FOR THE STAGE 4 RESTRICTIONS.

UNDER THE RESTRICTIONS OUTLINED BY VICTORIAN PREMIER DANIEL ANDREWS ON MONDAY, SUPERMARKETS, PHARMACIES, PETROL STATIONS AND OTHER LIMITED FOOD AND ESSENTIAL GOODS RETAILERS WILL STAY OPEN.

RETAILERS ARE MOVING TO THEIR DIGITAL CHANNELS TO SELL GOODS, RAMPING UP HOME DELIVERY AND CLICK AND COLLECT OPTIONS.

JB HI-FI ON TUESDAY SAID 46 JB HI-FI STORES AND 21 THE GOOD GUYS STORES LOCATED WITHIN METROPOLITAN MELBOURNE WILL BE TEMPORARILY CLOSED TO CUSTOMERS FROM WEDNESDAY NIGHT FOR A MINIMUM PERIOD OF SIX WEEKS.

“BASED ON CURRENT VICTORIAN GOVERNMENT DIRECTIONS, OUR ONLINE AND COMMERCIAL OPERATIONS WILL CONTINUE TO TRADE AND BE AVAILABLE TO MEET THE NEEDS OF OUR CUSTOMERS WITH FULFILMENT BY HOME DELIVERY AND CONTACTLESS CLICK AND COLLECT,” JB HI-FI SAID.

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“THE GROUP’S WAREHOUSES AND METROPOLITAN MELBOURNE STORE NETWORK WILL BE OPERATIONAL, WITH STRICT SAFETY MEASURES IN PLACE, TO FULFIL ONLINE AND COMMERCIAL ORDERS,” IT ADDED.

BABY BUNTING SAID STORES IN METROPOLITAN MELBOURNE WILL REMAIN OPEN TO SUPPORT NEW AND EXPECTANT PARENTS, ALTHOUGH IT WAS LIMITING THE NUMBER OF PEOPLE IN EACH STORE.

“COVID-SAFE WORK PRACTICES WILL CONTINUE TO BE APPLIED, INCLUDING ENCOURAGING CUSTOMERS TO SHOP ONLINE OR USE OUR CONTACTLESS CLICK AND COLLECT SERVICE,” BABY BUNTING SAID.

THE NATION’S BIGGEST DEPARTMENT STORE MYER SAID ITS WILL CLOSE ITS HISTORIC MELBOURNE CBD STORE AS PART OF THE FORCED SHUTDOWNS. MYER WILL ALSO BE CLOSING STORES IN METRO MELBOURNE FROM WEDNESDAY NIGHT, ALTHOUGH IT REMAINS OPEN TO CONSUMERS WHO TURN TO ONLINE AND CLICK AND COLLECT TO DO THEIR SHOPPING.

BUNNINGS AND OFFICEWORKS WILL BE OPEN FOR TRADE CUSTOMERS BUT SHUT TO ORDINARY SHOPPERS, ALTHOUGH PARENT COMPANY WESFARMERS HAS URGED THE GOVERNMENT TO REFINE ITS RULES BECAUSE IT BELIEVES BIG STORIES CAN OPEN SAFELY. WESFARMERS WILL ALSO CLOSE ITS KMART AND TARGET STORES IN METROPOLITAN MELBOURNE.

MEANWHILE, ANALYSTS SAY FOOD RETAILERS AND CHAINS WITH A STRONG ONLINE PRESENCE WILL BE THE BIGGEST WINNERS FROM THE VICTORIAN LOCKDOWNS, WHILE COMPANIES WITH BIGGER SHARE OF STORES IN MELBOURNE, LIKE JB HI-FI, OFFICEWORKS AND THE GOOD GUYS, ARE THE MOST EXPOSED.

MANY RETAILERS WILL CLOSE THEIR DOORS AND THOUSANDS OF STANDOWNS ARE EXPECTED AS STAGE FOUR RESTRICTIONS COME INTO FORCE ACROSS MELBOURNE, WHILE COMPANIES WITH ENHANCED DIGITAL CAPABILITIES WILL BE ABLE TO TRADE AS NORMAL.

A REPORT FROM JP MORGAN ANALYST SHAUN COUSINS SAYS FOOD RETAILERS REMAIN BEST POSITIONED, WITH A SALES BOOST EXPECTED INITIALLY DUE TO PANIC BUYING BUT ALSO DUE TO PEOPLE EATING AT HOME FOR THE NEXT SIX WEEKS.

WHILE THERE WILL BE A COST IMPOST IT WILL BE TO A LESSER EXTENT THAN THE INITIAL CORONAVIRUS WAVE, WITH THE EARLY UNCERTAINTY HAVING PASSED.

PETROL STATION RETAILERS ARE WELL POSITIONED AS THEY WILL ATTRACT INCREMENTAL TRADE GIVEN THE REQUIREMENT TO STAY CLOSE TO HOME, YET THIS COULD BE SOMEWHAT OFFSET BY REDUCED TRAVEL MOVEMENT CUTTING FUEL VOLUMES.

MR COUSINS SAID FROM A COMPANY PERSPECTIVE, THE LOCAL ADVANTAGE THAT HAD SUPPORTED GROCERY, LIQUOR AND HARDWARE WHOLESALER METCASH AND INDEPENDENT SUPERMARKETS SHOULD RETURN.

COLES AND WOOLWORTHS SHOULD ALSO DO WELL, WITH COLES ARGUABLY BETTER OFF GIVEN ITS MELBOURNE HERITAGE AND HENCE A SLIGHT STORE NETWORK ADVANTAGE, ALTHOUGH WOOLWORTHS DOES HAVE MANY FORMER SAFEWAY SITES.

DISCRETIONARY RETAILERS WERE MORE LIKELY TO SUFFER AN EARNINGS FALL THROUGH THE SIX WEEKS OF LOCKDOWNS.

“ALTHOUGH ONLINE IS AVAILABLE AND TRADE OPERATIONS CAN CONTINUE, THE REDUCED OPERATING HOURS FOR DISCRETIONARY RETAILERS WILL REDUCE SALES AND EBIT,’’ MR COUSINS SAID.

“INVENTORY MANAGEMENT IS A SIGNIFICANT CHALLENGE, ESPECIALLY FOR SEASONAL PRODUCT, WHICH COULD MODERATE GROSS MARGINS.”

MR COUSINS SAID CONSUMER ELECTRONICS CHAIN JB HI-FI AND OFFICEWORKS, OWNED BY WESFARMERS, HAD THE AMONG THE HIGHEST SHARE OF STORES IN VICTORIA.

“OFFICEWORKS AND JB HI-FI HAVE A HIGHER SHARE OF STORES IN VICTORIA VERSUS ITS POPULATION SHARE; OFFICEWORKS 31 PER CENT OF STORES, AND JB HI-FI AUSTRALIA AND THE GOOD GUYS (ALSO OWNED BY JB HI-FI) BOTH 27 PER CENT OF STORES.

“HARVEY NORMAN, MYER AND SUPER RETAIL GROUP AND WESFARMERS ALL HAVE A LOWER PROPORTION VERSUS THE VICTORIA POPULATION SHARE. DESPITE STAGE 4 APPLYING IN MELBOURNE, THE STAGE 3 RESTRICTIONS IN REGIONAL VICTORIA ARE ONEROUS AND RETAIL SALES ARE EXPECTED TO BE IMPACTED STATE WIDE.”

MR COUSINS SAID ONLINE RETAILERS WOULD GAIN FURTHER SHARE.

ONLINE SHOPPING WAS ENJOYING YEARS OF CUSTOMER ENGAGEMENT IN MONTHS AND STAGE 4 WOULD BE ANOTHER ACCELERANT TO ONLINE (AND OMNI-CHANNEL) RETAIL IN AUSTRALIA.

“THIS FAVOURS THE RETAILERS THAT HAVE INVESTED OVER SEVERAL YEARS IN A STRONG ONLINE OFFERING. WE NOTE THERE COULD BE A GREATER SKEW TO DELIVERY VERSUS CLICK AND COLLECT WHICH COULD MODERATE THE MARGIN IMPACT BUT INCREASES IN SCALE REMAIN A POSITIVE.”

FROM A COMPANY PERSPECTIVE, OFFICEWORKS, JB HI-FI AND SUPER RETAIL ARE WELL-POSITIONED. BUNNINGS WAS LEARNING FAST YET ARGUABLY WOULD HAVE BEEN BETTER POSITIONED IF IT HAD ENGAGED EARLIER WITH ONLINE, MR COUSINS SAID.

JP MORGAN WARNED THE INTRODUCTION OF STAGE 4 LOCKDOWN RESTRICTIONS COULD SHOCK THE CONSUMERS INTO ACTION.

“COUPLED WITH AN INABILITY TO SPEND IN SOME AREAS OF SPENDING (EG ARTS AND SPORTS, EATING OUT, TRAVEL), DISCRETIONARY RETAIL HAS GENERALLY DONE WELL, ESPECIALLY CATEGORIES ASSOCIATED WITH THE HOME, AND INITIALLY PREPARATION FOR EXERCISE/STUDY/WORK FROM HOME.

“WHILE THE SAVINGS RATE HAS INCREASED ARGUABLY INTO THE TEENS, THE AUSTRALIAN CONSUMER HAS ADOPTED SOMEWHAT OF A LAX RATHER THAN CONCERNED APPROACH TO THE IMPACT OF COVID-19 NOW AND INTO THE FUTURE.

“THE SHOCK OF STAGE 4 RESTRICTIONS IN MELBOURNE COULD SEE A CHANGE IN CONSUMER BEHAVIOUR ACROSS AUSTRALIA, AS THE VULNERABILITY OF COMMUNITIES TO COVID-19 BECOMES MORE APPARENT AND THE LONGER TERM IMPACTS ON THE ECONOMY BECOME MORE EVIDENT