Shopping habits exposing weaker retailers

Jane Harper
Herald Sun
October 24, 2012

A TWO-speed retail sector is emerging as the gap between successes and stragglers widens, analysts say.

Retail giants Woolworths and Wesfarmers cautiously heralded the green shoots of a consumer revival last week, but troubled clothing manufacturer Pacific Brands was less optimistic yesterday.

New chief executive John Pollaers told the annual meeting in Melbourne he was uncertain the group could turn around last year’s loss. Underlying sales in the first months of the financial year were down.

Analysts said the shifting retail climate was crystallising the differences between poor performers and more robust companies.

“We are seeing the strong getting stronger and the weak getting weaker,” Morningstar retail analyst Tim Montague-Jones said.
“Companies such as Woolworths and Wesfarmers are getting a larger share of the frugal dollar and taking market share from weaker competitors.”

PacBrands — which owns 40 brands including Bonds, Rio and Sheridan — posted a $451 million loss in the year to June after being hit by restructuring costs and goodwill writedowns.

Mr Pollaers, who took the helm in September after the resignation of Sue Morphet, said the climate was producing “mixed” retailer results.

“I think it’s still a wait-and-see over the next 12 months to see how the retail environment shapes up,” he said.

Mr Pollaers could not rule out further writedowns or restructuring moves for the group, but said he was happy with the changes that had been made.

“My sense is the company is in much better shape as a consequence of the decisions that it’s taken over the last five years,” he said.

Mr Pollaers said the company was well placed to benefit from any economic upturn, and would focus on top-line sales growth, improving its retail operations, and exploring potential overseas markets for its top brands.

“There are plenty of opportunities for us,” he said.

Shareholders responded positively to changes to Pacific Brands’ salary policies, and the company comfortably avoided a “second strike” on the adoption of the remuneration report.

Almost 98 per cent of shareholders voted in favour of the report, compared with last year, when 53 per cent voted it down.
Pacific Brands’ shares closed down by 4.5 per cent at 53c.