Retail surge fuels rates speculation… Fast food audits… Retail lease fracas… State/federal funding promises… Reporting ‘sustainable’ risk… Online entertainment bonanza… Flight Centre drops private equity plan… BlackBerry winner
Wednesday, August 1, 2007/
- Retail surge fuels rates speculation…
- Fast food audits…
- Retail lease fracas…
- State/federal funding promises…
- Reporting ‘sustainable’ risk…
- Online entertainment bonanza…
- Flight Centre drops private equity plan…
- BlackBerry winner…
- Economy roundup
Retail sales surged ahead by 1.4%, seasonally adjusted, in June – a result that exceeds market expectations and will further confirm the widespread view that we are set for an interest rate rise in August.
The 1.4% increase represents a strong rebound from recent declines in retail growth of 0.3% in April and May this year.
Although the market had expected a rebound in retail sales, the 1.4% result is significantly above the 1% increase most predicted and it is the biggest monthly rise in two years. The result means retail sales have increased 6.7% over the past 12 months.
Clothing and soft good retailers enjoyed the strongest conditions of the sector in June with an impressive 5.6% increase in sales. Sales of growth of 1.4% in hospitality, 1.3% in household goods and 1.2% in food retailing also contributed to the result.
Queensland retailers led the nation with sales growth of 2.2%.
Activity also lifted significantly in the manufacturing sector in June, according to the Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index. AiG chief executive Heather Ridout says strong domestic demand is behind the boost in activity, with production, new orders, employment, finished stocks and deliveries all up.
The retail sales and manufacturing results follows strong building approvals growth of 7.5% and credit growth of 1.8% revealed in data yesterday. Combined they support a robust view of the Australian economy that may reassure the Reserve Bank of Australia that an August interest rate rise would not seriously impede future growth.
In the wake of the scrutiny of Bakers Delight franchisees under investigation for underpaying employees, Australia’s Office of the Workplace Ombudsman is to conduct spot checks of fast food outlets and juice bars to ensure adequate youth wages.
The Sydney Morning Herald reports that 10,000 fast food businesses will be sent information packages detailing their legal obligations to staff.
Inspectors will conduct random audits of about 1000 of these businesses to ensure proper wages are being paid, with special attention given to shift penalty rate entitlements and overtime.
The Productivity Commission inquiry into retail leases is opening a can of worms. More than 100 submissions have been received, some reportedly running to 700 pages. And more are expected.
The imbalance of power between landlords and tenants, and franchisors and franchisees, is emerging as big concerns for industry participants.
Joanne Howarth, a former tenant of the Lend Lease shopping centre at Erina Fair, one hour north of Sydney on the New South Wales central coast, is using the Commission inquiry to publicise the problems she says she and other tenants have experienced at the shopping centre.
Howarth, who owned the Arizona Bar & Grill restaurant at Erina Fair, has lodged a submission detailing her experience and that of several other tenants of the shopping centre. She says she lost her home and all her savings when her business failed.
She claims that when Lend Lease, the owner of Erina Fair, expanded the shopping centre by 132% in 2003, it promised increased traffic. In fact, traffic to the centre has increased by less than 4% a year over the past three years, and competition for business has increased.
Howarth has become the spokesperson for the Erina Fair Tenants Action Group and claims that 77 businesses have all been forced to close their doors for similar reasons.
Lend Lease Retail rejects Howarth’s claims as false and misleading and says it “made great efforts to help Ms Howarth deal with the Arizona Bar & Grill business, and we regret that they were not able to attract sufficient support from the market”.
In a statement to SmartCompany, the company said that her failure “is not reflective of the business environment at Erina Fair”.
Howarth is arguing to the Productivity Commission that landlords should be held accountable for their representations about traffic flow, and when stores’ turnover falls, there should be rent reductions. She also believes there are problems for franchisees when franchisors and landlords form close relationships at the expense of franchisees.
Howarth has also complained to the ACCC that Lend Lease has acted unconscionably in contravention of the Trade Practices Act at Erina Fair. She says the ACCC has been considering her case for nine months but she is yet to hear whether it will pursue Lend Lease on her behalf. “We want [ACCC chief] Mr Samuel to take on the case to set a precedent… because [this type of behaviour] is destroying small business.”
But Horwarth has little faith in the ACCC, which she believes displays a lack of skills and experience. “We don’t need to strengthen the laws, the ACCC staff are uninformed and don’t do proper research and investigation.”
SmartCompany.com.au attempted to get a response from LendLease, but they were unable to respond before publication.
Labor leader Kevin Rudd’s promise to rearrange state-federal funding arrangements has been welcomed by leading industry groups the Business Council of Australia and Australian Industry Group.
Rudd says a Labor government would remove conditions on grants given to state governments in order to increase efficiencies and remove the basis for complaints by the states that failings in their programs are due to restrictions that come with federal funding.
“The emphasis seems to be on addressing the lack of transparency and putting more rationality into [grants to the states],” AiG chief executive Heather Ridout told The Australian.
Increased “triple bottom line” reporting by SMEs could increase profits by between 2% and 3%, new economic modelling reveals.
According to the report, commissioned by the Financial Services Institute of Australasia (Finsia), small business would increase profits by an average 2%, or $1000, and medium sized businesses by 3.1%, or $22,000 per year, if they reported on the impact of their activities on society and the environment along with conventional financial information.
A rise in the number of businesses that engage in triple bottom line reporting from the current 23% to 60% would result in a $1.2 billion boost to Australia’s annual gross domestic product, according to the report.
The biggest boost for businesses that report on their social and environmental sustainability would be reduced insurance premiums due to the increased information insurers and banks would have about environmental risk.
A focus on efficient environmental practices and increased employee morale would contribute a 0.8% increase in labour productivity, the report says, while favourable consumer attitudes to good corporate behaviour would allow those businesses to charge a 2% brand-based price premium, according to the report.
Finsia chief executive Stephen Harrison says the report shows there is a strong business and economic case for voluntary reporting by businesses of sustainability risks.
Growth in demand for online entertainment and subscription television will drive Australian consumers to spend more than $15 billion on media and entertainment by 2011, according to a new report by PricewaterhouseCoopers.
According to the report, consumer spending on media and entertainment will increase 5.3%, from $11.8 billion in 2006 to $15.2 billion in 2011. An increase of 11.1% in spending on subscription TV, 8.1% in spending on the internet and 6.9% increase on computer games are the biggest contributors to this growth, the report says.
By 2011, subscription and digital media entertainment will compromise nearly 47% of the total consumer spend in the sector, a result PwC partner Paul McNab says is “revolutionary”.
The travel group has abandoned plans to join with Pacific Equity Partners in a proposed leveraged joint venture after an independent report judged the deal neither fair nor reasonable for shareholders.
The deal would have valued Flight Centre at about $1.6 billion, including debt.
The independent expert, Ernst & Young, concluded that, based on an analysis of Flight Centre’s performance for the year to 30 June 2007, the offer was not fair or reasonable, the appropriate value of the business being $2 billion to $2.1 billion.
Flight Centre’s shareholders, who control more than 50% of the shares, said they would not support the deal under the proposed terms and would vote against it.
Flight Centre chairman, Bruce Brown, said that while the creation of a leveraged joint venture had the potential to deliver significant benefits to shareholders, it was also a highly complex and costly transaction.
The value proposition had become considerably less attractive to shareholders as a clearer picture of the transaction costs emerged, he said.
Sydney-based FuturePeople Recuitment has won the Optus BlackBerry. Congratulations to Linda Simonsen from FuturePeople Recruitment. Please write in and tell us how the BlackBerry helps you run your business!
For those who have been living under a rock, SmartCompany has been offering an Optus BlackBerry to readers who got their award entries in early. Thanks to the hundreds of companies that responded in the past week! And don’t forget. Entries close on Monday August 6!
Selling in Australia’s sharemarkets has recommenced this morning after some steadying yesterday, the S&P/ASX 200 losing 1.6% or 100.2 points to 6044 by 12.30pm.
An announcement by Macquarie Bank that two of its high-yield funds could lose significant value because of exposure to the US sub-prime market triggered the selling. Babcock & Brown, Allco Finance Group and Challenger Financial Services Group all followed Macquarie Bank shares down, according to a Bloomberg report.
The Australian dollar has followed the sharemarket down to US85.35c at 12.30pm after closing yesterday at US85.97c.
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