As we head into the autumn and winter trading periods, Australia should expect to see more retail brands collapse, according to high-profile retailer Gerry Harvey.
Some, including Jeanswest, look set to survive the insolvency process, but the collapses have resulted in the closure of a significant number of retail shopfronts.
Also contributing to the sense of a so-called retail apocalypse has been decisions by other retailers, including EB Games and Bose, to close multiple stores, and German hypermarket Kaufland’s shock exit from Australia.
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Speaking after the release of Harvey Norman’s latest results, Harvey told news.com.au there are more retail collapses on the way, and they will likely include smaller businesses.
“The main ones have probably gone now, there will be more but they might be smaller ones, although I don’t know of any that are having a really big problem,” he said.
“I don’t think anyone has been surprised by the ones that went — not anyone in retail or businesspeople, because they were all on the margin.
“It’s not a secret, it’s just a fact of life that there are certain retailers out there living day-to-day, while others are doing quite well, and others in between.
“It is a hard business, and some retailers are really good, while others are really bad, but overall it’s not an easy business.”
Harvey attributed the challenges currently confounding the retail sector to a number of issues, including high rents, online competition, and a downturn in spending associated with the drought and bushfires.
“It has been difficult right across the board in Australia — it’s just a thing more retailers and business have been battling in the last 12 months,” he said.
High retail rents have been a particular problem, said Harvey.
“We have a situation here with major shopping centres whacking up rent and big overseas chains coming in, but some are now leaving, department stores are in trouble and shopping centres are now dropping rents, so things have changed quite a lot over the last year.”
Speaking to SmartCompany last week, one commercial leasing expert said conditions for retail tenants are the worst he has ever seen.
“I’ve been doing this 40 years, I’ve seen CPI (consumer price index) at 18 per cent going back to the Gough Whitlam days … I’ve seen everything that’s bad for retailers,” said Lawrence Brown.
“But I’ve never seen this, this is something right out of left field.
“For a deal to be signed today, I would have to do it so that there was absolutely no downside.”
Brown, a leasing consultant and managing director of Complete Retail Services, has been working in the space for 40 years.
He said the COVID-19 (coronavirus) outbreak has combined with already weak retail conditions to create an unprecedented situation for Aussie traders that’s probably going to get worse before it gets better.
The situation is so precarious that fashion retailers are facing the possibility of a winter season without any stock.
For its own part, Harvey Norman saw its first-half profit drop by 4%, to $213.6 million. Revenue from Harvey Norman franchisees was down 4.2% to $497.8 million, while company-owned stores say a 5% increase in revenue, to $1.24 billion.