I had the pleasure of being in Melbourne over Christmas. It was a great time spent with friends and family.
I’d actually almost forgotten what insane Aussie summer heat feels like. But it didn’t take me long to catch up.
We landed around 18 December. As we’d literally rolled in with just a couple of suitcases, it meant time to shop! We had to get ‘Chrissie’ presents for everyone.
From where we were staying, the closest shopping centre was Southland. That would be our venue of choice. Before we had a chance to get out to Southland though, we had made a couple trips into the city.
One trip took us through South Yarra. Being a Melbourne High School old boy, it was a little trip down memory lane. Many years spent walking through the area either on the way to school, on the way to skiving off for a beach afternoon, or heading home.
Also a few trips to ‘LoC’ to grab a ‘souva’ and a coke, or La Porchetta for a large anything. At that age I had a bottomless stomach, something not replicated in my mid-30s.
But this most recent sojourn through South Yarra and Chapel St in particular was…well, it was different.
Consumers haven’t stopped spending…
Chapel St used to be a thriving hub of retail shops. Every other shop was some kind of boutique clothing shop or a new label that had burst onto the scene appropriately in time for the Spring Racing Carnival.
Then everything else was either a bar or the likes of LoC or LaPorchetta, some kind of restaurant or takeaway.
Today, it’s a shadow of its former self. It feels like the heart and soul has been ripped out of Chapel St. We also had a chance to head through Fitzroy Street, St Kilda.
While it’s never been exactly a ‘retail’ hub of Melbourne, it has always had some kind of thriving scene with bars, boutique restaurants, and some atmosphere. Not anymore. It’s as dead as a door nail.
Bet those multimillion-dollar The Block apartments in the former death-den Gatwick hotel were worth it…
Nonetheless, you couldn’t help but feel these iconic parts of Melbourne were on their last legs.
It’s easy to understand where they come from when the likes of Dick Smith say iconic retail is dead.
In fact according to the Daily Mail Australia:
‘Entrepreneur Dick Smith believes the outlook [for retail] is so bad, high-profile collapses will accelerate until there’s very little left.
‘“Job losses are concerning. We have 170 retailers slated to close only two weeks into of January this year,” he told Today.
‘Speaking to Daily Mail Australia Mr Smith said that internet companies had driven the retail disaster.
‘“We will end up with just Amazon and Aldi and basically all the Aussie companies will be sent to bankruptcy,” he said.’
‘Iconic’ retail names such as Harris Scarfe, Bardot, Roger David, Collette by Collette Hayman, EB Games, and Jeanswest are now either running off fumes or completely cactus. Oh and Dick Smith, but that went under years ago.
Going through all those, yep you’d think retail in Australia is dead.
Only one problem with that. It’s not.
Actually if you know how to properly read the Aussie retail market, you can make a killing. It just depends on where you look.
When we got around to Southland — part of the Westfield shops, owned by Scentre Group [ASX:SCG] — it was clear retail wasn’t dead. Not here.
It was thriving. There were people everywhere. And there wasn’t an empty store front in sight. The consumer hasn’t completely stopped spending. They’re just pickier on where and how they spend.
The new breed are killing it!
People still buy stuff in Australia. It’s just the kind of stuff they buy has radically changed. That’s because tastes, styles, fashions, and perception of value has changed. Stores that can’t figure out how to deal with that struggle and die.
Those that can adapt with the market will flourish.
Speaking of iconic names, I’m guessing you’ve heard of Shaver Shop Group Ltd [ASX:SSG]? I remember buying my first Panasonic wet/dry shaver there. I used to buy beard oil from there. If I still lived in Australia I’d probably still buy my shaving related kit there.
Shaver Shop has certainly gone through it’s up and downs. But it’s still alive and kicking. And right now, it’s on the up. In fact over the last year, Shaver Shop Group’s stock price has gone from around 34 cents to as high as 70 cents less than a month ago. That’s 105% return in the last year. Business can’t be that bad, can it?
Then there’s Baby Bunting Group Ltd [ASX:BBN]. Does what it says on the tin here. They sell baby related products to the mums and dads of Australia. Here in the UK, their equivalent, Mothercare is currently in the process of administration. But not Baby Bunting.
In the last year their stock price has gone from around $2.12 to as high as $4 in November and now around $3.50. A 65% return to today’s numbers. They’ve clearly not submitted to the death of retail idea.
Then there’s the City Chic Collective Ltd [ASX:CCX]. Now this is a story of many parts. City Chic is a standalone brand. It used to be known as the Specialty Fashion Group. As SFG it had a bunch of ‘iconic’ brands, many of which began to fail and drag the company down.
So SFG offloaded them to Noni B. Noni B then changed their name late last year to Mosaic Brands Ltd [ASX:MOZ]. Now if you were to follow the progress of Mosaic, you’d see they’re part of the retail group suffering from the ‘death of retail’. Their stock has been on a dive, from around $3 in September last year to less than $1.60 in the last week.
But City Chic which specialises in real clothing sizes for women has been on a tear. They’ve found their lane by adjusting to the market. Around this time last year you could pick up CCX stock for about $1. Today at $3.20 you’d be sitting on a tidy 220% gain.
And last but not least, there’s Temple & Webster Group Ltd [ASX:TPW]. Their business is the new breed of Aussie retail. They sell furniture and homewares online. And their product range isn’t designer, but it’s not bargain basement either. It’s ‘affordable luxury’. This is a reflection of the modern consumer wanting quality and luxury without exorbitant price tags. It’s the new definition of value.
And Temple & Webster have also seen the future of the market and capitalised on the new Aussie retail. A year ago, TPW stock was trading at $1.25. This week it hit $4 and traded over briefly. That’s another 220% gain in a year.
Now call me stupid, but those few don’t look like retail is dead at all.
Okay, yes it’s radically changing in front of our eyes. And yes, fear has kicked into Aussie retail with full force — just ask Dick Smith.
This ‘new breed’ of retailer is absolutely killing it. Sure there are a few names in there from yesteryear. But they’ve learnt to behave like these new entrants and adapt to the new market.
The other good thing here is they’re all small-cap companies on the ASX.
If there was ever a time to buy the fear, then we think this just might be it. Aussie retail is ripe for the picking, so long as you find the right ones making the right moves.
Editor, Money Morning
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX, in particular small-cap stocks. Learn all about it here.