As if Australia's department store giants didn't have enough problems already, things could be about to get a whole lot worse with global cosmetics retailer Sephora opening its first Australian store today.
Sephora is the world's largest beauty retailer and has just set up shop in the Pitt St Mall in Sydney's CBD, while it has plans for around 20 more stores over the next few years. Unfortunately for companies like Myer Holdings Ltd (ASX: MYR) and David Jones (which are already struggling with the slew of changes occurring within the retail industry), Sephora has also committed to adopting US pricing on a number of brands, even if this means subsidising prices.
According to The Australian Financial Review, Myer and David Jones currently control an estimated 60% of the premium cosmetics market. In order to maintain the upper hand, both have already begun reducing prices on their cosmetics, while they've also begun making exclusive offers to loyalty program members.
At this stage, it is unclear how much the expansion of Sephora will impact Myer or its waning share price. In light of the increasingly popular online retail sector and shaky consumer confidence, Myer has struggled to grow profits, although it has reported 10 consecutive quarters of growth in its cosmetics business. As such, it is imperative that Myer remains competitive in this division, although volumes will need to increase in order to compensate for the lower sales prices.
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