Have you spent time in any of Australia's major malls or shopping centres recently? Did you notice anything different? I went shopping in Adelaide on the weekend and, to be honest, I didn't notice anything different. There were plenty of shoppers around, many Australian-owned stores were busy, and cafes were full.
So why are Australia's major retailers struggling?
Myer Holdings Ltd (ASX: MYR) is the latest casualty, following hot on the heels of disappointing results from rivals and peers OrotonGroup Limited (ASX: ORL), Metcash Limited (ASX: MTS), Woolworths Limited (ASX: WOW), Specialty Fashion Group Ltd. (ASX: SFH) and Kathmandu Holdings Ltd (ASX: KMD), among others.
Myer reported a 1.5% increase in first-half revenue to $1.76 billion but a 23% fall in net profit after tax to $62 million, some 20% below analysts' expectations from a month ago.
Some blame the influx of foreign competitors, others blame the internet, while other groups blame any combination of factors from current tax law to landlords.
Competition is Key
Investors are being taught a valuable lesson about how to select great companies. The best investors search far and wide for companies that have a competitive advantage over peers. It could be a unique product, a superior brand, grander scale or large switching costs but one way or another, the best companies are able to keep their customers through good and bad.
Australian retailers are struggling because consumer spending has fallen off, resulting in consumers either delaying spending or looking for cheaper alternatives from discount retailers.
Innovative and agile companies like Noni B Limited (ASX: NBL), Super Retail Group Limited (ASX: SUL) and Dick Smith Holdings Ltd (ASX: DSH) look set to outperform, while slow-movers like Myer and Metcash may find it hard to adapt to the changing retail landscape.
Don't make the same mistake, get ahead of the game!
