• Sort by

  • Industry

Toggle intro on/off

The Retail Mosaic Issue 6

An inventory balancing act - The short-term pain of excess inventory

07 April 2023

A successful retailer has the right product, at the right price, at the right time. However, retailers regularly find themselves with the wrong inventory position. In Issue 6 of The Retail Mosaic, we assess the metrics used to measure inventory, the most useful red flags and the margin pain a retail with too much inventory may endure. A retailer with excess inventory can quickly sink into financial losses, but the impact usually lasts no more than 12 months. While some Australian retailers have excess inventory, the problems are being cleared quickly and inventory positions are likely to be more balanced in 2024.

Harvey Norman (HVN) 1H23 result

Earnings normalisation underway

02 March 2023

Harvey Norman reported a 2% increase in system sales but a 7% drop in group EBITDA for 1H23. The result showed margin pressure from increased discounting across its businesses. The deterioration in its recent sales trends suggests it will be a tougher 2H23e and FY24e in our view. An added risk for Harvey Norman is the higher than usual franchisee inventory holdings, which could squeeze margins further over the next 12 months. We expect margins to largely normalise to pre COVID-19 levels as sales slow and discounting levels increase.

City Chic (CCX) 1H23 result

Inventory reset

01 March 2023

City Chic’s 1H23 result shows the financial cost of its elevated inventory position. The second-half will also be loss-making based on our forecasts. However, the more fundamental question is the magnitude of its recovery in profit margins and the path to a net cash position. Both seem likely. However, investors will need patience. While still facing a challenging six months, conditions are likely to improve.

Reporting season preview - Retail, food & beverages for 1H23e

Retail has reached peak earnings

02 February 2023

Australian retailers will deliver good results for the upcoming reporting season in February and March 2023, once again mystifying many that worry about higher interest rates. While reporting season will reveal impressive earnings for most, we are becoming more cautious. It may sound like a contradiction, but this set of results is likely a peak and earnings could fall meaningfully over the next 18 months as sales growth falls below cost growth.

Post-Christmas retail feedback 2022

Something to celebrate

06 January 2023

We expect Christmas retail sales to surprise on the upside with a partial offset in lower profit margins. The strongest feedback comes from department stores, electronics and supermarkets. However, not all have done well. Off-premise liquor looks to be in decline and womenswear feedback is weak.

City Chic (CCX) November AGM trading update

This will be a wild ride

29 November 2022

City Chic’s 2022 AGM trading update highlighted a normalisation in sales and squeeze in profit margins for FY23e. We expect FY23e EBITDA pre AASB-16 to fall to $19 million. While a low point, profitability should recover as the industry-wide inventory position normalises over the next year. We have structurally dropped our sales forecasts given Avenue looks to be resetting sales lower like many online businesses. We expect EBITDA margins to trough at 5.6% this year and recover to 11.8% by FY25e.

Harvey Norman (HVN) AGM November 2022 trading update

Strong demand locally

29 November 2022

Harvey Norman has provided an AGM update that reflects the strength of the consumer in many of its markets. Australian comparable sales rose 8.8% and the three-year CAGR is 8.0%. Slovenia and Ireland are also very strong. Given good sales results, we expect profit margins to only fall slightly in FY23e. If Harvey Norman can reduce its inventory levels in an orderly manner, the margin compression could be less than feared.

City Chic (CCX) - The company has enough demand for now

Discounting levels are up

24 November 2022

City Chic’s high inventory position has made investors nervous. We acknowledge the risk but feel that the combination of solid demand for fashion in its key markets, and a return to a net cash position is appealing. It won’t be a smooth ride for investors, but the company should emerge over the next 12 months with a stronger position in global plus-size fashion market and a net cash position.

Search result for "" — 310 articles found

Not already a member?
Join now to get all the latest reports in full and stay informed.

Get started