Retailers have been struggling against cyclical and structural pressures since the global financial crisis, but the latest set of numbers from Premier Retail shows what can happen if you have a growth strategy that actually works.
In addition to the usual woes for retailers, shares in Premier have been whacked over the past six months as the short sellers got taken in by the narrative that said having any exposure in Britain after the Brexit vote wasn't a smart move.
Since June 23, 2016, when the referendum took place, the major S&P; ASX 200 index has risen 7 per cent but shares in Premier have fallen 7 per cent.
That was reversed sharply on Wednesday when the shares jumped as much as 14 per cent at one point which showed all the talk about Smiggle and British exposure post-Brexit was completely overdone.
One of the features of 2016 was just how wrong financial markets were about some of the political events including Brexit and the election of Donald Trump as President of the United States.
It's not all plain sailing at Premier with retail sales for the 26 weeks ended January 28 rising 7.1 per cent to $588.6 million, just below consensus forecasts of close to $642 million.But it looks like double-digit growth at Smiggle and new stores at Peter Alexander helped make up for negative sales growth in its other core brands.Bunnings too will be hoping it can tap into what consumers want in Britain and last week its first store was opened in the Hertfordshire town of St Albans.
There's no doubt retail is a tough business.
In no particular order retailers can have high fixed costs – if they are the old fashioned bricks and mortar type – high working capital intensity, low barriers to entry as well as fussy and fickle customers.
Little wonder the sector is sometimes seen as a case study in the worst possible business to be in.
Bottom line, if you're in retail you're betting your capital that you can keep your costs low, your inventory sharp and fresh, your customers happy, (as well as getting more of them) and if that's not enough retailers have to be nimble enough to stave off any upstart competitors.
It's all a big ask.
It comes as local consumers have had to put up with the slowest wages growth since records began in the 1990s, while the impact of online shopping has also been well documented.
Retailers have also had it good. The local economy hasn't had a recession since 1991 and interest rates are at record lows.
But the strategy of discounting to chase sales now means consumers expect sales and huge discounts all the time.
Unless, of course, you have something consumers really want.
In Australia the consumer is still a very powerful force and spending does drive the local economy.
In the latest reported national accounts it contributed almost 60 per cent of gross domestic product.
We are all still spending, it's just what we spend our money on that has changed.
Apparently these days we are also more "cautious" when we open our wallets which means it's more important than ever that retailers keep up with our changing tastes.
At the same time local retailers have to put up with global competitors who still think they can make money here.
In 2016, according to the Australian Bureau of Statistics, we all forked out more than $300 billion on retail goods like food, clothing and spending at cafes and restaurants.
The report released this week also showed that although we spend more on clothes and food online, we do tend to spend less at specialised shops.
In addition, the ABS released some data on Monday that showed Australians, on average, spent just over $240 a week on retail goods in 2016, which was $5 a week more than previously.
