PERTH’S patchwork economy pulled the shutters down on a further two House kitchenware stores this week, after the Carousel and Armadale franchises went into administration.
PERTH’S patchwork economy pulled the shutters down on a further two House kitchenware stores this week, after the Carousel and Armadale franchises went into administration.
It comes just weeks after the Karrinyup, Joondalup and Whitfords store franchises were all placed in the hands of administrator HLB Mann Judd Insolvency (WA.)
It underscores the impact of a sharp pullback in discretionary spending,
particularly in the broad, middle
market.
Of the five stores in administration, only Whitfords will continue to trade after the master franchisor took over its operation.
HLB Mann Judd senior restructuring and turnaround consultant Bob Jacobs said he had noticed a marked increase in retail businesses seeking advice since February. He said high rents and rent increases were often the last straw for retail businesses already grappling with dwindling cash flow.
And despite the tough market conditions, many landlords are continuing to raise rents.
“It’s not slowing down and from what I can gather ... landlords are not renegotiating on the increase in rents,” Mr Jacobs said.
The House closures come after a horror start to the year for Australia’s retail sector with Colorado Group, Ed Harry, Borders and Angus & Robertson all falling victim to weak consumer spending.
Anxiety over interest rates rises, higher utility costs and the growth of online shopping have all been blamed for soft retail spending, but Retail Traders Association of WA executive director Wayne Spencer pins it on the GFC. He said the GFC taught consumers to budget and nationally savings were running at record levels.
Mr Spencer told WA Business News the impact was worst for retailers dealing with the big-ticket household items that could be delayed or deferred.
“People understand discretionary spending to be televisions or furniture and those areas have been hit dramatically, but it is all the way down to the chocolates and the soft drinks,” he said. “There is a lot of competition out there; you have price deflation, margin pressure and on the other end you have cost pressures for retailers, like landlords wanting rent increases.”
And the picture isn’t any brighter for the grocery sector as consumers rein in spending on non-essential items.
The National Association of Retail Grocers of Australia’s John Cummings said under-employment, which wasn’t reflected in the employment figures, was also putting the squeeze on many household budgets.
But the story isn’t all bad and WA’s uneven economy is harbouring pockets of resistance, where devoted shoppers are still doing their bit to bolster the retail trade results, particularly at the top end of the fashion market.
Lease Equity’s Jim Tsagalis said a number of leasing deals he was working on would set new high-water marks, both in city and suburban locations.
Mr Tsagalis identified fears over rising interest rates as the biggest dampener on spending but he said there were still plenty of positives on the horizon for the sector.
He suggested a more detailed analysis of the retail industry revealed how uneven the performance of the sector was across suburbs and centres.
“It really comes down to the micro economics of the locality,” Mr Tsagalis said.
“Clearly what has happened with Colorado, with Ed Harry and Angus & Robertsons and Borders had been something that has been ongoing and that doesn’t augur well.
“But there are still segments that are growing ... typically we work harder to find those operators that can take advantage of the situation but we have got some transactions that will be benchmark deals for the markets they are in.”
