The retail industry has seen mixed results over the past two days with the owner of the Athlete’s Foot franchise recording a 30% increase in annual profit while Speciality Fashion saw its profit halved in the same amount of time.
RCG Corporation chairman Ivan Hammerschlag, who has continued to brag that the company has withstood harsh retail conditions, is now changing his tone. Although the company has delivered an increase in net profit, and sales are up 4.4%, he is now calling for the Reserve Bank to slash interest rates.
“The consumers out there have had the fear of the lord put into them. What’s coming out of Canberra is quite scary for the consumer,” he told SmartCompany this morning.
Hammerschlag refers to the upcoming carbon tax, which the Federal Opposition has said is at the heart of the recent slowdown in consumer spending.
“I think interest rates need to be dropped, and I think the average family is doing it tough. I don’t know what CPI is right now, but I know groceries are going up by more than 3%. Consumers are just very cautious.”
He also warns recent job losses at BlueScope and OneSteel will ensure this trend continues.
“When people see that over 1,000 jobs are gone, they start thinking that they had better save if it happens to them as well.”
“I’m hoping that the Reserve Bank will drop interest rates and I think for the first half of this year, the consumer is going to be cautious.”
The Athlete’s Foot recorded a 30% increase in profit to $8.9 million, with revenue also up by 39% to $42.3 million. Hammerschlag has kept profits high by focusing on customer service and refusing to discount – but he says an outlook for the next year is impossible to give.
“We’ve always outperformed and I’m sure we’ll be doing very well. But it’s going to be very hard to predict in this climate what’s going to happen. We have very robust plans and strategies.”
Meanwhile, Speciality Fashion Group, which owns the La Senza, Katies and Millers brands, has recorded a 53.4% plummet in net profit to $14.17 million. Yesterday its shares fell 8.3% after the announcement was made.
Chief executive Gary Perlstein says the results reflect “very tough trading conditions throughout the year”.
While Perlstein said more advertising and the exchange rate helped offset higher manufacturing costs, “we incurred higher rental and wages from a larger store base, inflation, and investments in people which we have made to support our growth strategies”.
“The consequence of this was a decrease in our profitability for the year.”
While Perlstein also says retail is cyclical, he also admits that there are now permanent structural shifts occurring in the industry – including the move to online.
It also said that due to difficult trading conditions and “no indication of improvement”, a final dividend was not declared.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
