Business

Jeanswest, EB Games, victims of scary times for retailers

New Zealand retailers are holding up - just - in the face of what’s been described as a January Aussie retail “apocalypse”. And the coronavirus isn't going to help.

An unprecedented number of high-profile Australian stores have gone under this month. These include two Aussie-grown chains with a big presence in New Zealand: fashion chain Jeanswest, which announced it had appointed KPMG as voluntary administrators, and video games retailer EB Games, which said 19 stores would close in Australia. 

Meanwhile, the US-based headphone giant Bose, which sells in New Zealand through third party retailers, is closing all its stores in America, Europe, Australia and Japan - 119 in total.

So far there’s no shock news in New Zealand. KPMG spokeswoman Marjorie Johnston told Newsroom that “Jeanswest NZ is not affected by the Australian voluntary administration”.

However a close look at the financials for the NZ subsidiary show the company hasn’t made money since 2015. NZ Companies Office records show Jeanswest Corp (NZ) Ltd lost $2.6 million in 2016, $800,000 in 2017, and $1.6 million in 2018. The 2019 results aren’t yet available. Johnston wouldn't comment on the NZ financial position.

Jeanswest has approximately 15 stores across New Zealand, according to its store finder. Three more in Auckland are listed as “permanently closed”.

Retail NZ chief executive Greg Harford said the outlook was “gloomy” for the retail sector in New Zealand, but he wasn’t expecting the sort of mass-exodus seen in Australia. 

Still, “no retailer can continue to make losses indefinitely", he said.

New Zealand shoe retailer Ziera (formerly Kumfs) folded in September last year, blaming falling bricks and mortar sales and rising rents and staff costs.

Overall retail is growing, and NZ isn't doing so badly compared to most Australian states. Source: Retail NZ Retailing Now report.

Loadsa shopping, just not as we knew it

It’s not that we aren’t shopping - the exact opposite. Retail is a $96.8 billion industry in New Zealand and we’re spending almost double what we did 20 years ago in actual dollars; 30 percent more adjusted for inflation.

And it’s not necessarily that there’s anything wrong with our retailers. 

In fact we like our shops. We like Jeanswest, for example. Research company Roy Morgan does a monthly clothing store customer satisfaction ratings. It shows the almost 50-year-old jeans retailer got a 94 percent thumbs up from Australian shoppers in 2019 - more likes than any other clothing retailer.

It’s fair to assume the company has similar popularity in New Zealand.

Jeanswest started as one store in Perth in 1972. By 2011 there were stores in China, the Middle East, Indonesia, Russia, Nepal and Fiji - as well as NZ. From the Jeanswest website.

But as everyone knows, we’re spending more online. Online retail sales grew by 16 percent over the last year, according to Retail NZ’s 2019 Retailing Now report, while bricks and mortar grew 2 percent. International retailers took a third of the total online spend.

And competition from online retailers, here and overseas, is keeping prices - and therefore margins - down. Hence the closures.

Overall profit margins are just 3.6 percent in the retail sector, according to the Retail NZ report, released just before Christmas. In clothing and footwear margins are 4.4 percent, in electrical and electronic goods 3.4 percent. They are even lower for cars, fuel and food.

Less than half (45 percent) of NZ retailers met their sales targets for the last three months of the year, Harford says.

“There is strong competition from overseas and domestic websites, with consumers looking for convenience, great prices and great brands,” Harford says. “On the other side there is pressure on costs. Wage costs are increasing, as are production costs, lease costs and insurance costs.”

Caption

Things might pick up a bit this quarter, but Harford is pessimistic overall for this year.

“We’re operating in an uncertain economic environment, and then there’s the election, and the coronavirus creating uncertainty in terms of tourism and trade.”

EB Games

No one at EB Games’ New Zealand head office returned Newsroom’s calls and emails, but a sales assistant said she had heard the company’s 40 or so New Zealand stores were remaining open, at least for the time being. 

With online stores offering better deals and selection, I rarely have a reason to shop with them.

But as one Canadian store user put it, times are tough for EB Games.

“I need EB Games in Canada to last long enough to get my last paid off preorders from them (LEGO Skywalker Saga and Tales of Arise) and then I don't really care if they go out of business. Back in the 360 days I actually liked them more than most people, they carried more games and special editions than other stores. But now with online stores offering better deals and selection and EB Games stores being flooded with non-game related items, I rarely have a reason to shop with them.”

Get it early – This article was first published on Newsroom Pro and/or included in Bernard Hickey’s ‘8 Things’ morning email of the latest in-depth business and political analysis. Get it early by subscribing now or starting a 28-day free trial.

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