There are some interesting parallels between Briscoe Group’s strong performance and the proliferation of discount stores in the USA. While Briscoe shareholders were very happy with the special dividend announced last week, J C Penney shareholders were lamenting the fact that the company is paying no dividend due to a $160 million dollar loss. So what, if any, are the reflections for New Zealand?

Costco has been a reasonably local retailer to the NZ market in that they are now operating in Australia. We explained in an earlier NIB that they are a “wholesale club” concept, simply put you have to be a member to shop. Membership costs $55 a year. In the past week we have reviewed the similar store concept, Sam’s Club. There are 600 of these stores in the USA, averaging 12,400 square metres each. Sam’s Club is owned by Walmart, so the company is covering their options with the wholesale club business. Walmart developed Sam’s Club to compete with Costco. While Sam’s Club hasn’t been as successful as Costco, it has still generated sales for Walmart as the customers who shop at Sam’s Club would probably not shop at Walmart stores.

Both Walmart and Sam’s Club offer a wide range of merchandise from supermarket to general merchandise, but the offering from Sam’s Club is higher value with less choice, and is sold in bulk. So are there any reflections here for NZ. Certainly The Warehouse attempted to offer a wider choice of merchandise some years ago with their Warehouse Extra supermarket offering, but they simply didn’t have the infrastructure to survive over time. Hence they faltered and abandoned the concept. Had they continued and made it work, it would have benefited the wider consumer market and given NZ consumers another supermarket choice.

It is apparent that discount retailing in the USA has a strong following, evidenced further by the growth in the number of the “dollar stores”. So the message for us in New Zealand is that obviously Briscoe Group has balance in its offering, with value products at discount prices. There may be a message here for the traditional department stores to be “very aware” given the J C Penney experience!

Sharewatch

Kiwi Income Property Trust is the biggest owner of retail property on the NZX, laying claim to The Plaza, Northlands, North City, Lynnmall, Centre Place and New Zealand’s largest mall, Sylvia Park. This is an enviable portfolio which is valued at $1.3 billion – not to mention Kiwi’s $567 million of office property.

Kiwi announced its annual results last week, with the highlights including increased net rent (up 4.5% to $144 million) and positive revaluations for Sylvia Park and Lynnmall. Retail sales across Kiwi’s centres were up 8.4% to $1.4 billion, with comparable sales up 5.7%. Overall, the retail portfolio has performed strongly with sales growth exceeding rental growth.

In the Press

Local and international media highlights 14 – 21 May 2012

Postie Plus new growth strategy
Postie Plus, which flogged its Babycity chain of stores for some $4.1 million, seeks to double in size through buying rivals. The budget clothing company will progressively shift its base to Auckland as part of the new strategy.
(Source: NZ Herald)

EziBuy sale talk a whisper in the wind
The Australian private equity investor with a 43.47 per cent stake in EziBuy says a report that it’s selling its way out of the clothing company founded in Palmerston North is premature. An investment firm has been hired to investigate the feasibility of the exit and a formal sale process is expected in the second half of the year.
(Source: Inside Retail)

Hamilton Op shops face rate rise threat
A proposal to force rates increases of more than 700 per cent on Hamilton City’s not-for-profit stores could mean the shops would go from paying hundreds of dollars to thousands of dollars a year. Hamiltons not-for-profit organisations, which depend greatly on the shops to fund community work, have responded angrily. They told councillors at the draft long-term hearing that they would struggle to absorb the increases.
(Source: NZ Herald)