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Amid the ever-evolving, increasingly globalised retail landscape, Australian retailers have held firm against their international counterparts in 2014, according to accounting and advisory firm BDO’s annual Spend Trend report.The report, comparing key 2013-14 financial ratios and indicators for 19 ASX-listed retailers and 13 international retailers from across the US and UK, reveals 2014 was a more positive year for Australia’s retail sector.
Indications are the sector is recovering, with sales revenue and net profit margins moving upwards, BDO stated.
BDO partner John Bresolin observed, despite international retailers generating greater revenue growth in the past year, Australian retailers have improved their gross margins, cutting key costs to achieve superior growth in net profit.
“The 2014 global retail landscape has been characterised by hyper-integration, from major online players like Amazon playing in the bricks and mortar space to more international retailers entering new markets such as Australia,” Bresolin commented.
“Likewise, retailers have had to respond to increasingly sophisticated customers by better integrating their brand and sales experience across all touch points, from the computer to the change room and the smartphone to the sales counter.”
Bresolin stated the report found sales revenue among Australian specialty retailers grew by 6.6 per cent ($1 billion), compared to 10.4 per cent ($20 billion) for the selected international retailers.
“However, Australian specialty retailers led the charge in terms of gross profit margins, which increased by 2.2 per cent in 2014, as opposed to a fall of 2.8 per cent amongst international retailers,” he added.
“The local specialty retailers also demonstrated moves to better balance their expenses, with major costs like salaries and wages, rental and marketing representing 33 per cent of sales in 2014, down from 41 per cent in 2013 and 42 per cent in 2012 – a fall of 20 per cent.”
This translated into an 11 per cent increase in average net profit margins for Australian specialty retailers, while international retailers experienced a 6 per cent fall.
Bresolin further stated Australian retailers are well-positioned financially to meet the future challenges of increased international competition and the need for greater industry innovation to meet the demands of consumers, leveraging “stronger balance sheets with less debt to meet the challenges of the volatile retail sector”.
Meanwhile, online presence is an area local retailers need to further focus on.
“It is clear, however, that many Australian retailers need to strengthen their online presence, as they are still lagging well behind the internationals in terms of e-commerce market share,” Bresolin commented.
“For example, some of the international omni-channel retailers now complete up to a third of transactions online, while their contemporaries in Australia record levels as low as 1 or 2 per cent.”
