- Parts of the retail sector badly affected by the pandemic have yet to recover
- Meanwhile, Large Format Retailers have had very strong years so far
- Half a dozen ASX-listed LFRs grew half-yearly income 20% to 30%
The Large Format Retail (LFR) sector employs 441,807 people in Australia and represents more than 24.7% of all retail sales.
As Harvey Norman Chairman Gerry Harvey reported in his company’s 2020 Annual Report, the biggest consumer change from the pandemic both here and overseas was “the elevated importance of family, home, work and study from home, cooking and entertainment from home.”
Looking at the half-yearly results for several large-format brands in Australia, many have been able to capitalise on this consumer shift. It has been a very lucrative time indeed.
- Harvey Norman reported half-yearly revenue growth of 27% to $2.3bn
- Bunnings revenues were +24.4% to $9bn
- Officeworks +23.7 % to $1.52bn
- JB Hi-Fi +23.7% to $4.9bn
- Mitre-10 +20.6% to $1.3bn
- Super Retail Group, owner of Supercheap Auto, +23.1% in revenues
Every LFR business mentioned grew their income by 20% to 30% during the first half of the current financial year. Quite incredible results.
Burgess Rawson is a market leader in sales and leasing of large format retail investments nationally. They’ve also seen increasing interest in the sector, with their monthly auctions selling out, with far more money in the room than assets.
“Most retailers in the LFR sector are classed as ‘discretionary’, but COVID-19 has completely tipped that on its head with record sales performance reported right across the LFR sector.”
Billy Holderhead, Burgess Rawson Melbourne Director
“The move to working from home and change in consumer spending, due to an increase in home improvement projects, gardening and maintenance, will underpin ongoing demand for these retailers.”
“This success has certainly translated to strong property investor interest,” he added. “The most desirable properties in the market are top-tier retail investments, such as Officeworks and Bunnings, as they traded so well during the pandemic.
“These are blue-chip investments and very few freestanding properties have been publicly marketed in the last 18 months, so we expect strong competition for anything that is put up on the open market.”
Burgess Rawson Sydney Director Dean Venturato agrees, saying that large format retail has several attributes that continue to generate demand in the $7.5+ million range.
“Strategic locations, often with highway frontages, substantial parcels of land; ASX-listed tenants and secure leases all add up to a very desirable investment,” said Mr Venturato.
This appeal heightened during 2020 as large format retail continued to trade during lockdown.
“A huge benefit of large format retail outlets during COVID was the vast car parking areas,” Mr Holderhead said. “Retailers moved quickly to outdoor and socially distanced ‘click and collect’ services, with customers not even needing to leave their vehicles.”
Key Large Format Retail Players
• Leading retailer of home improvement and outdoor living
• 376 trading locations, more than 54,000 employees
• Recently employed 6,000 new team members due to increased demand
• Two new stores opening in Victoria and approval granted for another in Sydney
• Part of the ASX-listed Wesfarmers Group (ASX: WES)
• Australia’s leading retailer and supplier of office products
• 167 stores nationally, 9,000 employees
• Also part of Wesfarmers
• ASX-listed (HVN) leading homemaker brand with 220 stores across eight countries
• Harvey Norman operates under a franchise system in Australia
• Estimated to employ 10,000 across the nation
• JB Hi-Fi is a publicly listed Australian (ASX: JBH) retailer of consumer goods
• 303 stores nationally
• JB Hi-Fi acquired The Good Guys for $870 million in 2016
• Part of Metcash Limited’s Independent Hardware Group (ASX: MTS)
• In 2020, Metcash announced the acquisition of a 70% interest in Total Tools
Super Retail Group
• $2.7B retailer, listed on the ASX (SUL)
• 697 retail stores across Australia and New Zealand
• Brands include Supercheap Auto, Rebel Sport, BCF and Macpac