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Kiwi Retailers exit from USA Market

Paul Keane
Michael Hill

Another example of how tough it is in the international retail market was the recent announcement by Michael Hill Jewellers that they are to exit the USA market. For over 10 years Michael Hill has been focussed on the USA market growing the chain to some nine stores. The venture has been a difficult assignment and the decision to exit would have been considered after a long period of determination to break into the international market, the cost to the group in endeavouring to achieve a good economic outcome would have been considerable.

"The New Zealand market by comparison, is small and focussed. The ability to gain recognition of a brand in New Zealand or even Australia is considerably easier than the huge USA market where trying to achieve recognition takes years and big dollars." 

Pascoes and Stewart Dawson’s are two New Zealand brands owned by the James Pascoe Group that have delivered successful results over decades of business activity. The expansion by the group into Australia was seen by some commentators as a risky business at the time, but the company secured Prouds a well-known and elderly local brand together with Angus and Coote and Goldmark, both well-known Australian brands. The three brands are represented by a total of in excess of 460 stores across that country.

The result is a powerful exposure across the Australian continent to a growing consumer jewellery market. Hence the difference between the Michael Hill exposure in the USA and the comparison to the Pascoe Group exposure in Australia and New Zealand.

"The decline of the Pumpkin Patch Brand was driven by its exposure to the USA market and the inability to get significant buy-in by consumers to that brand in a competitive market."

The Michael Hill decline in the USA is a further example of how a huge market can affect a quality brand from a small nation. There are few examples of successful New Zealand originated brands that can survive in a foreign international competitive market.

Fortunately it seems, Michael Hill have identified the issues and pulled the plug before the exposure has had time to seriously affect the balance of the group, who continue to operate in New Zealand and Australia. Sticking to ones knitting is a key factor in the survival of any business!!

Sharewatch | Godfreys

Godfreys is a long-established brand in both New Zealand and Oz – but it’s only been listed on the ASX since 2014. The share price has had a rough ride since then, from an IPO price of $2.75 down to 32 cents currently.

Although Godfreys is a profitable business, its profits have fallen significantly compared to the pre-IPO period.

In the 2017 financial year, Godfreys had revenue of $174 million and EBITDA of $14 million – but made writedowns of $24 million, to reflect the value attributed to goodwill which simply hasn’t panned out. In the last few weeks, they’ve written down another $75 million. The overall picture is of a business which still generates cash, but hasn’t delivered on the aspirations it had when it listed.

Godfreys has 32 stores in New Zealand and another 190 in Australia. Of its NZ stores, 19 are company-owned and 13 are franchised, although the company is gradually shifting to a more franchise-oriented model.


In the Press

Local Media Highlights Thursday 8 February 2018


Bloodbath: New Zealand sharemarket braces for blow

New Zealand shares are tipped to be hit today after global sharemarkets were slammed in what's been described as a "bloodbath". Hundreds of billions of dollars were wiped from the value of shares around the world yesterday. Australia's stock market fell 3.2 per cent after Wall Street's 4.6 per cent fall — where gains for the year have been erased in what was the steepest tumble in nearly seven years.

(Source: NZ Herald)

RBNZ to release Monetary Policy Statement

The Reserve Bank's latest Monetary Policy Statement to be released on Thursday will be all about what’s under New Zealand’s economic hood, rather than any changes to the Official Cash Rate (OCR). The market, and most leading economists, are picking no change for the OCR, which has been at the historic low of 1.75% since November 2016.

(Source: Interest)

Foodstuffs moves Auckland HQ

After 53 years on the one site, New Zealand's biggest supermarket chain is moving its Auckland head office and primary distribution centre from Mt Roskill to Mangere, resulting the proposed closure of a Rotorua base where 51 people work. Foodstuffs North Island chief executive Chris Quin announced the shift to more than 1000 staff today, saying purpose-built premises would be developed at The Landing, Auckland Airport's business park.

(Source: NZ Herald)

Christchurch container mall tenants scatter as six-year-old 'temporary' community ends

Retailers and stallholders are hoping to restart elsewhere after Christchurch's famous container mall closed on Wednesday. After several reprieves, the remaining dozen container shops, food caravans and market stalls were making way for the construction of the Riverside farmers' market and shops.

(Source: Stuff)

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