The collapse of large chains such as Borders, Angus & Robertson, Colorado, and subsequent vacancies is causing a crisis of confidence in the Australian retailing industry. There are profit downgrades by Myer, David Jones, Noni B and the Premier Group of Portmans, Just Jeans, J-Jays, Smiggles etc. Â Premier have announced the closure of 50 specialty stores in shopping centres on lease expiry and there are increasing vacancy levels for specialties nationally.
What are the causes?
Global uncertainty, fear of a further recession, lack of consumer confidence post GFC, expressed as high levels of saving, debt reduction and low levels of discretionary spending. TheÂ $A is trading at historically high levels to the major currencies (particularly the US$) leading to steep rise in internet purchasing (this also boosted by no GST on purchases under $1000), an increase in overseas travel, and a slump in tourism into Australia.
The challenge for specialty retail tenancies:
- Maintaining cash flow
- Maintain good covenants and avoiding vacancies
- Preserving capital value