BDO's Mark Schiavello rounds up everything you need to know from ASX listed retailers' recent half year results.

The majority of ASX Listed retailers have now released their half year results for the six-month period ended 31 December 2018. Our analysis of the various presentations highlights some common themes, headwinds, challenges and opportunities.

Theme number 1 – Comparable store sales…down down down

There was a common thread of declining like for like store sales. In part this decline appears attributable to a 3.8% reduction in foot traffic during the same period.

Examples of declining comparable store sales is outlined in the commentary below:

PAS Group experienced an 8% decline in retail sales which was in part attributed to a decline in like for like retail sales due to challenging trading conditions most notably by reduced concession sales experienced in Department Stores.

While Noni B’s like for like sales declined by 3.1% over the period, it managed to achieve comparable store growth in December of 1%.

Lovisa experienced a 1.8% decline in like for like sales because of difficulties in the Australian retail environment and the recycling of a strong H1 FY18 performance.

JB Hi-Fi has bucked the declining like for like sales trend, recording 3% comparable store growth. It’s wholly owned subsidiary, The Good Guys also recorded comparable store growth (1.5%).

Theme 2 – effective store expansion is being well received

The investment community has rewarded retailers that have executed an effective store rollout strategy. Citi analyst, Sam Teeger had the following to say about Lovisa store expansion:

"While Lovisa's like for like sales remain subdued, it is pleasing that momentum has improved in the second half of the financial year. Further, the key driver of Lovisa's earnings growth remains store rollout, which is progressing ahead of our expectations."

Theme 3 – International growth is propping up results of various ASX listed retailers

From food to fashion, a number of retailers have benefited from growth outside of Australia.

While Domino’s fell short of targets within Australian and New Zealand, its European and Japanese operations delivered strong growth and now accounts for 70% of group revenue and ~50% of group EBITDA. According to its CEO, expansion into international markets provides a natural hedge against short term conditions affecting any single country, or region.

Harvey Norman’s 89 company owned stores across New Zealand, Singapore, Malaysia, Ireland, Northern Ireland, Slovenia and Croatia recorded 12% sales growth. Based on Gerry Harvey’s view, that ‘there is no end in sight to the economic headwinds that are battering consumer confidence’ in Australia, one might expect Harvey Norman to continue to explore international expansion.

Theme 4 – The market will reward strategic acquisition growth

Noni B’s Speciality Fashion Group acquisition assisted it in increasing EBITDA by 31.4% to $29.1 million for the half year to 31 December 2018. To date, the acquisition appears to have been well received by investors. This is underpinned by the expectation that synergies and organic growth will lead the achievement of FY20 EBITDA of $75 million.

Contact Mark Schiavello and learn more about how BDO can help your retail business.

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