Virus Damage: Michael Hill Closes, Woolies Postpones Drinks Demerger, Retail Food Drops Guidance

Jewelry chain, Michael Hill has become the first major Australian retailer to close its doors in light of the coronavirus pandemic, meaning the jobs of thousands of workers are at risk.

The news saw the company’s shares lose 16% to 23 cents yesterday, taking the loss so far in 2020 to 67%.

In a statement to investors on Tuesday, Michael Hill said directors had been monitoring the effect of COVID-19 on its key trading markets, which include Australia, Canada, and New Zealand.

Retailers around the country have seen a massive reduction in trade in recent weeks, with the hardest hit being in the discretionary sector. Some have reported sales falls of up to 50% in a matter of a week.

Due to this, Michael Hill said it would close its 165 Australian stores immediately, and for an indefinite period of time. Stores in New Zealand will also be shut immediately, as the country moves into full lockdown.

The company’s Canadian stores were closed on March 20, and will now remain shut indefinitely. Its online store will continue to operate.

Michael Hill employs around 2500 staff members across its 300 stores globally, who will now be stood down with access to leave entitlements and directed to access unemployment schemes such as Newstart in Australia and other support schemes.

“The board and management team have acted swiftly today following the extraordinary circumstances that are impacting the Australian and New Zealand retail markets,” company chair Emma Hill said.

“Whilst it is clear that the suspension of our store networks is necessary for the safety and wellbeing of our people and our customers – we know also that this will be a time of great uncertainty for them too, and we are doing our best to provide them with the support that they need through this difficult time.”

Meanwhile, across the Tasman, the Warehouse retail group says it will keep its 92 outlets open during the four-week lockdown, while all its websites will remain open and doing business.

Woolworths yesterday revealed that it has postponed the long-mooted demerger of its Endeavour liquor and hotels business after the governments ordered licensed venues to close to limit the spread of the coronavirus.

The supermarket giant said the separation and spin-off of Endeavour would be deferred until 2021 due to the temporary hotels closure and financial market conditions.

Woolworths was given the go-ahead to restructure the $10 billion segment in December ahead of a planned demerger and likely spin-off late this year.

The news had a marginal impact on Woolies shares yesterday which eased 0.7% to $36.18 in a market that was up more than 4% for the first solid session for several days.

Endeavor’s Australian Leisure and Hospitality Group operates 323 hotels, nightclubs, restaurants, cafes and sports bars.

The federal government on Monday ordered these types of venues – where people gather – to close to prevent the spread of the coronavirus.

These venues may still operate bottle shops and takeaway services.

Woolies CEO, Brad Banducci said affected staff would be redeployed if possible.

Endeavour also has bottle shops such as BWS and Dan Murphy’s, which continue trading.

In fact, some reports suggest online liquor sales have soared in the past week or so.

Woolworths said the venue closures, and changes to shopping behaviour at its supermarkets, meant it could not estimate the impact of the virus on its full-year financial results.

Sounds like a guidance change coming there in the next week or so.

Retail Food Group, which runs chains such as Gloria Jeans cafes, Donut King, Crust pizza outlets and more yesterday scrapped its guidance as expected.

But it told the ASX that it had some an upturn in sales at some of its chains, such as bakery group, Brumby’s.

Executive chairman Peter George said the Brumby’s Bakery chain had strong sales over the past two weeks due to increasing demand.

Crust and Pizza Capers had seen a rise in demand for home delivery, while Di Bella Coffee had growth in online sales and groceries.

RFG’s shares eased 8% to 3.2 cents.

The company is in a workout from years of debt and franchise problems and the impact from the COVID 19 is the last thing it would have wanted to see.

Meanwhile, another shopping centre regular, the Shaver Shop has withdrawn its earnings guidance for 2019-20. It also cancelled an interim dividend payment of 2.1 cents a share.

“On 21 February 2020, Shaver Shop released record first half sales and earnings results supported by like for like store sales growth of 9.3%. Trading performance in the first two months of 2H FY20 continued to be strong, with like for like sales up 9.3%. For the 8 months ended 29 February 2020, EBITDA (AASB 117) was approximately $14.4 million based on unaudited management accounts.

“This compares to the FY20 EBITDA guidance provided on 21 February 2020 of $14.25 million to $15.75 million. The earnings guidance assumed no material impact in the second half from the coronavirus,” the company told the ASX yesterday.

“However, over the past week, Shaver Shop has observed a material deterioration in trading conditions, reflected in a decrease in total like for like sales (including online sales) of approximately -11%.

“The rate of decline in like for like sales in our bricks and mortar stores was -23% (excluding online sales). Our online channel is performing better, but the growth in this channel is not enough to offset the decline in sales observed in our bricks and mortar stores in recent weeks.

“In response to this sudden change in trading performance, Shaver Shop has taken steps to reduce all non- essential expenditure across its business and is in preparing for a prolonged deterioration in the operating environment.

The shares tumbled 23% to 23 cents.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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