Acquisitions spur good news for retail in Australia

According to ‘Financial Review’, many companies within the local retail sector that have been marked down significantly in recent years could see better times ahead. This so much awaited improvement would respond to the rebound of the merger & acquisition (M&A) activity as well as the ever-growing interest to explore stock listings and floats on the stock market.

Regarding the latter, notable new entrants over the past 12 months include clothing firm PAS Group and Lovisa Holdings (fashion jewellery). The Australian journal highlights that PAS could be worth watching as a turnaround story.

Meanwhile, footwear group RCG Corporation, which reinvented itself thanks to the acquisition of Accent Group. The purchase is expected to generate annualised earnings before interest, tax, depreciation and amortisation of more than 30 million Australian dollars.

“RCG's acquisition of Accent Group was arguably the most compelling transaction in the apparel sector in that it not only was a vote of confidence in terms of raising capital in a tight market, but the prospective financial impact was considerable,” recall market insiders quoted by ‘Financial Review’.

It is noteworthy that, after an underwritten placement of 25 million Australian dollars at 70 cents a share, the stock has since traded as high as 1.30 Australian dollars.

Better and more affluent financing boosts M&A within retail

In a similar fashion, better and more affluent access to capital has provided the likes of Lovisa with the funding to make large acquisitions in recent months.

Despite its focus is on jewellery, Lovisa fits within the fashion accessory segment, where it is strengthening by increasing its footprint. The jewellery firm recently acquired 21 fashion accessory stores in South Africa, the majority of which will be renamed under the Lovisa brand.

Currently, Lovisa's main area of representation is Australia with about 150 stores, although it is also represented in New Zealand, Singapore and Malaysia. All regions performed well in the first half, with sales up 33 per cent on the previous corresponding period and the net profit of 12.3 million Australian dollars, slightly ahead of prospectus forecasts, as recalls ‘My Fairfax’.

 

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