Latest / What the Flux / Country Road (Group)...take me home! | Prada has its eyes on luxury | Gap pops 17%

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Country Road (Group)...take me home! | Prada has its eyes on luxury | Gap pops 17% · What the Flux

• 0:05
  Speaker 1: This is what the Flux. I'm Brett and I'm justin.
• 0:07
  Speaker 1: As Monday, the tenth of March.
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  Speaker 2: Doesy Boy. With Cyclone Alfred hitting Queensland and northern New
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  Speaker 2: South Wales over the last few days, insurers are bracing
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  Speaker 2: for thousands of claims. In fact, the cost of cyclone
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  Speaker 2: Alfred is expected to top two billion dollars. We are
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  Speaker 2: sending all of our thoughts to the Flux family who
• 0:24
  Speaker 2: have been affected by the cyclone flexam.
• 0:26
  Speaker 1: Do you know only one in four Australians with super
• 0:29
  Speaker 1: no their exact superannuation balance and regularly monitor it. Pretty
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  Speaker 1: crazy because it can be the biggest investment you've ever
• 0:35
  Speaker 1: made in your life. That's why in the Fox Academy
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  Speaker 1: this month, we cover everything that you need to know
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  Speaker 1: about super, from how to choose a super fun, all
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  Speaker 1: the voluntary and non voluntary contributions you can make, and
• 0:44
  Speaker 1: all the ways to maximize your super. So make sure
• 0:46
  Speaker 1: to check out the Fox Academy this month.
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  Speaker 2: Three compounding stories Today Dozzy Boy, very good, Let's do
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  Speaker 2: it for our first Country Road Group has seen its
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  Speaker 2: earnings fall by more than seventy percent in the second
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  Speaker 2: half of twenty twenty five after too many promotions and
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  Speaker 2: discount not even Black.
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  Speaker 1: Friday and Precrisist sales or enough for Country Road here
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  Speaker 1: be man. So what's going on?
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  Speaker 2: Well, Josey Boy Country Road Group is the company that
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  Speaker 2: owns Australian retailers like you guessed it, Country Road.
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  Speaker 1: But also Witchery, Mimco, Trenery and Politics with an X.
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  Speaker 2: And this whole squad is owned by Woolworth's Holdings.
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  Speaker 1: No, no, no, not the supermacher giant, but it's South
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  Speaker 1: African namesake.
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  Speaker 2: And this Woolworth Holdings Group is the same group that
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  Speaker 2: purchased David Jones for two point one billion dollars once
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  Speaker 2: upon a time.
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  Speaker 1: And sold it for under one hundred million dollars.
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  Speaker 2: But now Jusy Boy Country Road Group has seen its
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  Speaker 2: earnings for the last half fall from fifty point two
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  Speaker 2: million dollars to just fourteen point two million dollars.
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  Speaker 1: Or more than seventy percent drop in its earnings.
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  Speaker 2: The reason you ask, well, they ran promotions to get
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  Speaker 2: stock out of their warehouses as.
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  Speaker 1: Well as the impact of a weaker Australian dollar.
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  Speaker 2: But the worst part they don't reckon times of getting
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  Speaker 2: any better and as a result, Country Road Group will
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  Speaker 2: reassess the carrying value of its Australian retailers.
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  Speaker 1: And this could result in some very costly impairments.
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  Speaker 2: So what's the key learning here?
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  Speaker 1: The carrying value of an asset is essentially what the
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  Speaker 1: company thinks the asset is worth on its books.
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  Speaker 2: But when conditions change, companies may have to write down
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  Speaker 2: this value to reflect.
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  Speaker 1: Reality that could be a result of slower sales or
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  Speaker 1: shrinking profit margins, like the case for Country Road Group stores.
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  Speaker 2: And we know that shoppers have been tightening their wallets
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  Speaker 2: and discounts have been eating into company profits.
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  Speaker 1: So now Country Road Group needs to ask itself is
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  Speaker 1: Witchery or Mimco still worth what it's listed on our
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  Speaker 1: balance sheet?
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  Speaker 2: If they do choose to write down the value of
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  Speaker 2: these assets, it will be a hefty expense that will
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  Speaker 2: impact their future earnings and.
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  Speaker 1: Will also impact their total assets.
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  Speaker 2: And Jessie Boye we saw this with Star Entertainment Group
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  Speaker 2: who wrote down the value of their casinos by one
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  Speaker 2: point four billion dollars last year.
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  Speaker 1: And then man. While the write down isn't ideal for
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  Speaker 1: Country Road Group, it is a necessary reality check.
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  Speaker 2: For our second story, Parata Group. It just strutted past
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  Speaker 2: its competitors with four year revenue jump of seventeen percent,
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  Speaker 2: and now it's taking a look their juicy acquisition target.
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  Speaker 1: Prata really waltzing down the financial runway, b Man, So
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  Speaker 1: tell me more. Well.
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  Speaker 2: Prata Group was founded in nineteen thirteen as a leather
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  Speaker 2: goods shop in Milan.
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  Speaker 1: And since then it's grown into one of the world's
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  Speaker 1: most iconic luxury fashion houses.
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  Speaker 2: We'd be talking brands like Prata, Mumu Churches, Marchesi eighteen
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  Speaker 2: twenty four, which is a pastry shop, and Luna Rossa
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  Speaker 2: and be Manned.
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  Speaker 1: Despite a softer luxury market, Prita Group's net revenue grew
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  Speaker 1: seventeen percent in twenty twenty four to five point four
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  Speaker 1: billion euros.
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  Speaker 2: All right, and who were the winners for the Prata crew, Well.
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  Speaker 1: It was quite Prata who saw its revenue jump four percent.
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  Speaker 2: Surely it wasn't Luna Rossa, who I've absolutely never heard of.
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  Speaker 1: Nope, it was Mumu. It's revenue skyrocket by ninety three
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  Speaker 1: percent and across the one billion euro sales milestone for
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  Speaker 1: the very first time.
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  Speaker 2: In fact, Mumu now makes up twenty five percent of
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  Speaker 2: Prata group's business up from fifteen percent just one year ago. So,
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  Speaker 2: given Prata is one of the few thriving luxury houses,
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  Speaker 2: it seems to be in pole position to swoop on Versace,
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  Speaker 2: which is up for sale. So what is the key
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  Speaker 2: lee in fashion and business? If you want to stay iconic,
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  Speaker 2: you just have to expand.
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  Speaker 1: But here's the thing, be Man, luxury houses really create
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  Speaker 1: new brands from scratch.
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  Speaker 2: Even ELVIMH, with its seventy five brand empire like Louis Vuitton,
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  Speaker 2: diorg Ivanci, Tiffany and Co. Has only done it once
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  Speaker 2: since nineteen eighty seven, and that was when it launched
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  Speaker 2: fenty with Rihanna in twenty nineteen. Now carrying on the
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  Speaker 2: other hand, Julie Boy has bolted on Gucci, Balenciaga and
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  Speaker 2: Saint Laurent, amongst others, and so b Man.
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  Speaker 1: It's all about the strategic acquisitions and.
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  Speaker 2: In the battle to acquire Vasace, timing is everything.
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  Speaker 1: LVMH and Caring are struggling due to the luxury slowdown,
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  Speaker 1: and that means they need to get their own fashion
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  Speaker 1: houses in order for looking external. Prata, on the other hand,
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  Speaker 1: they're thriving.
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  Speaker 2: And that puts it in a perfect position to make
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  Speaker 2: an aggressive move here for our third and final story, Gap,
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  Speaker 2: the retailer has seen its share price pop more than
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  Speaker 2: seventeen percent after it beat profit estimates, but tariffs are
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  Speaker 2: still a big concern.
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  Speaker 1: Gap really pulling off the fashion equivalent of a glow
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  Speaker 1: ut b Man. So what's going on here?
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  Speaker 2: Well, Gap, also known as the Gap, is the global
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  Speaker 2: clothing and accessories retailer.
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  Speaker 1: It was found to back in nineteen sixty nine in
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  Speaker 1: San Francisco and it's going to over three thousand stores globally.
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  Speaker 2: Now Darzi Woite. Gap is also the owner of Old Navy, Banana,
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  Speaker 2: Republic and Athleta.
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  Speaker 1: And be Man. Despite the fact that Gap closed all
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  Speaker 1: its stores in Australia in twenty eighteen, it has the
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  Speaker 1: third most stores in the.
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  Speaker 2: World, behind none other than H and M and Zara.
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  Speaker 2: Where is uniclothe and b Man.
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  Speaker 1: Many of GAP's competitors, like Abercrombie and Fitch they ever
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  Speaker 1: warned of poor retail sales over the past week.
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  Speaker 2: But not Gap. They've bucked the trend.
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  Speaker 1: Yeah. Their revenue for the fourth quarter at was four
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  Speaker 1: point one billion US dollars, which.
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  Speaker 2: Was slightly better than investor expectation.
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  Speaker 1: But b Man, it was really they're better than expected
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  Speaker 1: earnings that got investors very excited.
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  Speaker 2: And neck minute their share price jump by seventeen percentile.
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  Speaker 1: But only see b Man because before you get too excited,
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  Speaker 1: GAP may be facing a bit of a supply chain headache.
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  Speaker 2: Yep, they produced some of their products in China, in Mexico,
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  Speaker 2: in Canada.
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  Speaker 1: Aka Trump's tariff.
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  Speaker 2: Towns exactly, So what is the key learning here?
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  Speaker 1: When tariffs go up, so do prices, and consumers are
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  Speaker 1: the ones often left holding the bag.
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  Speaker 2: Now, JARSI wait, we know that tariffs are essentially taxes
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  Speaker 2: on important goods, and.
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  Speaker 1: When governments impose them on countries, companies have two choices.
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  Speaker 2: He's option one absorb that extra cost.
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  Speaker 1: Option two pass it on to consumers.
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  Speaker 2: And many retailers are panicking now because Trump has still
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  Speaker 2: promised to implement twenty five percent tariffs on Canada and Mexico, and.
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  Speaker 1: He's pushed up the tariff on China to twenty percent
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  Speaker 1: as well.
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  Speaker 2: GAP is one of the lucky ones. It claims that
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  Speaker 2: less than ten percent of their products are sourced from
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  Speaker 2: China and.
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  Speaker 1: Less than one percent of their product comes from Canada
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  Speaker 1: and Mexico. Combine.
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  Speaker 2: But others, especially those deeply tied to Chinese manufacturing, are
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  Speaker 2: not so lucky.
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  Speaker 1: Fox dam If you are one of the three four
• 6:44
  Speaker 1: Australians that don't know you seepreinuation balance and don't monitor
• 6:47
  Speaker 1: it regularly, we have the perfect horse for you in
• 6:49
  Speaker 1: the Flux Academy this month. Make sure to download the
• 6:51
  Speaker 1: Flux app if you want to win some prizes as well.
• 6:53
  Speaker 2: Thanks for listening and we'll see you on Wednesday.