Latest / What the Flux / Triple M and Channel Seven face the music | Black Friday hits Adore Beauty's bottom line | Trump eyes 15% tariffs

Transcript

Triple M and Channel Seven face the music | Black Friday hits Adore Beauty's bottom line | Trump eyes 15% tariffs · What the Flux

• 0:05
  Speaker 1: This is what the flux and I'm justin and it's Wednesday,
• 0:08
  Speaker 1: the twenty fifth of February.
• 0:09
  Speaker 2: Does boy. There may be a global software sell off
• 0:12
  Speaker 2: at the moment, but rather than feel threatened, old Canvas
• 0:15
  Speaker 2: is seeing this as an opportunity for cheap buys. Canvas
• 0:18
  Speaker 2: has announced the acquisition of two new AI companies to
• 0:21
  Speaker 2: continue its growth, a new animation software company and a
• 0:24
  Speaker 2: marketing tool Jusei boy. That is canvas fifth acquisition in
• 0:27
  Speaker 2: just the last two years on.
• 0:28
  Speaker 1: A buying spree. Bee Man, I like it, thinking, Pam.
• 0:31
  Speaker 1: We know that superannuation is not the sexiest of topics,
• 0:34
  Speaker 1: but it is one of the most important. And in
• 0:35
  Speaker 1: the Flux Out today, we've broken down different types of
• 0:38
  Speaker 1: investing in superannuation. There's the full funds, that's direct investing.
• 0:42
  Speaker 1: If you don't know what any of that means, don't
• 0:44
  Speaker 1: worry because we haven't covered in the Flux Out. Make
• 0:46
  Speaker 1: sure to check it out.
• 0:46
  Speaker 2: Three Mammoth stories today, Juzy boy, let's do it for
• 0:49
  Speaker 2: our first. Southern Cross Media has suffered a seventeen percent
• 0:52
  Speaker 2: drop in profit in its first results since merging with
• 0:55
  Speaker 2: seven West Media, but it's CEO did not deliver this update.
• 1:00
  Speaker 1: Oo, wasn't this merger man to turn them into a
• 1:02
  Speaker 1: power couple? B men? Yeah, it's looking like a bit
• 1:04
  Speaker 1: of a rocky relationship.
• 1:05
  Speaker 2: So tell me all so JOI what just a little
• 1:07
  Speaker 2: reminder for you. Southern Cross Media is an Australian broadcasting
• 1:10
  Speaker 2: giant that owns FM radio brands like Triple M and
• 1:14
  Speaker 2: Hit Network.
• 1:14
  Speaker 1: I think nineties anthems, drive time Banter, the occasional cash
• 1:18
  Speaker 1: giveaway yep.
• 1:19
  Speaker 2: And it recently merged with seven West Media, the owner
• 1:21
  Speaker 2: of Channel seven TV seven plus streaming and the West
• 1:25
  Speaker 2: Australian newspaper.
• 1:26
  Speaker 1: And the man. That was roughly a four hundred million
• 1:28
  Speaker 1: dollar mergerut that was finalized in January this year and
• 1:30
  Speaker 1: pitched as the cross platform power couple.
• 1:33
  Speaker 2: And then the first combined results came in and it
• 1:36
  Speaker 2: wasn't pretty.
• 1:37
  Speaker 1: No, no, no. It's revenue came in at just over
• 1:39
  Speaker 1: one billion dollars, which was down one and a half percent.
• 1:42
  Speaker 2: Well, it's a net profit fell sixteen and a half
• 1:43
  Speaker 2: percent to just under thirty five million bucks.
• 1:46
  Speaker 1: And the man they warned that advertising conditions were weak
• 1:49
  Speaker 1: and volatile.
• 1:50
  Speaker 2: Not exactly the source of words that investors are excited
• 1:52
  Speaker 2: to hear Jasi boy.
• 1:53
  Speaker 1: But to make things even spicier, the CEO of the
• 1:56
  Speaker 1: merged company, Jeff Howard, unexpectedly retired the night before results
• 2:00
  Speaker 1: were to be announced.
• 2:01
  Speaker 2: Yes, retired the night before the results.
• 2:05
  Speaker 1: And less than two months into the new role.
• 2:07
  Speaker 2: So the company effectively fronted its big first earnings update
• 2:11
  Speaker 2: with its lead presenter not there.
• 2:13
  Speaker 1: No anchor at the desk, no host of the mic.
• 2:15
  Speaker 2: And does I must say it's pretty interesting that despite
• 2:17
  Speaker 2: only a small drop in revenue, its net profit got whacked.
• 2:21
  Speaker 1: So what is the key learning here?
• 2:23
  Speaker 2: Operating leverage can explain how a small drop in revenue
• 2:25
  Speaker 2: can cause a much larger drop in profit.
• 2:28
  Speaker 1: Foot simply, Operating leverage measures the ratio of a company's
• 2:32
  Speaker 1: fixed costs to its variable costs.
• 2:34
  Speaker 2: And media companies typically have high fixed costs. Yeah, there's
• 2:38
  Speaker 2: the studio infrastructure. There's the broadcast equipment, the talent contracts,
• 2:41
  Speaker 2: the content production, the transmission costs. And these expenses do
• 2:45
  Speaker 2: not fluctuate dramatically month to month.
• 2:46
  Speaker 1: So when revenue dips slightly, those fixed costs don't automatically shrink.
• 2:50
  Speaker 2: Let's say revenue falls one or two percent, if costs
• 2:53
  Speaker 2: stay largely the same that lost revenue flows almost entirely
• 2:57
  Speaker 2: through to lower profit and that's why the Merge Group
• 2:59
  Speaker 2: is now promised to make thirty million bucks in cost
• 3:02
  Speaker 2: cuts over the next financial year. For our second story,
• 3:06
  Speaker 2: Adore Beauty's profit has face planted seventy percent after Black
• 3:09
  Speaker 2: Friday blowouts, but it's betting on bricks and mortar to
• 3:12
  Speaker 2: save that glow.
• 3:13
  Speaker 1: Nothing like a bit of a retail therapy, but also
• 3:16
  Speaker 1: a big margin hangover. B man, So tell me.
• 3:18
  Speaker 2: More, Okay. So, Adore Beauty started as an online only
• 3:20
  Speaker 2: beauty retailer all the way back in nineteen ninety nine,
• 3:23
  Speaker 2: and it.
• 3:23
  Speaker 1: Listed on the ASEX in twenty twenty at a six
• 3:26
  Speaker 1: hundred and fifty million dollar valuation.
• 3:28
  Speaker 2: Since then it's market value who's fall into less than
• 3:30
  Speaker 2: eighty million bucks?
• 3:31
  Speaker 1: Wow? And then man. Even though Adoor Beauty sales grew
• 3:33
  Speaker 1: nearly nine percent over one hundred and ten million dollars
• 3:35
  Speaker 1: for the half, it's net profit also plummeted.
• 3:38
  Speaker 2: Yeah, it's net profit dropped seventy percent to just one
• 3:40
  Speaker 2: hundred and eighty nine thousand bucks for the half.
• 3:43
  Speaker 1: That is not a blow up. That is what you
• 3:44
  Speaker 1: call a big margin in the makeup world. And so
• 3:47
  Speaker 1: what's the culprit here? Three words, my friend, Black Friday discounting.
• 3:51
  Speaker 2: Now, yes, these sales may have helped drive revenue, but
• 3:53
  Speaker 2: it's seriously dented margins.
• 3:55
  Speaker 1: So now a door is leading into physical stores, with
• 3:58
  Speaker 1: ten new stores open in the last half to take
• 3:59
  Speaker 1: the total to eighteen physical source. But even so, b
• 4:02
  Speaker 1: men Adoor shares dropped nearly seven percent on the result.
• 4:05
  Speaker 2: Quite the fall from grace.
• 4:07
  Speaker 1: But I must say raises the big strategic question these deep,
• 4:10
  Speaker 1: deep Black Friday discounts actually worth it?
• 4:12
  Speaker 2: A very good question. So what is the key learning here?
• 4:14
  Speaker 1: Discounting can boost sales, but it often crushes profits.
• 4:18
  Speaker 2: Adores revenue increased almost nine percent, which on the surface
• 4:21
  Speaker 2: looks healthy, but profit tells the real story. The problem, Well,
• 4:25
  Speaker 2: it's Black Friday promotions meant slashing prices and slashing margins.
• 4:29
  Speaker 1: And when you're in beauty, those discounts are often very deep.
• 4:32
  Speaker 2: In fact, Jasi Boite Salesforce found that the average Black
• 4:35
  Speaker 2: Friday discount was around twenty four percent.
• 4:37
  Speaker 1: But categories like beauty and skincare and make up typically
• 4:40
  Speaker 1: with the highest at more than thirty three percent discount.
• 4:43
  Speaker 2: So you can see why Adore Beauty's profit margin was mayish.
• 4:46
  Speaker 1: And be man. For some retailers, black fridays can be
• 4:49
  Speaker 1: quite strategic, yep.
• 4:50
  Speaker 2: Clear old inventory, attract new customers, get them buicked on
• 4:53
  Speaker 2: your hero products.
• 4:54
  Speaker 1: But if your brand becomes trained around discounting, you risk
• 4:57
  Speaker 1: a race to the bottom.
• 4:58
  Speaker 2: For our third and final story, Donald J. Trump has
• 5:02
  Speaker 2: promised to hike global tariffs to fifteen percent across the
• 5:05
  Speaker 2: board after the US Supreme Court blocked his tariffs.
• 5:09
  Speaker 1: US Supreme Court says, Donald Trump, but your tariffs are fired,
• 5:12
  Speaker 1: we will be man.
• 5:13
  Speaker 2: So you obviously remember, juzzy boy, Donald Trump implemented tariffs
• 5:16
  Speaker 2: across the world in April last year.
• 5:18
  Speaker 1: Yep. We'd be talking. India whacked with a fifty percent
• 5:20
  Speaker 1: tariff on goods exported to the US.
• 5:22
  Speaker 2: Then there were tariffs on China. They got whacked with
• 5:24
  Speaker 2: a tariff over one hundred percent.
• 5:26
  Speaker 1: At one stage, even poor old Australia got whacked with
• 5:29
  Speaker 1: a ten percent tariff. But juzzy boy, there was a
• 5:31
  Speaker 1: plot twist last week because the US Supreme Court ruled
• 5:33
  Speaker 1: that Donald Trump's global tariffs were unconstitutional. So what did
• 5:37
  Speaker 1: Donald Trump do? He doubled down?
• 5:39
  Speaker 2: Yep. Just days later, Trump announced plans to raise the
• 5:42
  Speaker 2: global tariff rate on imports from ten percent to fifteen
• 5:45
  Speaker 2: percent across the board and they man.
• 5:47
  Speaker 1: The announcement sent governments and businesses into a mild paddy.
• 5:50
  Speaker 2: And jusey boy. While some countries will be well ahead
• 5:53
  Speaker 2: with just fifteen percent tariffs, others like Australia are the losers.
• 5:57
  Speaker 1: Especially because Australia won't have the same advent over other
• 6:00
  Speaker 1: countries like it previously did.
• 6:02
  Speaker 2: So what is the key learning here?
• 6:04
  Speaker 1: In global trade? Sometimes it's not about being the cheapest,
• 6:06
  Speaker 1: it's about being less expensive than everyone else. Australia just
• 6:10
  Speaker 1: happened to be in the only ten percent tariff club
• 6:13
  Speaker 1: while parts of Asia and Europe were hit with tariffs
• 6:15
  Speaker 1: of up to fifty percent, and man that advantage helped
• 6:17
  Speaker 1: drive a nineteen percent lift in exports to the US
• 6:20
  Speaker 1: last year, particularly in beef, in aircraft components and medical instruments.
• 6:24
  Speaker 1: But now with a blanket fifteen percent tariff for everyone,
• 6:27
  Speaker 1: the edge that Australia had has disappeared. And to be clear,
• 6:30
  Speaker 1: Australia isn't worse off than its competitive countries, but it's
• 6:33
  Speaker 1: no longer better off and in trade, losing an edge
• 6:36
  Speaker 1: can feel like a setback even if nothing else changes.
• 6:39
  Speaker 1: Foxam ever heard the term about pulled investments? Well, in
• 6:41
  Speaker 1: the superindustry, it's these premixed investment options you've probably heard of,
• 6:44
  Speaker 1: like conservative balance growth, but there's also other ways to
• 6:47
  Speaker 1: invest in your soup back so that you can have
• 6:49
  Speaker 1: more control. You want to learn more about our superannuation
• 6:51
  Speaker 1: investing actually where they sure to download the Fox app
• 6:54
  Speaker 1: and check out our latest article.
• 6:55
  Speaker 2: Thanks for listening and we'll see you on for Friday.