Random comments/observations from reviewing the AGM pack ......

Random comments/observations from reviewing the AGM pack ...

Random general thoughts ...
- AX1 is continuing to show it's class as a superior retailer. Growth in LFL store sales, growth in store numbers, new stores quickly profitable, seeding new concept opportunities etc.
- Also looks like they're strong commercially - hard lease negotiations (willing to walk away), shut stores, re-birth stores in other brands, manage supplier relations etc
- Online presence strong, growing and the endless aisle concept is a great way to keep royalty rents down and capture the sale in the excitement/pressure of in-store environment.
- These guys plan and execute really well re: store changes, brand improvements, website improvements, inventory/logistics systems, etc

Compare to say a failing retailer like Myer ... and they thrash them in every area. Whilst Myer complains about leases, it seems that AX1 renegotiates existing leases and makes low-ball offers on leases other retailers vacate.

Random other thoughts:
- No doubt the good US$ hedge is helping at least to some extent with margins and competitiveness. Ditto for GST changes for online purchases. US hedge won't always be so favorable (it's been the reverse in past) ... but the GST change is here to stay.
- I've been wary of OS expansion without a better moat (ie. exclusive brands is countries) so very happy to see some small investments in other complimentary growth in ANZ, eg. Subtype and own branded accessories.
- Using Subtype to understand apparel then perhaps a move in that direction could be a great growth opportunity (assuming they execute with their usual precision).
- As first 7 weeks were up 4.6% and first 20 up 2.5% ... means the 8-20 week period was up a more modest 1.4%. Real test will of course be sales between now and end January when school goes back.
- I suspect that 'real' LFL store growth is higher, it's just that some store sales are getting directed to the online growth via the 'endless aisle' strategy. This'll avoid royalty rents, offset by cost of packing/postage, but no doubt with a gain of reduced inventory and store-to-store shipping. Overall I'd guess higher margin, but IMO the real advantage is in not missing a sale.
- I really like the Mega-store concept. This will be highly attractive to brands wanting to showcase a new range or even to launch in Aust. Should help secure exclusivity of new brands/models, hold existing suppliers and enable high margins on exclusive products.
- With such a large footprint and the Megastores, I expect that international brands will be increasingly eager to partner with AX1 and possibly surrender further local marketing $'s and therefore margin to AX1.

Comments/observations from others?