1 00:00:03,960 --> 00:00:06,449 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean 2 00:00:06,450 --> 00:00:09,990 Sean Aylmer: Aylmer. Today, it's all about retailers. A week and a 3 00:00:09,990 --> 00:00:14,160 Sean Aylmer: half ago, we saw surprisingly strong spending for May. Month- on- 4 00:00:14,160 --> 00:00:17,189 Sean Aylmer: month at retail turnover rose by almost a percent after 5 00:00:17,190 --> 00:00:20,190 Sean Aylmer: about $ 33 billion. But we've also seen a drop in 6 00:00:20,190 --> 00:00:24,810 Sean Aylmer: consumer confidence, which normally isn't good for retailers. With inflation 7 00:00:24,810 --> 00:00:29,279 Sean Aylmer: building and interest rates climbing, retail shares, particularly discretionary retail 8 00:00:29,280 --> 00:00:32,549 Sean Aylmer: shares, have broadly sold off over the past six months 9 00:00:32,549 --> 00:00:35,340 Sean Aylmer: or so. So where's the sector going? Now, before we 10 00:00:35,340 --> 00:00:38,400 Sean Aylmer: get into this conversation, remember we're not an investing podcast 11 00:00:38,400 --> 00:00:41,550 Sean Aylmer: and you should get professional advice before making any investment 12 00:00:41,550 --> 00:00:44,668 Sean Aylmer: decisions. Ben Gilbert is the head of Australian Research at 13 00:00:44,670 --> 00:00:46,320 Sean Aylmer: Jarden. Ben, welcome to Fear and Greed. 14 00:00:47,070 --> 00:00:47,251 Ben Gilbert: Thanks very much Sean. Great to be here. 15 00:00:47,251 --> 00:00:51,900 Sean Aylmer: Upfront Ben, retailers have been sold off. Are we kind 16 00:00:51,900 --> 00:00:55,650 Sean Aylmer: of getting to the point where investors maybe start thinking 17 00:00:55,650 --> 00:00:57,180 Sean Aylmer: about jumping in again? 18 00:00:58,050 --> 00:01:01,980 Ben Gilbert: Look, I think we're always getting closer and the challenge 19 00:01:01,980 --> 00:01:04,260 Ben Gilbert: is that we haven't actually seen any real hit to 20 00:01:04,260 --> 00:01:06,119 Ben Gilbert: the numbers. If you go out there and you speak 21 00:01:06,120 --> 00:01:08,369 Ben Gilbert: to most retailers, and as you mentioned in the intro, 22 00:01:08,370 --> 00:01:10,739 Ben Gilbert: the retail trade numbers have still been very strong. We're still around 10% year-on-year 23 00:01:12,510 --> 00:01:16,080 Ben Gilbert: growth through May. So the piece I think now is 24 00:01:16,080 --> 00:01:18,390 Ben Gilbert: the million dollar question is, is when does it start to 25 00:01:18,390 --> 00:01:21,120 Ben Gilbert: slow and how material is the slowing? And what I 26 00:01:21,120 --> 00:01:22,920 Ben Gilbert: would say is in the last couple of weeks and 27 00:01:22,920 --> 00:01:25,230 Ben Gilbert: some of the high frequency data, we have started to see a bit of 28 00:01:25,289 --> 00:01:27,630 Ben Gilbert: a moderation in spending. And I think now as these 29 00:01:27,630 --> 00:01:29,819 Ben Gilbert: rate cuts start to hit, that's going to sort of 30 00:01:29,819 --> 00:01:33,660 Ben Gilbert: really come home. To your point though, the market is 31 00:01:33,660 --> 00:01:36,479 Ben Gilbert: starting to price some of this in, and you're seeing some pretty material hits 32 00:01:36,480 --> 00:01:38,700 Ben Gilbert: to share prices. And we do think that a few 33 00:01:38,700 --> 00:01:41,069 Ben Gilbert: people are going to start dusting off some of these names 34 00:01:41,069 --> 00:01:42,571 Ben Gilbert: again and looking at them from the buy side. 35 00:01:42,570 --> 00:01:46,018 Sean Aylmer: Okay. Now, Ben, I was reading something that you put out in 36 00:01:46,020 --> 00:01:48,149 Sean Aylmer: the last week or so, and you were talking about 37 00:01:48,300 --> 00:01:53,850 Sean Aylmer: how you think about investing in retail, earnings, market position, 38 00:01:53,850 --> 00:01:56,700 Sean Aylmer: secular and valuations. I want to go through those four 39 00:01:58,380 --> 00:02:00,990 Sean Aylmer: so I can understand it, just how you do things. 40 00:02:00,990 --> 00:02:03,449 Sean Aylmer: So when you're talking about earnings and whether or not 41 00:02:03,450 --> 00:02:04,441 Sean Aylmer: to invest, what are you looking at? 42 00:02:04,441 --> 00:02:09,060 Ben Gilbert: There are a few things we have a look at. So firstly, obviously earnings and cash flow is 43 00:02:09,060 --> 00:02:11,790 Ben Gilbert: king. You fundamentally, you value a business on the cash 44 00:02:11,790 --> 00:02:14,070 Ben Gilbert: flow that it's able to generate today and what you 45 00:02:14,070 --> 00:02:15,210 Ben Gilbert: think it's going to be able to generate in the 46 00:02:15,210 --> 00:02:17,940 Ben Gilbert: future. What we've had a look at to sort of what 47 00:02:17,940 --> 00:02:20,160 Ben Gilbert: you're referencing is we've gone through and had a look 48 00:02:20,160 --> 00:02:22,709 Ben Gilbert: at a number of names under our coverage from sort 49 00:02:22,709 --> 00:02:26,010 Ben Gilbert: of JB Hi- Fi to Harvey Norman, to Wesfarmers, in 50 00:02:26,010 --> 00:02:27,930 Ben Gilbert: terms of having a look at what is the outlook 51 00:02:27,930 --> 00:02:31,110 Ben Gilbert: for earnings, is it positive? Is it negative? How have 52 00:02:31,110 --> 00:02:34,380 Ben Gilbert: they positioned themselves through and post COVID in terms of 53 00:02:34,380 --> 00:02:36,899 Ben Gilbert: investing in the business to come out a better business? 54 00:02:36,929 --> 00:02:40,139 Ben Gilbert: Because as we look at historical studies, is that companies 55 00:02:40,139 --> 00:02:43,020 Ben Gilbert: that invest in tough times typically come out stronger in 56 00:02:43,020 --> 00:02:45,060 Ben Gilbert: an ability to take share. And then we've also had 57 00:02:45,060 --> 00:02:47,669 Ben Gilbert: a bit of a look at valuation and effectively what the market's 58 00:02:47,669 --> 00:02:50,550 Ben Gilbert: pricing in from a risk perspective. And what we've then 59 00:02:50,550 --> 00:02:51,809 Ben Gilbert: sort of come out is try to have a bit 60 00:02:51,809 --> 00:02:54,328 Ben Gilbert: of a look at a quality score across our coverage. 61 00:02:54,690 --> 00:02:56,910 Ben Gilbert: And then we've looked at that against where we see 62 00:02:56,910 --> 00:02:59,699 Ben Gilbert: sort of perceived earnings risk and valuation to have a look 63 00:02:59,699 --> 00:03:01,410 Ben Gilbert: at where we think the risk reward is starting to look 64 00:03:01,410 --> 00:03:03,570 Ben Gilbert: a little bit more attractive from an investment standpoint. 65 00:03:06,120 --> 00:03:08,969 Sean Aylmer: So the question is where is the risk reward starting to look a little more attractive? 66 00:03:09,630 --> 00:03:12,060 Ben Gilbert: Yeah, well, that's the question that we're trying to answer. And I think 67 00:03:12,360 --> 00:03:15,929 Ben Gilbert: what we've come to on that basis is that there's 68 00:03:15,929 --> 00:03:17,639 Ben Gilbert: still a lot of earnings risk out there. If you look 69 00:03:17,850 --> 00:03:21,240 Ben Gilbert: at the report you're referencing, we cut our forecast pretty 70 00:03:21,240 --> 00:03:24,120 Ben Gilbert: materially across a number of names. So we're cutting forecast 15, 71 00:03:24,120 --> 00:03:28,259 Ben Gilbert: 20% for fiscal '23 and fiscal '24. Some of the 72 00:03:28,260 --> 00:03:30,240 Ben Gilbert: names though that we think are probably starting to look 73 00:03:30,240 --> 00:03:31,949 Ben Gilbert: a little bit more interesting on the screen that we've 74 00:03:31,950 --> 00:03:35,430 Ben Gilbert: done is the likes of Domino's Pizza, global rollout, benefits 75 00:03:35,430 --> 00:03:38,670 Ben Gilbert: from consumers starting to trade down; someone like Flight Center 76 00:03:39,060 --> 00:03:41,430 Ben Gilbert: in terms of people going out, traveling again. The fact 77 00:03:41,430 --> 00:03:43,830 Ben Gilbert: that the market is seeing some pretty big pricing, which 78 00:03:43,830 --> 00:03:47,309 Ben Gilbert: is always helpful for margin. Woolworths in the supermarket space, 79 00:03:47,309 --> 00:03:49,590 Ben Gilbert: defensive name. And then in the sort of the mid 80 00:03:49,590 --> 00:03:52,019 Ben Gilbert: to smaller (inaudible) town, companies like Accent Group, which 81 00:03:52,020 --> 00:03:54,300 Ben Gilbert: own things like Athletes Foot, Hype, et cetera. 82 00:03:55,740 --> 00:03:59,190 Sean Aylmer: Domino's, let's start there. Its share price has been hammered 83 00:03:59,430 --> 00:04:02,190 Sean Aylmer: over since late last year or so. Is that one 84 00:04:02,190 --> 00:04:05,339 Sean Aylmer: where you think, well, people trading down for example may 85 00:04:05,340 --> 00:04:07,229 Sean Aylmer: be good for Domino's, but also it's just a lot 86 00:04:07,230 --> 00:04:08,070 Sean Aylmer: cheaper than it was. 87 00:04:08,910 --> 00:04:10,890 Ben Gilbert: It is. And I think this comes to the whole 88 00:04:11,010 --> 00:04:14,460 Ben Gilbert: expectations piece is that if you look at what's happened with rates, 89 00:04:14,460 --> 00:04:16,140 Ben Gilbert: and we did some work around sort of looking at 90 00:04:16,140 --> 00:04:21,058 Ben Gilbert: correlation to three and 10 year bond yields, is that the rising rate environment typically hits high 91 00:04:21,059 --> 00:04:26,159 Ben Gilbert: growth companies that have a larger portion of their valuation out in the terminal year, just (inaudible) with time value of 92 00:04:26,160 --> 00:04:28,650 Ben Gilbert: money. And Domino's is one of those names. The multiples 93 00:04:28,650 --> 00:04:30,839 Ben Gilbert: higher, there's a lot more value ascribed to out of 94 00:04:30,839 --> 00:04:34,890 Ben Gilbert: years given how significant the rollout expectations are. So if 95 00:04:34,890 --> 00:04:36,868 Ben Gilbert: you look at the hit there, a function of that has 96 00:04:36,870 --> 00:04:39,540 Ben Gilbert: been sort of bond rates or bond yields, et cetera, 97 00:04:39,540 --> 00:04:41,969 Ben Gilbert: in terms of what's happening there, but also just concerns 98 00:04:41,969 --> 00:04:44,849 Ben Gilbert: around how much of a COVID beneficiary were they, are some 99 00:04:44,849 --> 00:04:47,579 Ben Gilbert: of their longer term store rollouts achievable, will there still 100 00:04:47,580 --> 00:04:50,010 Ben Gilbert: be appetite amongst franchisees to take on and roll out 101 00:04:50,010 --> 00:04:52,200 Ben Gilbert: new stores? And I think what we're starting to see 102 00:04:52,200 --> 00:04:55,500 Ben Gilbert: now is that Domino's positioning in market as a value 103 00:04:55,500 --> 00:04:58,320 Ben Gilbert: player that is able to deliver a clear and consistent 104 00:04:58,320 --> 00:05:00,569 Ben Gilbert: service via delivery, be it with in Germany, be it 105 00:05:00,570 --> 00:05:03,238 Ben Gilbert: in Australia, Japan, wherever it is, puts them in pretty 106 00:05:03,240 --> 00:05:05,549 Ben Gilbert: good stead. We spent some time with Domino's in Japan 107 00:05:05,549 --> 00:05:08,339 Ben Gilbert: recently and just the quality of the network, the quality 108 00:05:08,339 --> 00:05:10,919 Ben Gilbert: of the people within that business and the opportunity was 109 00:05:10,920 --> 00:05:13,500 Ben Gilbert: pretty clear. And it's one of the reasons that it's 110 00:05:13,500 --> 00:05:15,750 Ben Gilbert: one of our key picks on the positive side at 111 00:05:15,750 --> 00:05:16,079 Ben Gilbert: the moment. 112 00:05:16,589 --> 00:05:18,389 Sean Aylmer: Stay with me, Ben, we'll be back in a minute. 113 00:05:24,690 --> 00:05:27,510 Sean Aylmer: I'm speaking to Ben Gilbert, head of Australian Research at 114 00:05:27,510 --> 00:05:30,330 Sean Aylmer: Jarden. One of the reasons that I don't ever have 115 00:05:30,330 --> 00:05:33,960 Sean Aylmer: a DIY fund myself and give it to managers like 116 00:05:34,020 --> 00:05:36,839 Sean Aylmer: you or experts in is that you need to be 117 00:05:36,839 --> 00:05:39,779 Sean Aylmer: active all the time. And I'm coming to Woolworths versus 118 00:05:39,779 --> 00:05:41,730 Sean Aylmer: Kohl's here because in that note that you put out, 119 00:05:42,180 --> 00:05:43,350 Sean Aylmer: I'm going to get it wrong here, but I think 120 00:05:43,379 --> 00:05:45,990 Sean Aylmer: you're overweight Kohl's and you've come back to neutral because 121 00:05:46,170 --> 00:05:49,229 Sean Aylmer: Kohl's have had a good run, but vis-a- vis Woolworths, you 122 00:05:49,230 --> 00:05:51,599 Sean Aylmer: think okay, maybe it's not time to be overweight Kohl's 123 00:05:51,599 --> 00:05:54,599 Sean Aylmer: because Woolworths is picked up, whatever the story is. But 124 00:05:54,809 --> 00:05:57,599 Sean Aylmer: it's all about being active in what you're doing as 125 00:05:57,599 --> 00:06:00,539 Sean Aylmer: opposed to buying Domino's or buying Woolworths or Kohl's or 126 00:06:00,540 --> 00:06:02,940 Sean Aylmer: whatever. And then not looking at it again for three 127 00:06:02,940 --> 00:06:05,549 Sean Aylmer: years, which many of the DIY investors do. 128 00:06:05,970 --> 00:06:08,250 Ben Gilbert: Yeah, look, I think it's an interesting one though, Sean, 129 00:06:08,250 --> 00:06:11,370 Ben Gilbert: because people have different time horizons and I think often 130 00:06:11,610 --> 00:06:13,889 Ben Gilbert: if you look at people that are willing to look at 131 00:06:13,889 --> 00:06:16,919 Ben Gilbert: a quality business in a quality sector that's generating cash 132 00:06:17,219 --> 00:06:19,410 Ben Gilbert: and are prepared to look through a nearer term volatility, 133 00:06:19,800 --> 00:06:21,839 Ben Gilbert: often that can be the better outcome if you look 134 00:06:21,839 --> 00:06:24,750 Ben Gilbert: forward on a three, five year view. But as we 135 00:06:24,750 --> 00:06:27,510 Ben Gilbert: know, when you're sitting here living it day to day, 136 00:06:27,510 --> 00:06:29,669 Ben Gilbert: there are sort of shorter term machinations that will come 137 00:06:29,670 --> 00:06:32,370 Ben Gilbert: through in the market, be it you hear out there 138 00:06:32,370 --> 00:06:34,709 Ben Gilbert: or you do some work on consumer studies, whatever that 139 00:06:34,709 --> 00:06:37,110 Ben Gilbert: Woolworths might be getting a bit of momentum, that online 140 00:06:37,140 --> 00:06:39,868 Ben Gilbert: is really taking off again, which is where Woolworths has 141 00:06:39,870 --> 00:06:41,910 Ben Gilbert: been stronger. That means that you sort of got to 142 00:06:41,910 --> 00:06:45,029 Ben Gilbert: look at those relative calls. And I think when you're looking 143 00:06:45,029 --> 00:06:47,249 Ben Gilbert: at some people sort of in the market that are managing 144 00:06:47,250 --> 00:06:49,678 Ben Gilbert: money, they're obviously going to be much closer doing that 145 00:06:49,678 --> 00:06:52,019 Ben Gilbert: day to day and really trying to sort of maximize 146 00:06:52,020 --> 00:06:55,919 Ben Gilbert: returns on a daily, monthly, weekly basis. Whereas the DIYs, 147 00:06:57,210 --> 00:06:58,589 Ben Gilbert: you've got a bit more of a luxury to look 148 00:06:58,589 --> 00:07:01,380 Ben Gilbert: out and ignore some of the shorter term volatility. 149 00:07:01,800 --> 00:07:05,490 Sean Aylmer: Okay. So if you talk about quality companies, what about Woolworths, Kohl's and Wesfarmers? 150 00:07:05,820 --> 00:07:08,549 Ben Gilbert: Yeah. Look, as you said, they're quality companies. They're three 151 00:07:08,549 --> 00:07:11,099 Ben Gilbert: of the key blue chips that would sit in Australia 152 00:07:11,100 --> 00:07:14,880 Ben Gilbert: and the reality is that they're quality businesses and they're 153 00:07:14,880 --> 00:07:16,500 Ben Gilbert: going to be quality businesses for a long time to 154 00:07:16,500 --> 00:07:19,380 Ben Gilbert: come. They've got dominant market positions. They've got very strong 155 00:07:19,380 --> 00:07:23,340 Ben Gilbert: brands. They've got brands that resonate with the consumer and they're in 156 00:07:23,340 --> 00:07:25,889 Ben Gilbert: positions where they collect a lot of data. They understand 157 00:07:25,889 --> 00:07:28,379 Ben Gilbert: what's happening and they're in the position to give consumers 158 00:07:28,379 --> 00:07:30,990 Ben Gilbert: what they want at a reasonable price given their scale 159 00:07:30,990 --> 00:07:33,390 Ben Gilbert: or good value, which is not just price but service, 160 00:07:33,390 --> 00:07:36,239 Ben Gilbert: et cetera. So look, I think they all look like 161 00:07:36,240 --> 00:07:38,820 Ben Gilbert: good quality companies on the longer term. In terms of 162 00:07:38,820 --> 00:07:41,280 Ben Gilbert: where we're sitting at the moment, we've got overweights on Woolworths 163 00:07:41,280 --> 00:07:43,889 Ben Gilbert: and Wesfarmers. We're sitting with a neutral on Kohl's having 164 00:07:43,889 --> 00:07:46,469 Ben Gilbert: recently pulled it back, as you said. Why is that? 165 00:07:46,619 --> 00:07:49,020 Ben Gilbert: Well, Woolworths, we just think is starting to get a 166 00:07:49,020 --> 00:07:52,620 Ben Gilbert: bit more momentum again. We also think that their capabilities 167 00:07:52,620 --> 00:07:55,950 Ben Gilbert: with respect to data and understanding the customer, adopting a 168 00:07:55,950 --> 00:08:00,120 Ben Gilbert: true pull versus push model, things like targeted promotions saying, " 169 00:08:00,120 --> 00:08:02,639 Ben Gilbert: Okay, Sean, you like buying Tim Tams every week, let's give 170 00:08:02,639 --> 00:08:04,889 Ben Gilbert: you a better promotion just for you because you value 171 00:08:04,889 --> 00:08:07,650 Ben Gilbert: that and that's going to drive loyalty." Similarly, something like 172 00:08:07,650 --> 00:08:10,980 Ben Gilbert: Wesfarmers Bunnings, which is around two thirds of the valuation 173 00:08:10,980 --> 00:08:13,890 Ben Gilbert: of that group, powerhouse brand. I think if you looked 174 00:08:13,890 --> 00:08:15,239 Ben Gilbert: at sort of two of the best or one of 175 00:08:15,240 --> 00:08:17,369 Ben Gilbert: the best brands in Australia, you'd see a few people 176 00:08:17,370 --> 00:08:19,530 Ben Gilbert: that wouldn't put that up there. And they just continue 177 00:08:19,530 --> 00:08:21,150 Ben Gilbert: to go to strength to strength. They've got a lot 178 00:08:21,150 --> 00:08:23,969 Ben Gilbert: of opportunities to expand into new categories as they've continued 179 00:08:23,969 --> 00:08:26,010 Ben Gilbert: to do over the years. And they're now starting to 180 00:08:26,010 --> 00:08:28,710 Ben Gilbert: move into areas like marketplaces. So you see they're selling 181 00:08:28,710 --> 00:08:31,980 Ben Gilbert: via third parties things like electronics, et cetera, online. Now, 182 00:08:31,980 --> 00:08:33,750 Ben Gilbert: yes, there's going to be some up and downs around 183 00:08:33,750 --> 00:08:35,968 Ben Gilbert: the housing outlook. But I do think that if you 184 00:08:35,969 --> 00:08:38,399 Ben Gilbert: look back to their numbers back into the 80s, they've 185 00:08:38,400 --> 00:08:42,269 Ben Gilbert: proven to be relatively resilient through pretty difficult macro backdrops, 186 00:08:42,299 --> 00:08:44,100 Ben Gilbert: and hence why we're still pretty comfortable pushing that one 187 00:08:44,100 --> 00:08:45,929 Ben Gilbert: as an overweight. They've also got a bit of a 188 00:08:45,929 --> 00:08:48,270 Ben Gilbert: lithium player at the moment as well, Sean, where they're 189 00:08:48,270 --> 00:08:50,610 Ben Gilbert: developing a mine in Western Australia too. But I won't 190 00:08:50,610 --> 00:08:51,569 Ben Gilbert: claim to be an expert there. 191 00:08:52,679 --> 00:08:56,519 Sean Aylmer: Moving away from the big players, there are still smaller players 192 00:08:56,520 --> 00:08:59,129 Sean Aylmer: which can be quality, and there are certainly smaller players 193 00:08:59,129 --> 00:09:02,099 Sean Aylmer: which aren't. I want to talk about kind of the, 194 00:09:02,190 --> 00:09:05,220 Sean Aylmer: you mentioned Flight Center, JB Hi- Fi, space fits into 195 00:09:05,220 --> 00:09:08,429 Sean Aylmer: this, potentially Adairs, I don't know, but sort of some of 196 00:09:08,429 --> 00:09:12,479 Sean Aylmer: those smaller retailers and where they fit on the spectrum. 197 00:09:12,929 --> 00:09:15,719 Ben Gilbert: Yeah. Look, there's some great mid to smaller cat retailers 198 00:09:15,719 --> 00:09:18,900 Ben Gilbert: out there. I think you mentioned JB Hi- Fi. If 199 00:09:18,900 --> 00:09:21,208 Ben Gilbert: you look at JB Hi- Fi on paper and what they've 200 00:09:21,210 --> 00:09:23,340 Ben Gilbert: been able to do in Australia over the last 10, 15 201 00:09:23,340 --> 00:09:26,760 Ben Gilbert: years from sort of Richard Uechtritz to Terry Smart to 202 00:09:26,760 --> 00:09:29,639 Ben Gilbert: Richard Murray now Terry Smart back again, is that they're one of the 203 00:09:29,639 --> 00:09:32,580 Ben Gilbert: best, if not the best electronics retailers globally on paper. 204 00:09:33,120 --> 00:09:37,439 Ben Gilbert: Very productive stores, great positioning around price, dominant market position. 205 00:09:37,950 --> 00:09:39,569 Ben Gilbert: The reason I think we're probably a little bit more 206 00:09:39,570 --> 00:09:42,690 Ben Gilbert: cautious around something like JBs is that the competitive backdrop, 207 00:09:42,780 --> 00:09:44,700 Ben Gilbert: while it's probably been getting a bit easier the last 208 00:09:44,700 --> 00:09:47,399 Ben Gilbert: couple of years, we expect it to accelerate again over the next little a while. And 209 00:09:48,509 --> 00:09:50,160 Ben Gilbert: we've written about the fact that we think the likes 210 00:09:50,160 --> 00:09:53,249 Ben Gilbert: of Bunnings, the Wesfarmers Group are going to push more into electronics. 211 00:09:53,580 --> 00:09:56,250 Ben Gilbert: Amazon's continuing to ramp up in Australia. You look at 212 00:09:56,250 --> 00:09:58,738 Ben Gilbert: what they're doing with Amazon Flex at the moment. If 213 00:09:58,740 --> 00:10:01,110 Ben Gilbert: they were to source another big shed down in Victoria, 214 00:10:01,170 --> 00:10:04,019 Ben Gilbert: there's a big push there. And electronics is still one 215 00:10:04,020 --> 00:10:05,639 Ben Gilbert: of the obvious categories they're not a big player in 216 00:10:05,639 --> 00:10:08,069 Ben Gilbert: here. So yes, it's a great company. We just think 217 00:10:08,070 --> 00:10:10,980 Ben Gilbert: there's some competitive pressures. Other ones that you talk to, 218 00:10:10,980 --> 00:10:14,848 Ben Gilbert: Super Retail Group, that's got guys like Rebel and Macpac and BCF, 219 00:10:14,940 --> 00:10:17,640 Ben Gilbert: great brands within that portfolio. And we think they're probably 220 00:10:17,640 --> 00:10:19,110 Ben Gilbert: going to do a little bit better than most given 221 00:10:19,110 --> 00:10:22,170 Ben Gilbert: their data capability. Then you've got other ones like Adairs, 222 00:10:22,170 --> 00:10:25,349 Ben Gilbert: et cetera, that you mentioned, again, good businesses, but they've 223 00:10:25,349 --> 00:10:28,439 Ben Gilbert: probably got some more cyclical headwinds coming up and potentially 224 00:10:28,440 --> 00:10:30,329 Ben Gilbert: a bit more competition in the space as well. 225 00:10:30,600 --> 00:10:33,450 Sean Aylmer: You mentioned data a couple of times, a more important 226 00:10:33,450 --> 00:10:34,949 Sean Aylmer: part of investing in the future. 227 00:10:35,100 --> 00:10:39,389 Ben Gilbert: Yeah, I think this is a really interesting piece of 228 00:10:39,389 --> 00:10:42,120 Ben Gilbert: the puzzle at the moment. We've got changes with respect 229 00:10:42,120 --> 00:10:45,720 Ben Gilbert: to privacy laws globally around things like the GDPR in Europe, 230 00:10:45,750 --> 00:10:47,879 Ben Gilbert: which is effectively how you can use first party versus 231 00:10:47,879 --> 00:10:51,000 Ben Gilbert: third party data. First party data being if you run 232 00:10:51,000 --> 00:10:53,880 Ben Gilbert: a shop and you are collecting it yourself. Third party 233 00:10:53,880 --> 00:10:55,170 Ben Gilbert: being if you want to try and buy it from 234 00:10:55,170 --> 00:11:01,108 Ben Gilbert: someone else. Now first party data is the goal at the moment. And if you can harness 235 00:11:01,110 --> 00:11:03,540 Ben Gilbert: that and bring that into your business and understand how 236 00:11:03,540 --> 00:11:05,968 Ben Gilbert: to use it and communicate with consumers in a way 237 00:11:06,240 --> 00:11:08,220 Ben Gilbert: that gives them the product that they want, at the right 238 00:11:08,220 --> 00:11:10,828 Ben Gilbert: time, at a good value proposition, it puts you in 239 00:11:11,250 --> 00:11:14,250 Ben Gilbert: really good stead. The challenge is, as the old sort of 240 00:11:14,250 --> 00:11:17,070 Ben Gilbert: adage in the industry is, is processing that data is 241 00:11:17,070 --> 00:11:19,230 Ben Gilbert: a bit like drinking from a fire hydrant. There's just 242 00:11:19,230 --> 00:11:21,208 Ben Gilbert: so much of it when you've got to work out 243 00:11:21,210 --> 00:11:24,179 Ben Gilbert: how to manage it. And I think what we're seeing is that in 244 00:11:24,179 --> 00:11:27,750 Ben Gilbert: Australia, we're still behind some of the leaders globally, but 245 00:11:27,750 --> 00:11:29,730 Ben Gilbert: there's a few companies locally I think that are catching 246 00:11:29,730 --> 00:11:32,098 Ben Gilbert: up at pace. And Woolworths is one I'd put in 247 00:11:32,099 --> 00:11:35,040 Ben Gilbert: that bucket. And you're seeing Wesfarmers, it's talked about putting 248 00:11:35,040 --> 00:11:38,670 Ben Gilbert: a hundred million dollars of OPEX into data and their 249 00:11:38,670 --> 00:11:41,309 Ben Gilbert: new platform. So it's a big, big focus, and it's 250 00:11:41,309 --> 00:11:44,760 Ben Gilbert: a big opportunity here. And there's some opportunities or case 251 00:11:44,760 --> 00:11:47,910 Ben Gilbert: studies offshore at the moment. So use Tesco who, while 252 00:11:47,910 --> 00:11:49,559 Ben Gilbert: on face value in the UK at the moment, they 253 00:11:49,559 --> 00:11:51,599 Ben Gilbert: might not be the cheapest. When you look at their 254 00:11:51,599 --> 00:11:55,140 Ben Gilbert: Tesco club card promotions, which they're utilizing data to target, 255 00:11:55,349 --> 00:11:57,208 Ben Gilbert: they are cheaper and they've probably had one of the 256 00:11:57,210 --> 00:12:01,170 Ben Gilbert: best share performances of the traditional grosses in that market, 257 00:12:01,410 --> 00:12:03,750 Ben Gilbert: and again, through utilizing data and it's a win- win 258 00:12:03,750 --> 00:12:05,728 Ben Gilbert: for the consumer and also for the retailer because you 259 00:12:05,730 --> 00:12:08,730 Ben Gilbert: don't have wasted promotions, you can drive loyalty, lift lifetime 260 00:12:08,730 --> 00:12:09,360 Ben Gilbert: customer value. 261 00:12:09,660 --> 00:12:12,389 Sean Aylmer: I remember talking once to the former boss of Australian 262 00:12:12,389 --> 00:12:15,719 Sean Aylmer: Pharmaceutical Industries, which is now owned by Wesfarmers, the big 263 00:12:15,719 --> 00:12:18,150 Sean Aylmer: pharmacy chain. And he was just talking about how their 264 00:12:18,179 --> 00:12:20,220 Sean Aylmer: loyalty program was one of the best in the country. 265 00:12:20,490 --> 00:12:24,450 Sean Aylmer: And he said so much value is in that loyalty program. 266 00:12:24,720 --> 00:12:26,728 Ben Gilbert: Yeah. I agree. I think if you look at the 267 00:12:26,730 --> 00:12:29,580 Ben Gilbert: Sister Club program, which is API, I think that's one 268 00:12:29,580 --> 00:12:32,460 Ben Gilbert: of the key reasons that Wesfarmers look to buy that business. 269 00:12:32,759 --> 00:12:35,369 Sean Aylmer: I'm thinking of the online place, the kogan. com, Temple & 270 00:12:35,369 --> 00:12:37,950 Sean Aylmer: Websters, which obviously had a great time during the pandemic, 271 00:12:38,160 --> 00:12:41,130 Sean Aylmer: have come off totally since then, but they would be 272 00:12:41,130 --> 00:12:43,078 Sean Aylmer: good data plays some of those company. Well, they would 273 00:12:43,080 --> 00:12:45,090 Sean Aylmer: have good first party data, wouldn't they? 274 00:12:45,480 --> 00:12:48,629 Ben Gilbert: Yeah, they will and they do. And again, I think the challenge is 275 00:12:48,630 --> 00:12:51,990 Ben Gilbert: how you manage and utilize that and get people coming 276 00:12:51,990 --> 00:12:54,360 Ben Gilbert: back to the sites and giving people what they want, 277 00:12:54,360 --> 00:12:57,809 Ben Gilbert: because you can sort of collect all the data and it can all 278 00:12:57,809 --> 00:13:00,090 Ben Gilbert: come into a data lake. But the challenge is, and 279 00:13:00,090 --> 00:13:01,980 Ben Gilbert: I sort of joke sometimes is sometimes these things can 280 00:13:01,980 --> 00:13:04,050 Ben Gilbert: turn into data swamps because you've got to actually be 281 00:13:04,050 --> 00:13:07,110 Ben Gilbert: able to manage it. But you talk to some of those names and obviously 282 00:13:07,110 --> 00:13:10,050 Ben Gilbert: the big beneficiaries, you also have a look back through 283 00:13:10,139 --> 00:13:12,149 Ben Gilbert: COVID and where we are now with the retail sales 284 00:13:12,150 --> 00:13:14,309 Ben Gilbert: out last week and then the more detailed set this 285 00:13:14,309 --> 00:13:17,220 Ben Gilbert: week is we're sort of back to trend for online 286 00:13:17,220 --> 00:13:20,400 Ben Gilbert: penetration (inaudible) , which I think's fascinating because people are 287 00:13:20,400 --> 00:13:22,650 Ben Gilbert: flooding back to stores and telling us they want the 288 00:13:22,650 --> 00:13:26,309 Ben Gilbert: experience. So it's all about giving people what they want, 289 00:13:26,309 --> 00:13:29,189 Ben Gilbert: utilizing that in the right way to maximize that customer value. 290 00:13:29,639 --> 00:13:31,200 Sean Aylmer: Ben, thank you for talking to Fear and Greed. 291 00:13:31,890 --> 00:13:32,760 Ben Gilbert: No problem at all. Thank you. 292 00:13:33,059 --> 00:13:35,429 Sean Aylmer: That was Ben Gilbert, head of Australian Research at Jarden. This 293 00:13:35,429 --> 00:13:38,190 Sean Aylmer: is the Fear and Greed Daily Interview. Remember you should 294 00:13:38,190 --> 00:13:41,880 Sean Aylmer: get professional advice before making any investment decisions. Join us 295 00:13:41,880 --> 00:13:43,889 Sean Aylmer: every morning for the full episode of Fear and Greed, 296 00:13:43,920 --> 00:13:47,549 Sean Aylmer: Australia's most popular business podcast. I'm Sean Aylmer. Enjoy your day.