It’s not easy being an Aussie retailer.
First, there’s that population problem. The people barely outnumber the koalas and kangaroos, 16 million to 13 million, in a land mass about as large as the United States. Then, there are those pesky trading laws. Two of Australia’s six states prohibit business on Saturday afternoons, and all states force stores to close on Sundays.
And, of course, there are layers of notoriously rigid government rules and regulations that turn shopping center development into an exercise only for those with the patience of Job.
All this has scarcely held back Coles Myer Ltd., a powerhouse operator of department, discount and food and liquor stores that has been built by merger into Australia’s biggest company in terms of sales--$10.2 billion last year, accounting for 20% of the volume done in that country’s food and general merchandise stores. It is also one of the nation’s largest owners of real estate, with nearly $1 billion in properties.
(By one estimate, if Sears, Roebuck & Co.'s merchandise group, the world’s largest retailer with $28 billion in annual sales, were as dominant in the United States, its sales would total a whopping $135 billion.)
No longer content with being known Down Under, the Melbourne-based Coles Myer is coming up and over, with a listing on the London Stock Exchange as of early 1987 and a listing on the New York Stock Exchange scheduled to go into effect today.
“We have an international inclination,” Coles Myer’s understated chairman and chief executive, Brian E. Quinn, said last week on a visit to Los Angeles, one of many stops nationwide on a “road show” designed to introduce the company to brokerage firm analysts and spark interest among U.S. investors.
And he doesn’t just mean an inclination to sell Coles Myer stock internationally. Eventually, Quinn said, the Australian company intends to add U.S. food or general merchandise retailers to its stable.
“While we’re not here (on this trip) to look for acquisitions, clearly we’ll (eventually) be trading in regions outside our own,” Quinn said.
That would continue a trend of purchases of U.S. retailers by foreign companies, notably Toronto-based Campeau Corp.'s recent acquisitions of Allied Stores and Federated Department Stores and the British merchant Marks & Spencer’s subsequent purchase of Brooks Bros. from Campeau.
Coles Myer’s roots are in variety store operator G. J. Coles, which opened its first store in 1914. At the end of the 1950s, the company branched out into supermarkets.
In 1969, through a joint venture with K mart Corp., Coles introduced discount stores to Australia. The concept proved so successful that in 1978 Coles bought out K mart’s half interest in exchange for 20% of Coles’ stock. K mart still receives royalty payments for its name and has three representatives on the company’s board.
In 1985, G. J. Coles acquired the Myer Emporium Ltd., then Australia’s third-largest retailer, which had been suffering declining profits as a result of an aggressive expansion during a time of depressed retail sales. Myer, founded in 1901, did, however, bring to Coles the dominant department store chain in Victoria, with stores also in New South Wales, as well as Grace Bros., the largest department store in New South Wales, and Boans, the largest department store in Western Australia.
Walton Toured Stores
The combination vaulted Coles Myer into an unchallenged position as the nation’s largest listed public company and top retailer, with more than 1,400 stores (including some New Zealand discount food stores) and 26% of Australia’s grocery business, 67% of the department store market and 77% of the discount store sales. Coles Myer’s closest retailing competitor is Woolworths (unrelated to the U.S. company), which has been a poor performer in recent years.
Coles Myer has already won fans among U.S. retailers. Sam Walton, the legendary founder of Wal-Mart, visited the stores in March, 1987, with Robert Kahn, a management consultant and Wal-Mart director. “We were fascinated with what they were doing,” said Kahn, who publishes Retailing Today newsletter from his base in Lafayette, Calif. At Wal-Mart’s annual meeting in June, Kahn used Coles Myer’s market share levels as an example of why Wal-Mart should not feel constrained by current levels of sales at U.S. retailers.
Retailing analysts in Australia praise Coles Myer’s management and performance. Operating profit last year rose 50% to $261 million, in part because of contributions by a group of hypermarkets, selling food and discount merchandise, that the company has been developing under the Super K mart name. Results were also helped by a revamping that has resulted in the sale of real estate and some poorly performing units.
In a recent research report, First Boston Australia Equities Ltd. issued a “buy” recommendation on the stock, citing the company’s “dominance of the Australian retail scene, its excellent growth prospects, reliable cash flow and superb management.”
Quinn, 52, whose passions include jogging and fast cars (he owns a Ferrari, a Porsche and a Jaguar), started with the company 33 years ago as a trainee and has been chief executive for six years and chairman for just over a year.
The company’s chief financial officer is John Barner, a native of Georgia who worked in Australia for Citibank for 20 years before joining Coles Myer.
As for U.S. acquisitions, Quinn hastens to note that any purchase is unlikely before 1990. But, he added: “We’re opportunistic (and) opportunity sometimes knocks only once. We can fund a significant acquisition, (and) I doubt we’d be going lower than $1 billion.”
In the meantime, barring a U.S. retailer in his Christmas stocking, Quinn said he is looking forward to another gift this holiday. Some Australian states are finally starting to loosen restrictions on trading hours. Said Quinn: “That will be a huge step forward.”