Gordon Brothers’ Frank Morton Sees No End to Changes Sweeping Retail

Article

Date June 2017

Australia’s retail sector is in the grip of rapid change, the likes of which has not been seen before, as it enters an era of a “thinning out’’ of underperforming busi¬nesses that has triggered a wave of store closures and failures in the US, a global retail investor and ¬restructure expert has warned.

Frank Morton, the chief executive of Gordon Brothers’ international operations, said Amazon was partly driving the accelerated pace of innovation and Australian retailers needed to “sharpen their game” or risk falling by the wayside, as new more powerful and successful retail models flex their muscle.

Visiting Australia, where Gordon Brothers recently opened an office that is now overseeing the fire sale at collapsed fashion chains Herringbone and Rhodes & Beckett, Mr Morton said Amazon’s ¬recent $18 billion takeover grab for US supermarket Whole Foods was a threat to other retailers. But it could also be viewed as an endorsement in the future of bricks-and-mortar stores, he said.

“It certainly shows Amazon’s commitment to the grocery market and it also shows you the power from Amazon’s perspective of their belief in traditional bricks and mortar as well,’’ Mr Morton told The Australian.

“It shows Amazon’s understanding bricks and mortar is an ¬element that’s important to the total retail offering; how those two come together is going to be ¬interesting. The people who figure out the combination of the two are the ones that are going to be the winners in this game.”

Gordon Brothers has been an active adviser, participant and ¬investor in the US retail sector for more than 100 years and has a highly entrepreneurial approach to business. It can act as consultant or ¬adviser to push through a restructure or, if it deems there is a return to be made, invest its own capital to buy and then transform a struggling company.

It works for distressed companies as well as healthy ones. It bought, restructured then sold the once powerful Polaroid company after the dawn of the digital age sent it to the wall.

Reflecting on the turmoil swirling though the US and Australian retail sectors, Mr Morton said ¬industries in both countries, and across the globe, were facing a thinning of their ranks as stores closed and some retailers shut down -completely.

“Look at consumer electronics in northern America. There is only one big box retailer dedicated to consumer electronics and people like Amazon have picked up substantial market share, as have players like Wal-mart,’’ he said.

In its wake, retailers have reduced their store numbers and shut down locations. Where this trend will end, he did not know.

“(The question) I haven’t seen anybody really answer correctly is really the right balance: when does it stop?” he said.

“And I do think that plays out in Australia probably not quite to the extent that it has in the US.

“The US has been ‘over-stored’ for 15 to 20 years but I do think the pressures Australian retailers will feel (are) from the continued ¬investment on e-commerce platforms and also foreign entrants like Zara.

“Australian retailers will have to sharpen their game. “There are many good retailers here in Australia; there may be some that fall by the wayside as well.’’