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What’s wrong with Australian retailers?

Online retailer Kogan.com Ltd (ASX: KGN) slumped on its IPO yesterday, continuing a trend of Australian listed retailers failing to live up to expectations.

Kogan saw its share price sink from the IPO price of $1.80 to as low as $1.50, although the share price has clawed back some of those losses with a rise of 3% today.

That has been put down to a number of reasons – one of which was that the issue price was way more expensive than its closest listed competitors JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) as we noted here.

But in the past year or so, we’ve seen several retailers suffer huge falls in their share prices. Here’s a sample:

  • Surfstitch Group Ltd (ASX: SRF) share price down 89% year-to-date after a series of issues, including losing its CEO in mysterious circumstances, profit downgrades, allegations of not meeting corporate disclosure rules and a potential class action.
  • Lovisa Holdings Ltd (ASX: LOV) saw its share price sink from a high of $3.79 to as low as $1.85 after missing market expectations, including a 40% fall in one day.
  • Super Retail Group Ltd (ASX: SUL) saw its share price slammed down more than 15% after the group’s leisure business saw a 40% fall in operating profit.
  • The Temple & Webster Group Ltd (ASX: TPW) share price crashed 69% in one day after warning that it would struggle to meet its prospectus forecasts.
  • Beacon Lighting Group Ltd (ASX: BLX) saw its share price sink 25% in one day in May, after reporting disappointing sales results – attributed to weak consumer confidence.
  • Godfreys Group Ltd (ASX: GFY) share price plunged more than 30% after downgrading its earnings guidance and replacing its CEO.

There are other examples too, but one does wonder why so many retailers have struggled in the past year – in what appears to be more than a coincidence.

Weak consumer confidence has been attributed by a number of companies as reasons for their disappointing announcements or missing market expectations, but maybe there’s more to it than that.

Particularly when you consider other retailers have had no such issues – including the likes of Nick Scali Limited (ASX: NCK), Vita Group Limited (ASX: VTG), Reject Shop Limited (ASX: TRS) and JB Hi-Fi.

That suggests the factors affecting at least some of those with disappointing results could be directly attributed to the company, its management and processes – and maybe they aren’t up to scratch.

Foolish takeaway

Retailing may appear to be a simple business, but can be much more complicated than it looks. For one, investors need to be aware that inventory management, logistics and distribution are enormously important factors in how successful retailers will be. It pays to look very closely at a retailer before jumping in.

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Motley Fool writer/analyst Mike King own shares in Vita Group. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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