‘Migration to value’: Best & Less sees customers looking for cheaper options

The boss of discount retailer Best & Less expects Australians to step up the hunt for bargains on clothing as financial stress on families mounts.

Best & Less revealed on Tuesday its net profits slid by 55 per cent to $36.1 million in the 12 months ended July 3, a year marked by COVID-19 store closures. Revenue rose 8 per cent to $622.18 million.

Best & Less chief executive officer Rodney Orrock says the clothing company is well-placed to offer lower-cost clothing to shoppers who may be taking a more budget-focused approach.

Chief executive Rod Orrock said that despite losing 21 per cent of trading days over the year due to lockdowns, sales had bounced back in the second half and the company was now well-placed to offer lower-cost clothing to shoppers who may be taking a budget-driven approach.

“As we move further into an uncertain economic environment, with rising interest rates and cost-of-living pressures placing families under increasing financial strain, we expect an acceleration in the migration to value that is already under way,” he said.

Orrock said the retailer’s baby and children’s clothes had been performing particularly strongly, underlining that these categories were not seen as discretionary spending.

While parents may be making tough choices about what to spend money on at the moment, “they won’t choose not to invest in their baby”, he said.

“Parents understand kids are hard on their clothes. Value is an important component of that [purchase].”

‘When things get tough, it’s very much about the family. I think we’ve got a strong opportunity to take advantage of that.’

Best & Less CEO Rod Orrock

He’s hoping the spending will continue through to the Christmas period, when the retailer launches its annual Christmas-themed apparel.

“When things get tough, it’s very much about the family. I think we’ve got a strong opportunity to take advantage of that,” Orrock said.

Inflationary pressures have been felt across the company and some prices have gone up, the retailer said in its 2022 earnings report to investors.

“The company has taken action to protect margins, including selectively increasing prices in line with its ‘good, better, best’ product and pricing strategy, negotiating cost mitigation with suppliers, and rationalising materials and product lines,” the report said.

While store foot traffic was still below pre-COVID levels, it is recovering, with total sales up 38 per cent in the first weeks of 2023 and like-for-like sales up 1.4 per cent on this time last year.

Best & Less is the latest retailer to report that consumers are still spending. Jewellery brands Lovisa and Michael Hill surprised the market on Monday  with strong results and a positive outlook for the rest of the year.

Best & Less investors will receive a final dividend of 12 cents, bringing the full-year payout to 23 cents.

The market responded warmly to the numbers despite the profit drop, with shares up 5 per cent at $2.75 shortly before midday in Sydney.

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