Beacon Lighting captures the Morrison-Frydenberg economic miracle

Glen and Ian Robinson in the Beacon Lighting store in Burwood, Melbourne. Picture: David Geraghty / The Australian.

Australia is experiencing a Morrison miracle. To be more accurate it’s a Morrison-Frydenberg miracle.

We have a consumer boom that is different to anything we have previously seen. Not everyone is winning but those who have been able to catch the boom’s waves are achieving incredible profit growth. Later I want to look at how the boom transformed the world’s largest speciality lighting retailer, Beacon, delivering a 133 per cent profit rise in the half year to December 31.

What makes this boom so different is that, while it is happening, the media is full of sad central business district stories and people who are suffering from the lack of overseas students and tourists, the collapse of events, plus, particularly in Victoria, the severe impact of shutdowns.

But if you’re in the property business — particularly in regional areas — the power of the boom is unprecedented and that’s spreading to building and related areas. Home related retailing has already boomed. We are looking at fundamental changes in spending patterns so the boom is not about to fizzle out.

Indeed, sleepy large enterprises which have held back on investment will soon change course.

However one of the greatest dangers to Morrison-Frydenberg miracle is the emerging shortage of both skilled and unskilled labour in the boom areas of the economy. That shortage is being fanned by the high JobSeeker payments. It’s really important that Frydenberg sticks to his guns and removes the additional JobSeeker payments across the board.

But targeted help is needed in some of the badly affected areas, including for many people in their 50s who are doing it tough.

The boost for companies like JB Hi-Fi, Bunnings and Harvey Norman has been well documented but the Beacon story not only captures the forces the driving the boom but shows why it looks like continuing.

Beacon is 55 per cent owned by the Robinson family and in the years after its public flotation in 2014 it did reasonably well. But achieving growth was tough.

But early in January and February 2020, after a tough December, there were surprising signs of growth. But then came the terrible weeks of late March and early April. Suddenly disaster scenarios were hitting Australian boardrooms and Beacon, like most other companies, went to its bankers to make sure they had sufficient cash to survive a potential disaster.

Beacon was founded in 1967 by Ian Robinson (who remains chairman) but his son, 39-year old Glen Robinson has been CEO since 2013 and in April he took what seemed to be an incredible gamble. JobKeeper was announced late March and a multitude of retailers around the land shut their doors to make sure they are were entitled to the allowance and could lower their rent. Robinson took a risk and kept the Beacon doors open, so received no JobKeeper and few rent reductions. But no staff member was stood down, which created deep goodwill among the highly skilled work force. After Easter the spending waves started so he took the risk and ordered more stock.

Initially when people began working at home they needed better lighting for their desks. Then the extra time being spent at home made them look at their existing lighting.

Beacon’s customer base is middle and upper income Australia and many of them have two homes. As they spent more time in their beach or rural properties they realised that the second dwelling needed lighting and other upgrades. While a proportion were suffering, for most their money kept coming and many households received a $40,000 boost via superannuation withdrawals. At the same time interest rates kept falling, so building up the spending power.

As the half year to December 31 proceeded two other forces took over. First the rising property values made middle and upper income Australians more confident and more prepared to invest in their home to add to its value, which boosted lighting demand. Secondly Beacon lighting customers are prolific overseas travellers and their cash balances were boosted by the cancellation of overseas trips. Now they are not planning any overseas trips for at least one or two years. That means extra cash available to spend on the home. In addition, many are changing houses to move out of the city or buying a second house.

Beacon lighting results reflect that incredible reduction in overseas travel expenditure, which is likely to continue into 2022. During the Victorian shutdowns Robinson was forced to shut his stores but, by using extra payments and government allowances plus holiday pay, most of the impacted staff lost only one or two weeks’ pay.

Beacon now believes that the days of running companies from larger centralised offices have gone and the modern communication that has emerged from the lockdowns has changed the game. The demand for regional dwellings indicates many others have reached the same conclusion. There has been great publicity about the trade dispute with China, but Chinese factories have maintained supply although orders placed earlier because of shipping problems.

Like almost every other business Beacon is looking at the lessons of 2020 and working out how to make sure that a growth path continues.