By Simon Evans, The Australian Financial Review & Sydney Morning Herald, 26 May 2015
The Australian and New Zealand operations of high-end Danish audio equipment and television maker Bang & Olufsen have been acquired by Emerald Group Investments, which operates the LK Boutique luxury watch and jewellery outlets in Melbourne and Sydney and is aiming to capitalise on strong growth in the luxury market in Australia.
Bang & Olufsen has nine retail stores in Australia and one in New Zealand and the local business has been sold by the Danish parent as it undergoes heavy restructuring on a global scale.
Emerald Group Investments chief executive officer James Kennedy said on Tuesday the luxury end of the market in retail in Australia was growing strongly as confidence accelerated among high net-worth individuals, while the middle-market was being squeezed.
"The markets and the customers have never been more polarised," Mr Kennedy said.
Bang & Olufsen in Europe cut 125 jobs in March, as it embarked on a revamp of its business which was hit hard in the aftermath of the global financial crisis as buyers in Europe opted for other lower-priced brands and steered away from the high-end, expensive items which are at the core of the Bang & Olufsen range.
Mr Kennedy said that Emerald Group's total revenues were expected to reach $70 million in 2015-16 when the Bang & Olufsen acquisition and other expansion plans were included. The Emerald Group currently generates around $40 million in annual revenues from its stable of LK Boutique stores at the Crown casino complex in Melbourne and The Star casino in Sydney, and a stand-alone Rolex boutique store in Martin Place in Sydney. He wouldn't divulge the price tag for the Bang & Olufsen business. "I can't comment on that," he said.
Mr Kennedy said Emerald aimed to revitalise the Bang & Olufsen brand in Australia with a revamp of marketing, to tap into the growing confidence of consumers at the high-end luxury market.
"It's a top-end brand, innovative and has great design," he said. It had lost its way a little as the parent company went through some difficult restructuring but Emerald had ambitious growth plans as it revitalises the brand in Australia, he said.
"For the moment we are going to get our feet under the desk," he said, referring to a plan for a steady transition as Emerald takes ownership from May 29. The nine retail stores will remain the foundation of the business in the first instance, but there are expansion plans afoot.
The strong influx of high-end tourists into Australia was helping to deliver strong growth in the LK Boutique business, while there was a growing confidence among high net-worth locals because of soaring real estate prices and a rising sharemarket.
He predicted a continued squeezing of the middle section of the retail market in Australia, in line with what was occurring in the United States where the high-end luxury retailers were performing strongly, and the mass market value retailers like Costco and WalMart were making solid headway, but those in the middle ground were finding it harder.
Mr Kennedy said Emerald had been increasing revenues by 50 per cent each year since 2012.