The Music Dies as Australian Dollar Soars - Wall Street Journal (blog)

By James Glynn

Australia's soaring currency has claimed another victim in the retail space.

The country's largest music retailer, Australian Music Group, will lay off close to 600 staff in the nationwide shutdown of its Allans Billy Hyde stores, which dot the central business districts and suburbs of major cities.

Brendan Richards, a partner at AMG's receiver Ferrier Hodgson, said the collapse of the group is directly attributable to the Australian dollar, which makes buying musical instruments and equipment online an attractive option for shoppers.

"It has become easier and cheaper to buy specialist music equipment and replacement parts and consumables – like drums skins and guitar strings, etc. – over the internet. It is very hard to compete," Richards told Deal Journal Australia.

AMG failed to find a white knight for its operation, and doors will be closed in November.

The Australian dollar has been trading above parity with the U.S. dollar in 2012, buoyed by aggressive offshore demand for the country's AAA-rated sovereign bond. The Aussie dollar has also shaken off falling commodity prices in 2012 to remain the darling of international markets.  Wednesday in Asia, it was trading at a two-week high of US$1.0310.

Armed with a powerful currency, Australians are travelling abroad in record numbers, and rising internet sales are biting hard into the bottom line of all brick-and-mortar retail.

The demise of the music group comes after aggressive interest rate cuts over the last year.  The Reserve Bank of Australia has not been able to raise the mood consumers despite handing out 1.5 percentage points in interest rate cuts.

The iconic retailer's roots date all the way back to 1850, when co-founders Joseph Wilkie, John Webster and George Allan opened a musical warehouse on what's now one of Melbourne's best-known streets — Collins Street. It later moved moved into larger premises next door which included a grand saloon for performances and teaching rooms.

Though its stores will be no longer, part of the Allans legacy will live on through the Fairfax Media -owned 3AW radio station, which it co-founded in 1932.

Billy Hyde was a drum manufacturer and singer who opened his first store in 1962.  Allans and Billy Hyde merged in July 2010.

Gillian Tan contributed to this post.