Issue No. 52: January 2014
DIDN’T WHO DO WELL? Best Wishes for the New Year and attached comes the hope that it is a prosperous and successful one for us all. In most businesses this is the time of year to look ahead and plan for the coming twelve months, but in retail and town centres it is also the time to look back at the last twelve weeks and look for signs and trends to cast light on the coming months. But who were the obvious Winners & Losers?
Next Verdict: Winner Sales: Up 12% on last year for the period from 1 November to 24 December. Britain's second-largest clothing retailer reported sales "significantly ahead of expectations" in the run-up to Christmas. The company raised its pre-tax profit forecast for 2013
Ryman and Robert Dyas Verdict: Winner Sales: Ryman reported a 1.7% increase in sales from 1/11 to 24/12, compared with the previous year. Over the same period, Robert Dyas sales rose by 5.2% Serial entrepreneur Theo Paphitis saw his lingerie-to-lever-arch-files empire boosted by healthy trading over Christmas.
John Lewis Verdict: Winner Sales: A 7% rise in like-for-like sales in the five weeks to 28 December. John Lewis was boosted by a 22.6% rise in online sales compared with Xmas 2012, accounting for 1/3rd of its total sales over the period. Stores were also up as shoppers snapped up late presents on the high street
Debenhams Verdict: Loser Sales: Underlying sales barely rose by 0.1% in the 17 weeks to 28 December, despite a 27% rise in sales online. Gross profit margins fell by up to 1% Debenhams warned pre-tax first-half profits would be 26% down on last year at ÂŁ85m after false hopes for a late surge in sales.
House of Fraser Verdict: Winner Sales: Like-for-like sales excluding VAT for the three weeks to 28 December were up 7.3%, with online sales up 57.7% Department stores group House of Fraser said a surge in online sales helped it to its best ever Christmas trading period Marks & Spencer Verdict: Loser Figures are just out as View goes to Press and as predicted the outcome is not very positive.
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Issue No. 52: January 2014 Once again food fairs better than other good at M&S, but along with Tesco, and particularly Morrisons, Christmas 2013 has not been a good time for these traders and shares are suffering as a result.
GROCERS TO BE “KEPT IN THE DARK” Grocers are cutting back on megastores, but rising internet food sales see supermarkets sign up for twice as much online warehouse space this year. The major supermarkets will this year commit to doubling the space devoted to internet distribution centres, known as dark stores, say property agents Jones Lang LaSalle. Around 1.8m sq ft of warehouse space is devoted to dark stores, but that will increase as online shopping transforms the retail sector. The internet is set to become a key battleground for the grocers in 2014 as Morrisons finally launches its online service in partnership with Ocado and rival supermarkets vie to entice shoppers with services such as same-day delivery and convenient "click and collect" locations. Morrisons and Tesco were among the retailers who declared an end to the "race for space" last year. Grocers' online services are thought to have played an important part in the tussle for customers over Christmas. As much as 15% of UK grocery sales, worth £900m, are anticipated to have been booked online in the four days from 20-23 December, according to analysts at Verdict, compared with an average of 5.5% throughout 2013. The importance of internet stores was underlined this Xmas by John Lewis and Next, when both reported double digit rises in online stores over the season. While the proportion of online sales is much smaller than other sectors, the size of the food market makes it key to any growth for mainline supermarkets. "Dark stores really make internet shopping a more viable option for a lot more shoppers than when goods are picked in store," said Andy Stevens, senior retail analyst at Verdict. Waitrose will more than double the number of online delivery slots available when it opens its second centre in south London this autumn. Tesco will open its seventh dark store in Oxfordshire later this year and is scouting for further sites in Birmingham and Manchester Sainsbury's has said it will open its first dark store in Bromley-by-Bow, east London, "within the next few years". Retailers are being forced to open the new dark stores because delivering to thousands of homes demands a completely different set up to transporting bulky loads to a few hundred stores. Jon Neale, UK head of research for Jones Lang LaSalle, which detailed the plans in its 2014 property predictions report, said the increase in demand for sites was not only driven by more people buying online but by the concentration of shoppers in particular areas. "The growth of internet shopping is about the changing nature of demand. It is more pronounced among certain demographics and is not distributed evenly across the country," he said.
BIG DEAL… HIGH STREET OF THE YEAR AWARD Deal in Kent was announced as the winner of the High Street of the Year award from more than 500 nominations made by Telegraph readers. The judges, chaired by the minister for the high streets, Brandon Lewis MP, choose Deal as part of their Reinventing the High Street campaign. The judges said, “Deal is a very good example to other struggling high streets of how an engaged local community, with support from local and national government, can match enthusiasm with good and innovative
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Issue No. 52: January 2014 practice.” Shortlisted for judging were: Leek, in Staffs, Ramsbottom in Lancs, Bridport, Dorset; Bury St Edmonds, Suffolk; Cambridge (Mill Road); Malmesbury, Wilts; Sherborne, Dorset; Teddington, Middx; and Yarm, Teesside.
IT REALLY CAN’T BE THAT ‘EASY’ SURELY? Almost everyone has become a bargain-hunter. The big supermarkets are being squeezed by discounters and all have ceded market share to cut-price rivals Aldi and Lidl. The trend has not been lost on Stelios Haji-Ioannou, the billionaire founder of easyJet and serial entrepreneur. In August he unveiled loose plans for easyFoodstore, a budget grocer selling essentials at sub-supermarket prices. His plan for an early 2014 opening has passed, but Stelios is still set on the idea. He hopes to offer a limited range of 100 items for around 50p each. The idea is that customers would benefit from ultra-cheap prices and still make a profit, especially if he could buy up cheap retail space for more branches. "First, is it possible to add a limited range of frozen foods and still be cost effective? Second, we want to automate the checkout process with self-service scanning using handheld devices. The technology is out there but is it cost effective? Third, we want to see how feasible cashless payment is, bearing in mind the target audience." To eliminate the costs and security risks of handling cash, easyGroup is looking at ways to let customers load up a payment card with cash. The group has recently started using photo ID at Food from the Heart, his project in his native Cyprus to give basic food to the needy, which was the other trigger for his idea. Patrick O'Brien at Verdict Retail is struck by the fact that Stelios wants his store to be cheaper than Aldi and Lidl. "It is not immediately apparent that there is a great gap there," but thinks the concept could work on a national scale if easyGroup developed a chain in the convenience-store sector, which is "not an oversaturated market in terms of the discounters. They are a very innovative organisation that does try different business models and is prepared to make mistakes." That could be a polite reference to the mixed fortunes of Haji-Ioannou's recent ventures. While his orange-liveried planes transformed the airline industry, attempts to bring the no-frills model to cruise liners and cinemas flopped, while easy4men toiletries sank without trace. But no one disputes the prize of getting a slice of the UK's food and grocery market, which was worth £170bn in 2012 and is growing. Aldi and Lidl have seized £1bn worth of sales from the big four supermarkets over the past year and some see room for even more competition. For now, there is no target date for opening the first branch. Haji-Ioannou says there is more work to do and that easyFoodstore has to compete for time with easyGroup's other projects.
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Issue No. 52: January 2014 The next move is to open a "mock-up" store on the ground floor of easyGroup's building in Croydon, to test systems and consumer reaction "in a controlled environment" in the next few months. "Think of it as a laboratory," Haji-Ioannou says. "I still have more questions than answers about this industry."
WHILE HOPES RISE, PRICES FALL Prices in British shops fell at their fastest pace in seven years last month as retailers battled for hard-pressed customers with deep discounts on clothing, furniture and electricals. The British Retail Consortium said shop prices fell for the eighth month running in December. The fall in overall shop prices came as non-food prices fell an annual 2.3% in December compared with deflation of 2% in November. Food prices continued to rise but at the slowest pace for more than three years. As fresh fruit prices fell and those for non-alcoholic drinks barely rose, food inflation eased to 1.7% from a rate of 2.3% in November. The numbers echo reports from the high street of heavy discounting in the run-up to Christmas, particularly on clothes. Debenhams parted company with its finance director last week after it warned of a sharp fall in profits. Investors are nervous about the figures for Marks & Spencer, after it too slashed prices in a last-minute attempt to woo shoppers before Christmas.
View Editor: ian@thegreenbrain.co.uk
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