Allegedly

Allegedly

We have entered retail results season here in the UK, and some of the big names have unveiled extremely healthy annual numbers over the past few weeks – especially multiple retailers with a strong food element to their business. Tesco shares jumped after it announced that last year’s sales rose 7% to £61.48b, and the retailer struck a confident, bullish tone in its reporting notes. Elsewhere, B&M sales in the UK rose +8.5% year-on-year (up +3.7% on a like-for-like basis), as the retailer opened 47 new stores, while Home Bargains revealed that turnover increased 10.2% to £3.7b in the year to 30th June, while pre-tax profits rose 12.4% to £332m. Thanks to the increase in sales and profits, the owners – the Morris family – will share dividends totalling £36m, up from £30.5m last year. TJ Morris also stated that the number of Home Bargains retail outlets is set to increase in the year ahead. The company currently operates 594 stores but its aiming to open between 800 and 1,000 retail outlets, which it expects to lead to further growth in turnover and profitability. However, there was a slight sting in the tail: over 2,000 jobs were lost at Home Bargains over the last financial year, as overall staff levels were reduced from 28,401 to 26,845. Now, I must confess to not being overly familiar with staffing and service levels at Home Bargains, living in an area not yet penetrated by the retailer (given there were several large Wilko stores close by before the chain closed, maybe this is one of the areas in which it is looking to expand its store estate?) – but one has to hope that as retail starts to pick up again, it will strive to get the right balance between profit for the owners and staffing levels…

One thing which might help all retailers – large and small, food and non-food – is a reform of business rates system. The Labour Party announced last month that if it wins the next election, it will “fix” the business rates system, replacing it with a new, fairer system of business property taxation with the aim of “rebalancing the burden and levelling the playing field.” The aspiration is sound: the devil, of course, is in the detail. What are the mechanics of the proposal? And how quickly can the current system be overhauled or replaced? Some of us are old enough to remember the Poll Tax being described in a similar way, and we all know how that turned out (although I’m not sure we’ll see retailers rioting in quite the same way). Naturally, this is all completely dependent on Labour winning an election – not by any means a foregone conclusion, despite the current government’s continuing nightmare in the polls – but if we do somehow end up with a system that is in Labour’s words “fit for the 21st century”, it will be an important step in revitalising Hight Streets the length and breadth of the UK and Ireland. Retail is not just one of the country’s largest sources of employment, but it is at the very heart of the health of town centres, and surely we all want to see high streets becoming a pleasurable place to visit again. How we reconcile that with a modern digital economy where many of the large platforms and online sellers are based outside the UK for tax purposes, and therefore are arguably not contributing their fair share or subject to a level playing field is a conundrum for far greater economic minds than mine. But I do hope we find ourselves with a government – of whatever stripe – which is prepared to tackle this head on. Retailers are a resourceful bunch, and I still feel the “nation of shopkeepers” expression is one we should wear with pride. But if we still want to lay claim to that, we have to start by addressing the elephant in the room – the balance of the tax burden between physical and digital retail…

I love the fact that one of our most read online stories of the past few weeks was about the social gathering of a group of Scottish toy trade reps and agents which took place in Glasgow last month. It’s a lovely idea, and one that maybe some of their UK and Ireland counterparts may decide to replicate. And it shows the warmth and camaraderie that these people built up over the years. Wouldn’t it be great to think there will be gatherings like that in ten or twenty years’ time? That will be totally dependent on what happens to retail in the coming years – I’m not sure I can see the people who punch numbers into algorithms ever deciding to get together to swap stories and reminisce about the time something funny happened in the course of their daily travails. I don’t know if it still exists in some form, but there used to be a clandestine toy trade group called “The Toy Soldiers”, which basically consisted of a the leading sales directors from major toy companies, who would get together ‘informally’ to chew the cud and discuss the hot topics of the day that affected the UK toy market, and what could be done to address some of the challenges (and yes, that is called a cartel these days, but those were simpler times). If the idea was ever to be resurrected, I guess it would need a new name – perhaps the Cyber Warriors would be more applicable in the 21st century…

Toy suppliers and their retail partners will be heartened by the gradual improvement in freight rates. There were genuine concerns at the turn of the year that the situation in the Red Sea would have a long-lasting impact, but rates continue to fall, especially if shipments aren’t urgent. Those prepared to accept slower sailing times can take advantage of better prices, which may help some companies over the coming months. We will just have to hope that everything is resolved before the more time-sensitive fourth quarter, when the delayed arrival of products can be infinitely more problematic for both suppliers and retailers…

On a visit to the Toymaster Northampton central office, it was noticeable that the space has been completely transformed since our last visit – the team now works upstairs, while the ground floor has been turned into a multifunctional space where committee and selection meetings can be hosted, vlogs can be shot by suppliers (under the watchful eye of the toy industry’s latest mega-influencer, Paul Reader), window banners and promotional material can be displayed, and in-store shelf layouts can be tinkered with. The space is not only a fantastic resource for Toymaster and its members, but it is also now going to be offered to suppliers who are looking for a centrally-located facility to host sales meetings or other company get-togethers – and it certainly beats the local Premier Inn any day…

Like many in the toy community, we picked up reports of problems at Spain’s Poly Juguetes retail chain. However, speaking to Pablo Merino, Country director at Poly Juguetes, it seems that the initial media reports weren’t entirely accurate. Contrary to quotes which suggested that Poly was ‘inviable’, Pablo assured me that is definitely not the case. Indeed, the stores all remain open at present, and as we go to press on this edition, Poly remains in conversation with potential new shareholders to replace the previous owner, the Teal Group (the parent company of The Entertainer) with the aim of taking the business forward. With the economy improving in Spain (the region has apparently enjoyed a decent start to the year), Pablo believes that “subject to the incorporation of commercial levers hitherto not allowed by the current ownership”, Poly has a future. For the sake of the 180 or so employees, I very much hope that is the case.