Retail round up - The Sunday Papers

Archived article dated Sunday June 1st 2008

Senior executives at Kingfisher to benefit from private equity-style incentive scheme, City traders bet on falling retail shares, Rice rationed by some supermarkets, More store card use by shoppers

Sunday Telegraph

Kingfisher will announce this week the introduction of a radical private equity-style incentive scheme for its 50 most senior executives as part of its turnaround plan. Under the scheme, the listed DIY giant's top directors could net tens of millions of pounds between them if they hit targets for earnings per share and total shareholder returns over a three-year period. The scheme will be heavily weighted to reward out-performance and could be extended to middle managers if successful.

City traders are betting almost £6bn that the value of UK retail shares is set to fall, underlying just how pessimistic the outlook is for Britain's beleaguered high street chains. Short sellers have staked £5.7bn on disappointing news pushing down the share prices of the 21 retailers in the FTSE 350, which include Marks & Spencer, Tesco and Next. This means that 8 per cent of all shares in the retail sector are now held by short sellers, according to Data Explorers.

Unilever has sold its Sainsbury's in-store dry cleaning company to the shoe repair firm Timpson, after the operation fell into administration last month. Persil Services's collapse will be an embarrassment to Unilever, which set the company up through its Unilever Ventures arm and expanded it into 75 Sainsbury's stores. Timpson, which is family-owned, has bought the business after Baker Tilly, the restructuring expert, was hired to handle the administration.

Sunday Times

Tesco has agreed to buy out Royal Bank of Scotland's share of their Tesco Personal Finance joint venture in a deal estimated to be worth close to £1 billion. The supermarket giant made an informal offer for RBS's 50% stake several weeks ago. Although the bank initially rebuffed the approach, it is understood that talks began last month and a deal has now been agreed in principle. Sources close to the talks expect an announcement of the sale to be made at Tesco's annual meeting later this month. RBS's decision comes amid mounting speculation that the bank could struggle to sell its RBS Insurance operations.

Land of Leather has called in KPMG, the accountant, to advise on the renegotiation of bank facilities before its year-end in July. The struggling sofa chain is under pressure from a sharp downturn in trading and increased costs. The company said it had £16.3m of cash balances in March but as trading deteriorated was under pressure to come to a new arrangement with its bank. It has a revolving credit facility of £5m (reduced from £7m last year) a £1m overdraft facility and it owes £53m to suppliers and other creditors.

The investment firm thought to be the world's biggest owner of private golf courses has emerged as a contender to acquire Esporta, the fitness-club chain. KSL Capital Partners, a US buyout firm that counts golf-course operator Clubcorp among its investments, is understood to be one of half a dozen parties to have submitted initial offers for the British gyms group last week. Esporta is estimated to be worth about £200m, though the company also owns property valued at around £250m.

The Observer

Shoppers are relying on store cards or reverting to cash as they try to keep their heads above water, says Debenhams chief executive Rob Templeman. 'We are seeing a lot more cash purchases and the number of store card transactions is moving up,' he said. 'There is a definite trend away from credit cards, and my suspicion is customers are using them to pay their everyday bills.' His comments come as a poll by GfK NOP showed consumer confidence had fallen to a low last recorded in the 1990 recession amid falling house prices and rising household costs. Around 1.8 million Britons have had their credit card limits cut in the last six months.

Financial Times Sat/Sun

Supermarket chains have begun rationing rice as the effects of rising prices and disruptions to supply spill over from specialist grocers and suppliers to larger stores. Netto, the Danish-owned discount store, has been restricting sales of larger bags of rice to one per person in all stores in recent weeks across the UK. Mike Hinchcliffe, marketing manager for Netto UK, said: “We're temporarily limiting our larger 10 kg bags of rice to one per customer because, like most other UK supermarkets, we are having to manage and minimise the impact the global rice shortage is having on our suppliers.“We are experiencing a high demand for rice and have introduced this measure across our 184 UK stores to ensure that all of our customers have a fair opportunity to make their regular rice purchases. Our smaller 1kg packs remain on free sale with no restrictions planned at this time.” It expects the restriction to continue “indefinitely”.

Mail on Sunday

Debenhams plans to capitalise on recent gains in its market share by ramping up its fashion ranges with 'more daring' styles this autumn. The department store chain is recovering from a poor year, but industry figures suggest it may have taken market share from its fiercest rivals, Next and Marks and Spencer.

Moss Bros chairman Keith Hamill plans to leave the retailer before its agm on June 25 as the company struggles to recover from a tumultuous two years. Hamill's resignation has prompted mounting speculation that chief executive Philip Mountford may also leave.

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