Retail round up - The Sunday papers

Archived article dated Sunday September 7th 2008

M&S boss joins Boris Johnson's London advisory board, Asda chases after M&S customers by ditching Coleen Rooney, Woolworths to shake up executive rewards, John Kinnaird steps into Faith shoes, MFI cooks up merger with kitchens rival Homeform, Hard road ahead for French Connection, Morrisons on a growth spurt, Staff handed share in Neal's Yard business.....

The Sunday Telegraph

The bosses of China Mobile, JP Morgan Chase and Marks & Spencer are to advise Boris Johnson on retaining London's status as one of the world's leading cities. Wang Jianzhou, Jamie Dimon and Sir Stuart Rose have agreed to become members of the International Business Advisory Council for London (Ibac), a new committee that is intended to help make London a more attractive place to live and work in the run-up to the 2012 Olympic Games. Among the other overseas-based members will be Sunil Bharti Mittal, the head of Bharti Enterprises, one of India's largest conglomerates; Herbert Hainer, who runs the German sports goods group Adidas; David Bonderman, the co-founder of TPG, the private equity group; and Vincent de Rivaz, the chief executive of EDF Energy, the French utility that is in negotiations to buy British Energy, the nuclear power generator.

Asda is chasing after Marks & Spencer customers by abandoning its use of celebrities in its fashion adverts and launching a new range of better-quality, longer-lasting clothes. The move is an attempt to cash in on the thousands of M&S customers hit by the credit crisis, many of whom have left the retailer in recent months in search of cheaper clothes. The change of strategy from Asda is a clear attempt to win over millions of middle-class customers that have started to cut back on their shopping budget. It has already seen a 10 per cent increase in the number of food shoppers from the AB socio-economic group, compared to last year, and said it has won over many Waitrose regulars looking to cut down on their food bills. Helped by some photogenic nurses, it hopes to persuade these shoppers to start buying their clothes from the supermarket as well.

The board of Woolworths is to revamp its executive pay scheme following a slump in its share price. Advisers to Woolworths say that Richard North, its chairman, is concerned that senior managers at the company are not being given sufficient incentives to turn the business around. The managers' current share options could be re-based to reflect the more handsome incentive scheme that has been given to Steve Johnson, the former Focus DIY chief executive who started as chief executive of Woolworths this week. Johnson has been awarded nil-cost share options over 24m shares. He stands to earn a total of £9m over the next four years if he can almost triple the share price from where it stood when he joined, to 20p.

The Sunday Times

John Kinnaird is this weekend finalising a deal to buy shoe company Faith. Kinnaird, who also owns men's clothing firm Envy, has teamed up with Agilo, an investment fund specialising in distressed companies, which owns teenage girl fashion business Chilli Red.The two partners plan to combine Faith, Envy and Chilli Red to create a business that would have about 155 stores and approximately 300 concessions in House of Fraser, Debenhams, and Galeries Lafayette. Barclays bank took control of Faith several weeks ago after the lender refused a debt-for-equity swap proposal by its private equity owners Bridgepoint Capital as well as a further £8m of equity. Bridgepoint bought Faith for £64m in 2004 and has since injected a further £15m. Instead of Bridgepoint's restructuring proposal, Barclays chose to run an auction of the business. Agilo was founded last year by Jason Granite, a former distressed debt trader at Deutsche Bank, and Milos Brajovic, founder of the trading arm of Swiss mining giant Glencore. Agilo, which counts Michael Portillo among its advisers, has bought a number of other retail companies including Sports Cafe and Ponden Mill. Faith was founded in 1964 by Samuel Faith before eventually being sold by his son Jonathan to Bridgepoint.

MFI is considering a merger with its British rival Homeform, which operates the Moben Kitchens brand. The deal would create a combined company with 360 stores employing more than 5,000 people. The move comes less than two years after MFI was rescued by Merchant Equity Partners (MEP) for just £1. It has since been faced with challenging markets and has been looking for a partner for several months. Homeform is owned by Sun European, which also owns SCS Upholstery, a furniture business it recently bought out of administration. Talks have been held with Nobia, the Swedish retailer, about combining its UK business Magnet Kitchens with MFI. Discussion have also been held with several private-equity firms and hedge funds about an additional injection of cash. An MEP spokesman told The Sunday Times: “We are happy with the operational progress we have made with MFI since we bought the business but recent market conditions have prompted us to consider our strategic options and possible business combinations.” Rumours that MFI was struggling were sparked by the recent appointment of two senior Hilco directors to the board of MFI.Further fuel was provided when Kroll Talbot Hughes, the restructuring expert, was brought on board to strengthen MFI's “underresourced finance function”.Despite the revelation that MFI is now considering its options and looking for additional investors, sources close to the company insist that the retailer will survive and that its original backers will continue to provide support.

The Independent on Sunday

Clothing chains French Connection, Primark and Next all report results this week ahead of the vital Christmas quarter for the high street. Analysts predict profits at French Connection are likely to be flat for the first half of the year. Sanjay Vidyarthi, analyst at Dresdner Kleinwort, said: "We think French Connection is fixable but maintain that the scale of recovery is formidable in the current environment. We think management will be issuing another cautious statement." Shares in the group have slumped more than 60 per cent over the past year, closing the week at 63.75p.

The Observer

Morrisons is funding a major schools initiative designed to tackle children's ignorance about where food comes from. The multimillion pound 'Let's Grow' campaign, which aims to get children to grow their own vegetables, launches this week with a series of ads fronted by TV gardener Diarmuid Gavin. Research by the supermarket found one in 10 children didn't know potatoes and carrots could be grown in a garden. Under the scheme, shoppers collect vouchers that schools can swap for gardening equipment. The scheme is a departure for the retailer that is shedding its 'Northern discounter' image under chief executive Marc Bolland. Over the past year Morrisons has won customers with new look stores and ads featuring celebrities such as Lulu, and it is expected to report further progress at its half-year results on Thursday. Analysts expect a strong showing with underlying sales up 7.5 per cent.

Neal's Yard Remedies owner Peter Kindersley has handed staff a 15 per cent stake in the retailer as it embarks on a major global expansion plan. Kindersley has given 280 employees, including workers at its eco-factory in Dorset, shares in the business. Kindersley said it was the first time he had tried the approach, adding: 'We want Neal's Yard to be the number one natural health and beauty brand.' Kindersley bought Neal's Yard for an estimated £10m and sales are expected to reach £18m this year as he finances expansion in the UK and Middle East. But Neal's Yard's success comes at a challenging time for the organic industry with sales tailing off as a result of the credit crunch. Kindersley said: 'In times like this the "light greens" are going to equivocate, but they will come back when things get better.'

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