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Retail round up - The Sunday papers
Archived article dated Sunday December 9th 2007
Woolworths moves to tackle debt mountain, Threshers in merger talks, Ozwald Boateng to open on Saville Row, Baugur raiders set to launch bid for Moss Bros, UK consumer spending to suffer as fixed rates end, Women lead in the gadget ranks, ASDA serves up cheapest turkey, Tesco plans major US expansion.
The Sunday TelegraphWoolworths is under pressure to renegotiate its debt mountain as it goes into Christmas trading. Woolworths' banks are understood to be concerned that they do not have enough security over hundreds of millions of pounds they have lent the retailer. Its shares fell to 14.5p last week after an investment bank gave warning that its core retail business is worthless. The company says that it has been planning the move since September because this kind of asset-backed borrowing is cheaper than its current arrangements. Woolworths adds that it will drop plans to refinance if the credit crunch makes it impossible to get a better deal. Sources close to Woolworths' syndicate of ten UK and overseas lending banks - which have committed to providing the retailer a credit line of £225m until the middle of 2009 - say they are concerned that, while Woolworths' average debt levels have risen in recent years as it has diversified into the distribution business 2 Entertain, its profits are falling. Sources close to the refinancing process add that general concern over the credit crunch mean that the lenders are increasingly nervous and want a new deal. "We are all aware of ten retail busts 
The owners of Oddbins and Threshers have held talks about a possible merger to create a UK wine retailing powerhouse. Private equity firm Vision Capital, which owns Threshers, approached Oddbins' French owner Castel Freres, one of France's largest privately-owned wine companies, to discuss the possible tie-up, according to informed sources. Executives from Vision and Castel also held a secret meeting to discuss the tie-up and a number of other matters of collaboration such as operations and corporate social responsibility. However sources cautioned that the talks between Vision and Castel were highly preliminary and it is possible that a deal may not happen. The merger talks come as Britain's off-licence chains face an increasingly difficult operating environment. Recent accounts filed at Companies House show that Oddbins fell deeper into the red last year - with pre-tax losses increasing to £8.6m in the year to December 31, 2006.
Ozwald Boateng will this week kick off an ambitious global expansion drive with the opening of a store on London's Savile Row. The opening of the 6,500sq ft store will be followed by a second London store, two UK regional stores and six outlets in the Middle East through a partnership with Al Tayer, a local business. Boateng is also in discussions with potential partners in the US and Japan.
The Sunday Times
Baugur is preparing an estimated £40m takeover bid for Moss Bros. City sources said that Baugur, which owns high-street brands such as House of Fraser and Hamleys toy store, is working on detailed bid proposals and could make an approach to the Moss Bros management team led by Philip Mountford as early as this week. The bid would come only days after shares in Moss Bros dived when it became the latest retailer to issue a profit warning before the crucial Christmas trading period. It is thought that an offer from Baugur would be pitched in the “forties per share”, slightly above the current share price, which closed at 37p on Friday, valuing the business at £35m. Word of Baugur's move came as speculation intensified that the Icelandic group may launch a spring bid for Debenhams, the department-store chain. Baugur is barred from making an offer until the end of January under Takeover Panel rules, but analysts believe that the Icelanders will then revisit the idea. Analysts suggested that Baugur could generate huge synergies from merging back-office functions and increased buying power from owning both Debenhams and House of Fraser (HoF). It may also close a handful of weaker performing HoF stores and merge them with Debenhams, they speculated.
Britain faces the weakest growth in consumer spending since 1992 because of the impact of the credit crisis on household interest payments and the downturn in the housing market, according to a new analysis.The analysis, by Citigroup, suggests spending will rise just over 1% in 2008, after an increase of more than 3% this year.It also says 1.7m households will face a “reset shock” in the coming months, with the interest they pay rising more than 1% as existing fixed-rate and discount mortgages have to be renegotiated. According to another analysis by Fathom Consulting, Britain runs a high risk of “stagflation” weak growth and high inflation next year. It calculates the probability of UK growth of less than 1% in 2008 at 35%.
Women will overtake men as the primary buyers of electronic gadgets for the first time this Christmas, according to department-store chain John Lewis. Helen Keppel Compton at the company told The Sunday Times that a “tipping point” had been reached this winter and women would be responsible for between 50% and 60% of all purchases in its electrical departments during the festive season. She said most of the women were buying gadgets such as digital radios, iPods and digital photo frames. “The appeal of technology to women is cross-generational, from young women who have grown up with technology, to women who have been exposed to technology at work and older, motivated self-learners who are all embracing new products which help them capture memories, stay organised and keep in touch,” she said.
The Observer
A new industry poll has found Asda serves up the cheapest turkey and trimmings of the Big Four supermarkets. Britons will consume £1bn of groceries during the festive season but value-conscious shoppers, says the survey, will find their money goes further in Asda. A trolley of its Christmas items costs £112.92, compared with £124.02 at Sainsbury's, the highest priced store according to the study by The Grocer magazine. Morrisons finished behind Asda, at just 32p more. But Tesco was third, with a festive basket adding up to £117.98. The cheapest frozen turkey at Tesco was £8, versus £7 in its Wal-Mart-owned rival.The survey, published this week, compared the price of 33 items including Brussels sprouts, mince pies and tinsel. Retailers fear consumers will rein in spending as pressure on household budgets mounts, but the British Retail Consortium predicts we will spend £12bn on groceries and gifts, 5 per cent more than last year. It estimates the average cost of Christmas lunch is almost £16 per head, compared with £14 in 2006. Asda chief executive Andy Bond said its success reflected £150m in price cuts. But Sainsbury's boss Justin King argued his stores sold 'significantly better products'.
Tesco's Tim Mason has signalled the extent of the supermarket's ambitions for Fresh & Easy, its US food chain, predicting it could be the 'fastest growing retailer in the world' for years to come. Mason also revealed plans to introduce non-food lines next year. Tesco has developed Fresh & Easy as a chain of mini supermarkets, which sell fewer products and more own-brand lines than a typical US grocer. It claims the low-cost model enables it to undercut rivals such as Safeway - although not Wal-Mart - by 10 to 25 per cent. Its decision to open convenience stores avoids going head to head with Wal-Mart's supercentres. Mason said there were no plans to open the vast 'Extra' stores Tesco operates in the UK: 'When you have no market share in a country the size of America you don't need to be inventing formats. You just need to find a winning application then to apply it.'
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