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Retail round up - The Sunday Papers
Archived article dated Sunday April 13th 2008
Tesco warns planning reforms will cost £190m, Shareholders in shoe supplier 'will get nothing', Co-op lines up lenders in bid for Somerfield, Green seeking an exit from BHS to focus on Topshop, Credit crunch hits home, Retailers issue record toll of profit warnings, JD Sports scores SPL Dundee United shirt deal, Ossian Retail Group poised to go into administration, Tesco rebuts US store fears...........
The Sunday Telegraph
Tesco has warned the Competition Commission that its proposed changes to Britain's supermarkets planning system will cost the industry almost £190m. The introduction of an ombudsman to oversee relations with suppliers will further add to the estimated cost, with shoppers having to pay for the increased bureaucracy, it said. "The Competition Commission's proposals will regrettably have serious ramifications for consumers and the UK economy," Tesco wrote in its final submission to the Commission. Proposals by the regulator to increase red tape in the planning system would mean higher prices for shoppers in the short term, Tesco warned. "In the longer term the Commission risks freezing investment, limiting expansion and having a detrimental effect, not just on the grocery sector as a whole, but in the wider economy beyond its remit." The warning comes as Tesco prepares to announce full-year results on Tuesday.
Shareholders in shoe supplier Lambert Howarth have been warned by the company's administrator that they are unlikely to receive a penny. The administrator has also warned that the group's pension scheme will suffer a "significant shortfall", according to documents filed last week at Companies House. "At the date of our appointment the pension scheme was owed approximately £14m on a buy-out basis, by the company. According to BDO Stoy Hayward, Lambert Howarth collapsed after relations with Marks & Spencer, its largest customer, deteriorated. "In May 2007 the group entered into discussions with shareholders and potential new investors over fundraising... M&S was asked to confirm future trading commitment to the group. It was unable to do so," wrote BDO Stoy Hayward.
The Co-op has lined up financing from a trio of Britain's banks to support its efforts to buy Somerfield. Lloyds TSB, Barclays and RBS have been drafted in to provide debt financing for a deal worth up to £1.9bn that would create a group with a market share of Britain's food retail sector of about 8 per cent. Somerfield's owners, Robert Tchenguiz, private equity groups Apax Partners and Barclays Capital and Somerfield's senior management are in talks with the Co-op, which is carrying out due diligence.
The Independent On Sunday
Sir Philip Green is understood to be looking for buyers for BHS to concentrate on Topshop, which is expanding into the US with its Kate Moss clothing range.
Retail sources close to Sir Philip said he wants to sell BHS, which along with other retailers is having a torrid time on the high street. One source said "Sir Philip has talked to a number of people about buying BHS. He's caught in a bit of a problem - he wants to get out of BHS and spend more time on Topshop, which is going great guns. "But selling BHS is proving tough because no one wants to take on all 180 shops at a time like this. There are many, like Primark, who would like some of the town centre sites, and M&S would like about 20 stores."
But the source added: "Philip would be loath to break up the chain, and certainly wouldn't want to put staff in a difficult position. He might just have to stick through the rough times ahead and wait until the market turns." Sir Philip could not be reached for comment but has in the past denied rumours that BHS was for sale.
Sir Philip also predicted more pain for the high street, saying "This isn't like a jab - it's like continual jabs. The market is probably as difficult as I've seen it, very challenging. Nobody is getting excluded from this."
The Observer
The credit crunch has resulted in a situation where borrowers are struggling to borrow. Lenders are demanding bigger deposits, cleaner credit records, and higher interest rates. The attractive low-cost tracker and fixed rates that banks and building societies were pushing only a year ago have all but vanished. Product comparison site Moneysupermarket.com says that, while borrowers could choose from 30,107 mortgages last August, now there are just 7,121. The knock-on effect, says Yolande Barnes, director of research for estate agency Savills, is a slump in the number of people buying new homes. As the chart above shows, numbers buying and taking out house purchase loans (as opposed to remortgages) always falls in the post-Christmas period. But while borrowers took out 73,000 house purchase loans in February last year, this year the number fell to 49,000. Savills expects UK sales to fall by up to 30 per cent this year. Barnes says discretionary buyers have quit the market first. 'It doesn't matter when they buy, so they usually wait for spring to go househunting. At the start of a downturn, we would expect them to disappear first.'
Retailers issued the most profit warnings of all the companies in the FTSE All-Share index during the first three months of this year. But the pain was felt across the board with UK plcs firing off 114 profit warnings in the first quarter of 2008. That was the second consecutive quarter with a tally of more than 100 alerts a level not seen since the 2001 dotcom crash, says a study by Ernst & Young. The data is seen as evidence of the deepening financial crisis caused by the 'credit crunch' first manifested in risky loans made in the now deflating US housing market that has resulted in banks writing off billions of pounds. 'Banks are facing losses on more fronts than just US sub-prime mortgages and the impact of further write-downs will continue to dent confidence, tighten money markets and constrict lending,' said Ernst & Young partner Keith McGregor. 'We are just at the start of this process in the UK housing market.'
JD Sports is to sponsor Scottish Premier League side Dundee United next season. The Dundee United shirts will be emblazoned with the Carbrini brand which is aimed at teenage boys. JD Sports has built up a stable of profitable brands, including McKenzie and Sergio Tacchini. The retailer is expected to report an increase in profits up from £17.3m to £32.2m in the year to January on sales of £576.2m.
The Sunday Times.
Ossian Retail Group, which owns the fashion chain Internacionale and the Au Naturale homeware outlets, is poised to go into administration this week. The move is likely to result in the company being broken up, with its brands and 120 stores sold to various buyers. New investor Agilo, a distressed-debt investment specialist, which bought up Ossian's entire £25m debt last week, has initiated the move. Despite the dramatic step, Agilo is thought to be confident of saving most of the company's 2,500 jobs. Agilo filed a notice in court last week to appoint the accountancy firm Price Waterhouse Coopers as administrator within 10 days. They have already begun discussions with more than 10 parties interested in buying parts of Ossian. Edinburgh Woollen Mill, Poundstretcher and Bon Marché are among the potential buyers. Agilo has sold off about 30 of Ossian's stores to B&M Bargains.
Tesco is expected to use this week's announcement of full-year results to quell fears about Fresh & Easy. It has opened 60 Fresh & Easy outlets since last autumn, but has shelved further openings for the next three months. Tesco is expected to rebut claims that Fresh & Easy's sales are way below target. Analysts are forecasting that the group will announce pretax profits of about £2.8 billion in the 12 months to the end of February.
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