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Sunday Retail News Roundup
Dragon in the picture, Bidders eye slice of Pizza Hut, Boy wonder Wolfson stumbles at Next, Former Tesco boss Sir Terry Leahy EU, Blue chip firms ditch dividends in profits plunge, Chip and Pin notches up 10th birthday, Struggling Matalan wins debt reprieve, Mountain Warehouse US expansion, Tesco legal action land use, Ikea's taxes scrutinised €1bn underpayment claim.
Jessops has enjoyed a 20% jump in sales after being saved from extinction by the Dragons’ Den star Peter Jones who bought the brand name after the camera chain collapsed into administration in 2013, with the closure of all its shops. Jones had been expected to relaunch Jessops as an online-only operation. However, he opened 50 stores and rehired 350 staff. In accounts for the year to last April, he said demand for simple “point and shoot” cameras had fallen. But a greater proportion of the market was now made up of more expensive products designed for photography enthusiasts. Jones, 49, said the market had returned to roughly the same size as it was in the analogue film era. “The core difference now, however, is that there are far fewer camera specialist retailers to serve this market, meaning the opportunity for each store is actually higher than at any time before.” Jones said training staff to be experts would help ward off the threat from internet rivals. Sales rose from £57.9m to £70.4m during the year. Jessops swung from pre-tax loss of £2.1m to profit of £112,900. Jones, Jessops’ chairman, made most of his estimated £475m fortune in mobile phones.
Pizza Hut's British restaurants have been put on the block at £150m, four years after the chain nearly went into administration. Rutland Partners, the owner of Pizza Hut UK, has hired advisers at PwC to find buyers, City sources said. The sale comes after a successful turnaround of the fast-food brand, which struggled under former owner Yum! Brands, the American giant behind KFC. Rutland paid a nominal sum to acquire Pizza Hut’s restaurants in Britain four years ago. Rutland, which also owns the Bernard Matthews turkey empire, has pumped millions into Pizza Hut, refurbishing many of its 350 sites and revamping the menu. Pizza Hut now makes about £20m a year before interest and tax, and could be worth roughly £150m. The sale does not include Pizza Hut’s delivery service in Britain, which is still owned by Yum!. According to its most recent accounts, Pizza Hut made a profit of £7.4m in 2014, compared with a loss of £1.3m the year before. The chain employs about 8,500 people.
Next, one of the most successful fashion brands, needs refreshing as customers start to shun its high-rate credit deals. For years, Next’s share price has climbed thanks to its reputation as an unshowy but reliable retailer of outerwear and work clothes. It has eclipsed Marks & Spencer as a force on the high street and enriched its long-serving boss, Lord Wolfson, whose 1% of the company is worth more than £100m. Recently, however, there have been signs of trouble brewing. Gradual shifts in customer habits have revealed a trend that could turn out to be painful. After a rare shock from its Christmas trading figures, Wolfson admitted to “mistakes and challenges”. Of the 3.6m people who used its Directory catalogue and website in the last full financial year, 2.7m took up Next’s offer of finance. After 28 days, purchases start clocking up interest at a double-digit rate 24.99% until last October, when it was cut to 22.9%. Customers who buy with credit are several times more valuable to Next than “cash” customers. Not only do they bring in interest payments, £166.4m last year, but they tend to shop more frequently and buy more. For years they have been the quiet heart of Next’s empire, which spans 540 stores in Britain and boasts sales of £4bn.
Mail on Sunday.
Sir Terry Leahy, the former chief executive of Tesco, has warned against ‘blaming too much on Europe’ and said most business red tape was created in Britain. ‘There is a slight danger that you can blame too much on Europe. Most of the regulation, most of the bureaucracy, lies within Britain. We’re not going to become the Singapore of Europe overnight just because we leave the EU.’ Leahy said he favoured the UK staying in the EU if the Prime Minister’s negotiations over its membership were substantive and made ‘a real difference’. ‘We’ve spent nearly 40 years as part of Europe and I fear we would waste huge political and economic and social capital negotiating the new relations. 'If we just invested in making Britain more outward-looking that would be a better investment confidently engaging and competing with the rest of the world.’ Leahy is now a director of fast-growing discount store group B&M. He has also invested in smaller firms, such as designer homewares website Houseology, which exceeded a £1million crowdfunding target last week.
Shareholders and pension funds invested in Britain’s blue-chip companies face a swathe of cuts to their earnings, with analysts warning that more firms are likely to cut dividends as the jitters continue. Amid carnage in the stock market which saw the FTSE 100 index of the UK’s hundred largest firms fall 2.5 per cent to 5,708 last week, a raft of big names have slashed dividends, including supermarkets. Blue-chip groups to cut payouts in the past ten months include Tesco, Sainsbury’s and Morrisons.
Four in every £5 spent is now on a cards as Chip and Pin notches up tenth birthday. Britons’ use of debit and credit cards has spiked over the past ten years, with now nearly £4 in every £5 spent at UK retailers being on plastic according to new figures. Trade body, UK Cards Association, has released the data as it is now ten years since all Britons had to enter a pin to pay for items instead of giving a signature. In 2006, when the switch to Chip and Pin was completed, 55 per cent of spending at Retailers was made on payment cards, compared to 78.5 per cent in December 2015. Contactless payments, which were introduced in the UK in 2007, are now becoming increasingly popular, accounting for one in ten transactions. Spending made this way hit £1billion in a single month for the first time in November. In September 2015 the limit for a single ‘tap and go’ contactless payment was increased by £10 to £30.
Matalan's banks have given the struggling high street chain a vital reprieve on the company’s debt pile. Lloyds Bank has agreed to reset covenants on the retailer’s loan agreements, which will give the company much-needed breathing space on its borrowings as management grapple with tough trading conditions. It will also enable the chain to have continued access to its banking facilities. The move should reduce fears over Matalan’s prospects after ratings agency Standard & Poor’s raised concerns about its hefty borrowings following a sharp fall in profits. The company is weighed down with debts of £500m. Matalan has found the going tough as it is challenged by other value rivals, particularly Primark, the fast-growing fashion division of Associated British Foods.
Mountain Warehouse is expected to ramp up its US expansion as it gears up for a stock market flotation that will make multi-millionaires of its senior management team. The outdoor gear retailer has been quietly opening shops across Canada and North America, boosting its overseas revenues to now account for 20pc of the business. Mountain Warehouse, which has 191 shops across the UK, now has 23 shops in North America, two in Germany, three in Ireland and another 10 in Poland. The company also sells on Tmall, the online shopping platform owned by Chinese internet giant Alibaba. Mark Neale, who founded the business in 1997, said he believes the retailer can get to 300 stores in the UK and plans to add another 30 shops in North America and Germany in the next couple of years.
Tesco is being sued by a property developer over a breach of competition law that stops rival retailers from building stores near one of its supermarkets. High Peak Developments served Tesco with legal papers. The developer is claiming that the supermarket is acting illegally by refusing to release a restrictive covenant on land surrounding a Tesco store at Whaley Bridge, Derbyshire. It is understood that this will be a test case in the Competition Appeal Tribunal as it will be the first time the supermarket has ever faced formal legal proceedings relating to this issue. Tesco first bought the land for the store from High Peak Developments in 1997 and insisted that a covenant was put in place that ensured the surrounding land could not be used for the sale of food, convenience goods or pharmacy products. However, the developer is now alleging that Tesco is breaking competition law after the supermarket made a u-turn on an agreement to release the strict covenants last year.
The European commission pledged to study a report claiming that Swedish furniture giant Ikea may have underpaid taxes by €1bn between 2009 and 2014 due to aggressive tax strategies. Research commissioned by the Green/EFA group in the European parliament claims to show that Ikea “structured itself to dodge €1bn in taxes over the last six years using onshore European tax havens”, the group said in a statement. Responding to the report the commission said it would examine the claims. According to the Greens, Ikea uses “a series of tax loopholes in different European countries, namely the Netherlands, Belgium and Luxembourg to avoid paying taxes”. “One of the techniques is shifting royalties from each Ikea store to a subsidiary in the Netherlands, which acts as a conduit. The royalties go in and out of the Netherlands untaxed and end up in Liechtenstein, or at least partly ”. Ikea defended its management of its tax affairs.