Sunday Retail News Roundup
SA £1.4bn Home Retail Group swoop dashes Sainsbury's, Asda Christmas sales fall, Atterley blueprint UK, US, Europe and Asia, Rocco vs Roger on Brexit, Ladbrokes sees red new betting tax, Sainsbury's boss under pressure rival bid, Joules hires stockbrokers £150m float, Merchandise could further derail 'Argosbury' deal, In a twist.
Mail on Sunday.
Sainsbury's hopes of grabbing Home Retail Group (HRG), owner of Argos, have been hit by a last-minute £1.4billion bid tabled by a South African stores conglomerate. Steinhoff, which is 17 per cent owned by South African retail billionaire Christo Wiese, has approached HRG with a cash offer believed to be worth 175p a share, a total of £1.4billion, which is well above Sainsbury’s 160p mixture of cash and shares. One source familiar with Wiese and Steinhoff’s business strategy said: ‘Argos is a hell of a challenge. But Christo is in that mode and if he’s bidding cash for it, he’s going to get it.’ Sainsbury’s has struggled to convince its shareholders to back the deal and now faces having to ask them to pay even more or walk away. The supermarket giant has until Tuesday evening to formalise its offer but the deadline could be extended after Steinhoff’s approach.
Asda sales fell by almost 6 per cent over Christmas, its worst ever sales fall. Judgment to be reserved until the profit effect on Asda of this sales slump, due, of course, to the fierce competition from the discounters like Aldi and Lidl. The newcomers are more directly targeted at Asda customers than the other supermarkets, Asda has always placed itself as the shop for the price-conscious grocery buyer. And in geographical terms Asda is also more exposed to the interlopers who have opened more stores where they can compete directly, particularly in the North. That will change as Aldi and Lidl open more sites and clash in location with Tesco and Sainsbury. But what is more important is whether chasing growth in the top line (sales) is more, or less, important than keeping an eye on the bottom line (profits.) By resisting discounting even further and eschewing the Black Friday madness, Asda has clearly decided not to chase sales at the expense of profits. Chief executive Andy Clark said even in the face of falling profits he believed profits were stable. Indeed figures released in the autumn showed Asda sales also falling, but profits holding up. Meanwhile, Tesco and Sainsbury both reported profit falls.
Rescued fashion company Atterley has already signed up hundreds of independent stores as it forges a global network of fashion shops selling products on its website. Scottish entrepreneur Mike Welch, who sold his tyre fitting business Blackcircles to Michelin for £50 million a year ago, acquired the intellectual property assets of Atterley from administrators KPMG following its collapse last month. The site had previously received £2million in 2014 from investors which included former Tesco chief executive Sir Terry Leahy and Bob Willett, the former head of Best Buy International.
One is the scion of a famous hotel dynasty, the other a captain of the industry, each with opposing views on Brexit. OUT - Sir Rocco Forte, Chairman of Rocco Forte Hotels. David Cameron’s Battle for Britain was intended to show that the UK could win concessions from Europe and convince the sceptics they were better in than out. Sir Rocco Forte has long been a believer in quitting the EU. So has his view shifted?. ‘No, not at all – it’s strengthened,’ he says. ‘It is a bit of a waste of time – what he was asking for in the first place wasn’t very much. He’s always been for staying in and he’s basically handled these negotiations on that basis. IN - Sir Roger Carr, Chairman of defence giant BAE Systems. The phrase ‘captain of industry’ might have been invented for Sir Roger Carr, chairman of defence giant BAE Systems, vice-chairman of the BBC Trust, former president of the CBI and former deputy chairman of the Bank of England. When Carr speaks, the world of work listens – and he’s for staying in. There are, says Sir Roger in his typically brisk but considered way, four good reasons for staying in: ‘Economic prosperity – the EU is our largest single export market. International security – it strengthens our position in an increasingly unstable world.
Britain's biggest bookies will this week lay bare the financial impact of hard-hitting new gambling taxes and a crackdown on in-store betting terminals. Ladbrokes and William Hill will see their annual results hammered by the first full year of paying the point-of-consumption tax, a 15% levy on online gambling profits. Unlike internet-only operators, the two companies will also suffer from greater regulation of fixed odds betting terminals, FOBTs, which are taxed at 25% and now restricted to four per shop. Ladbrokes will report the first statutory loss in its history after taking a huge writedown on the value of its ageing betting shops and paying an extra £40m in taxes last year. William Hill is set to report a 22% plunge in its full-year pre-tax profits after stumping up an extra £87m in tax last year.
Sainsbury's boss Mike Coupe is under pressure after his ambitious bid for Argos has come close to unravelling after the emergence of a rival bid and the prospect of a competition review. South African retail giant Steinhoff, which owns British furniture chains Bensons for Beds and Harveys, launched an audacious £1.4bn cash offer for Home Retail Group late on Friday, throwing the plans of Sainsbury’s into disarray. Home Retail chief executive John Walden is understood to have met his counterpart, Markus Jooste, at the start of last week after Steinhoff expressed interest in making an offer. The two bosses are thought to have already established a relationship after meeting last year to discuss business practices.
Fashion retailer Joules, the high-street chain known for its colourful clothes and wellington boots, has appointed a team of advisers to prepare it for a £150m-plus stockmarket float. Stockbrokers Peel Hunt and Liberum have been appointed to manage an initial public offering of the retailer. A float is expected in April or May and is likely to result in a multi-million windfall for the entrepreneur Tom Joule, who owns 80pc of the company. The remaining 20pc is held by LDC, the private equity division of Lloyds Banking Group, which invested £22m in the retailer in 2013.
As half the population heads to the shops this weekend for some old-fashioned retail therapy, how many shoppers will be on the hunt for “general merchandise”?. Confused? That’s because no one goes shopping for “general merchandise”. It is an ugly, catch-all term, like “homewares” or “soft furnishings” that retailers love to use but is meaningless to anyone trekking round their local high street. Essentially, it means anything that is not food, such as toys, jewellery, clothing, stationery or furniture. It’s just far easier to bundle everything together and call it general merchandise. A minor technical point perhaps but this tendency to over-simplify the hundreds of different goods stocked in the shops has ended up right at the heart of Sainsbury’s attempted £1.3bn takeover of Argos.
Tesco’s decision to straighten out its curly croissants has divided opinion among top French chefs and bakers who cannot settle on which shape is the most authentic, but one thing they can agree on is that the British have been eating them the wrong way anyway. The supermarket chain said the move was prompted by its customers wanting to spread their butter and jam more easily, but some of France’s finest croissant connoisseurs are aghast at the thought of sullying the carefully crafted pastries with such mundane condiments. Jean-Christophe Novelli, the former personal chef to the French Rothschilds, who now runs a cookery school in Hertfordshire that has been hailed as one of the world’s best, said the French would “absolutely not” spread butter or jam on their croissants.