Retail round up - The Sunday papers
New Look on course for 1.7bn float, Tesco plans bra war against M&S, Weak pound 'is permanent', economists warn, Blacks Leisure may lay off 400 for rescue, Hermes to buy Asprey's Bond Street building, Despite the slump, shoppers will still fork out 15k for a handbag, Rose aims to leave Marks & Spencer with improving figures...
The Sunday Telegraph
Fashion retailer New Look is drawing up plans for a £1.7bn-plus stock market float. The company, which is backed by private equity firms Permira and Apax, could list on the stock market as early as January. A formal "beauty parade" of investment banks is due to begin imminently, with advisers expected to be appointed within weeks. New Look is one of a number of private equity-owned groups understood to be being lined up for flotation. Following the financial turmoil of the past two years there is pent-up demand from private equity groups who are under pressure from investors to sell a number of their investments. According to a recent survey by Ernst & Young, private equity groups saw a slump of nearly 70pc in the number of major investments sold in 2008. Acromas, which owns the AA and Saga, and Birds Eye Iglo are among the private equity-owned companies tipped to float next year. The size and success of the New Look float will be the first real test of investor appetite for these debt-laden businesses. Full article here.
Tesco, the UK's biggest retailer, will ramp up the pressure on Marks & Spencer by doubling the size of its upmarket Diamond Boutique lingerie brand at the beginning of 2010.M&S is the UK's biggest seller of lingerie, with a 26pc market share, but Tesco has been rapidly increasing its ranges in a bid to poach a greater slice. Terry Green, the chief executive of Tesco Clothing, said: "Diamond Boutique has, without doubt, set a new standard in supermarket lingerie by focusing firmly on luxury, quality and fit. The range has clearly struck a chord with shoppers, which is why we have big plans to expand the brand, offering more designs, more sizes and in more outlets throughout the UK. "The move comes as M&S gears up to announce its second quarter trading figures on Wednesday. Sir Stuart Rose, M&S's executive chairman, is expected to say that like-for-like sales over the quarter fell by 1.4pc. This is based on the forecasts of 11 leading City analysts.Sales of clothing and home products are expected to have fallen by 2.7pc, compared to a fall of 2.4pc over the first quarter. Sales of food are expected to have fallen by 0.3pc, compared to a first quarter decline of 0.5pc.
The pound may never fully recover from its current low as it lurches closer towards parity with the euro, economists have warned. A persistently high level of national debt, a permanently smaller financial services sector and an effort to rebalance the UK economy could all contribute to long-term weakness in sterling. "There is a good chance that the depreciation we have seen so far is a permanent shock," said Erik Britton, director at Fathom Consulting and a former economist at the Bank. Paul Robson, currency strategist at Royal Bank of Scotland, said that a smaller UK financial services sector was an example of "things that have kept sterling quite elevated over the last five years but simply don't exist any more". Full article here.
The Sunday Times
Outdoor retail specialist Blacks Leisure plans to put itself through a company voluntary arrangement in an attempt to secure its survival. The last-ditch rescue deal would see it shed about 80 of its 400-store portfolio that trade under the Blacks, Millets and Free Spirit names, putting approximately 400 UK jobs at risk. A CVA is an increasingly adopted insolvency procedure used mostly by retailers that enables a company to agree with its creditors how its debts should be paid and to close underperforming stores. It is seen as a more acceptable and consensual measure than an administration because it requires the approval of 75% of creditors. However, the procedure has still attracted criticism because some landlords argue that they are forced to choose between a CVA, where they recover some of their debts, and an administration, where debt repayment is much less likely. Full article here.
Luxury goods maker Hermès is set to acquire the Bond Street store occupied by prestigious jeweller Asprey for £73.5m.The French fashion house is buying the property, designed by Foster & Partners, from Quinlan Private, the Irish property investment firm that also owns landmark London hotels including Claridge’s and the Connaught. Hermès is keen to expand its retail empire and is said to be interested in taking over occupation of the store for its own brand. The business is performing well despite the global recession.Its last set of half-year financial results showed that turnover had increased by 7.6% to €875m (£802m). Full article here.
What recession? Harvey Nichols department store in Knightsbridge says it has just sold a £15,000 hand-made leather handbag, by US designer Lana Marks. The sale of the multi-coloured alligator leather Positano bag shows that high-end shoppers are still prepared to pay huge sums for a handbag. But the slump has prompted a shift to less obvious brands, as luxury lovers seek quality that won't be outdated after one season, retailers say. Hillary Vallieres, a spokeswoman at Harvey Nichols, said the Lana Marks label is "in the category of discreet luxury – it doesn't have a screaming label as other big brands do. A lot of customers are considering having less ostentatious labels, especially given the current recession."
Marks & Spencer will report improved summer trading this week. More resilient retail sales, a better food performance and the weakness of recession-struck suppliers are behind what is expected to be an up-beat statement. The word is that its executive chairman, Sir Stuart Rose, wants to make his last full year at M&S look good.M&S shares have outperformed the market since July, rising from just over 300p to touch 384p before falling back to 369p on Friday. Most analysts have bumped up their forecasts for the full year to £550m-£600m for profit before tax – about the same as last year. Although the delicious but pricey food offer may be suffering as some cash-strapped shoppers have traded down, growth is believed to be staid rather than disastrous.
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