Sunday Retail News Roundup
Sales fall greets new M&S chief, Ronson¬ís life at the pumps, Dixons Carphone boss on EU and mergers, M&S pins hopes on new boss Steve Rowe, Horse racing industry plans betting pool to rival Tote, Aldi cranks up pressure on the big four supermarkets.
Marks & Spencer is braced for another drop in clothing sales, underlining the scale of the challenge facing its new chief executive. Marks & Spencer is set to report a 3.4% fall in like-for-like general merchandise sales on Thursday. Although the performance comes amid dire retail conditions, last month, Lord Wolfson of Next said this year could be the toughest since 2008. M&S’s fashion and homeware department has been in decline for some time, it produced a positive number just once in the past 19 quarters. In contrast, M&S’s food division, which has consistently beaten the market, is expected to deliver a 0.3% sales rise. Steve Rowe, 48, an M&S “lifer” who takes over tomorrow from Marc Bolland as boss. Bolland, 57, spent six years and more than £3bn refitting stores, improving M&S’s distribution network and creating a new website. However, he failed to stem market share losses in the crucial womenswear area.
Gerald Ronson’s petrol stations are highly lucrative. But will he sell if private equity comes calling. The magnate was imprisoned for his role in the 1986 Guinness share-trading scandal but in 2000 the European Court of Human Rights ruled the trial had been unfair. The 76-year-old has built one of Britain’s largest chains of forecourts. When he started buying filling stations there were 38,000 of them in the UK. There are probably fewer than 9,000 today and Rontec, with 212 stations, is the 10th-biggest operator. In 2011, Ronson galvanised the sector when he bought some 800 sites from Total and immediately flipped about 250 of them over to Shell, selling other assets to the energy arm of Irish conglomerate DCC. 1,375 forecourts changed hands last year. Only one oil giant and one supermarket are now in the top five UK retailers. Ronson said he has had approaches to combine or offload his business, but insists he “doesn’t want to sell”. “There are opportunities still. I think we can double this business over the next three to five years”. About 4,000 sites are still owned by independent operators. The attraction for private equity investors is that many of the sites coming up for sale are underdeveloped retail businesses underpinned by a property asset.
Mail on Sunday.
Sebastian James, chief executive of Dixons Carphone, has spent the past few years fighting off Amazon. Now he has a stark warning for the grocery market: Amazon is coming for you next and it doesn’t care about making a profit. ‘Why is Amazon getting into the food market?’ asks the boss of the group that owns Currys, PC World, Dixons Travel stores and Carphone Warehouse. ‘Does it really think it can make money by selling food online? Definitely not. It’s all about how it can get its customers more and more addicted to Amazon Prime and the rest of the Amazon story. ‘Amazon doesn’t want to make money out of food, whereas every-body else does and that could make it a threat for big supermarkets’. Amazon’s global sales are $107billion (£75billion) a year but it appears to shrug off the need to make a profit. It has decimated the bookselling market and many electrical chains have closed in its wake. It has also been widely criticised for the amount of tax it pays in the UK compared with other retailers. James’s comments will be music to the ears of Ocado’s chief executive and online food retailing evangelist Tim Steiner. But not to big chains such as Tesco, Asda and Sainsbury’s, already engaged in an historic price war with German interlopers Aldi and Lidl.
Marks & Spencer is set to join rivals in declaring a sales washout for the first three months of this year. Sales at M&S’s clothing and home division fell by as much as 3 per cent in the three months to March, it is tipped to say on Thursday. It is also expected to reveal flat same-store food sales. A poor performance could put more pressure on full-year profits due to be announced in May, which brokers forecast will rise by 2 per cent to £674million. Last month, rival chain Next reported poor sales, saying conditions on the high street were their worst since the financial crisis in 2008.
The horse racing industry is planning to launch a new pooled betting business to take on the Tote. Key players including The Jockey Club, Racehorse Media Group and a number of individual racecourses, have set up a joint steering group to investigate the plans. Talks have been held with technology suppliers and overseas betting organisations. The steering group also plans to enter talks with the rest of the UK’s 60 racecourses as well as leading betting shop chains such as William Hill and Ladbrokes, which offer Tote betting products in their shops.
The German discounter Aldi, once derided as naff, low-quality and irrelevant, has more than doubled its market share in the past four years, overtaking Waitrose to become the UK’s sixth-largest supermarket chain. Along with Lidl, it has shaken up the market and forced chains like Tesco and Morrisons to slash prices, shed staff and offload stores as they try to rescue profits. Only 5% of its products are big brands such as Colgate or Coca-Cola, yet sales are rising by more than 15% a year. Now Aldi’s latest moves to maintain sales growth include own-label organic baby food and milk formula, selling wine online, and a new, smaller store in Tooting, south London, which, if successful could herald a wave of inner-city outlets. The privately owned chain is still a relative minnow, controlling just 5.8% of all grocery sales in the UK, but only Pampers nappies are bigger sellers than its Mamia brand, and 8% of our fresh fruit and veg, and over a fifth of all premium steaks, are bought in Aldi stores. Sales of Mamia nappies have risen 1,000% in the past four years as the company deliberately targeted new parents.
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