Sunday Retail News Roundup
Tesco profits plunge as City fears grow over turnaround plan, Net-a-Porters new boss I am the geek of chic, River Island profits flow, Gieves & Hawkes out of pocket despite makeover, Radio Times owner snaps up Moonpig, Honeymoon is over for Tesco boss, Food outlet firm SSP to really fly at new airports abroad, VW scandal deepens at its revealed half of company car buyers may ditch the embattled firm, Expansion at the double for David Cameron's mother-in-law's OKA shops, Sainsbury's questioned by accounting watchdog over income disclosures, HMV plots audacious international expansion.
Tesco is set to report a slump in first-half profits this week, cranking up pressure on the chief executive and raising questions over the pace of its turnaround. Britain’s biggest supermarket is expected to reveal that operating profit sank below £400m in the six months to August, less than half the £916m it reported in the same period last year. The performance, described as “hugely disappointing” by one analyst, will lead to louder calls for Dave Lewis to spell out his turnaround strategy to the City. It will also intensify speculation that the chief executive will be forced to tap investors for billions of pounds of fresh capital through a rights issue. Tesco’s plunging profits will raise fears that an apparent stabilisation in the supermarket industry will be short-lived. Grocers have been ravaged by discount competition from Aldi and Lidl, while tumbling commodity prices have hit revenues.
Like any good Italian boy, Federico Marchetti, the new boss of Net-a-Porter, loves his mum and is still a bit scared of her. “Mamma would never forgive me if she saw me wearing the wrong socks,” he grimaces. In the middle of a photoshoot in his new company’s west London office, Marchetti has just realised he is wearing blue socks with a black Dior suit and black John Lobb oxfords. A hipster-bearded minion rushes off and returns with box-fresh black socks to put a stop to this fashion crime. “We deliver in two minutes,” Marchetti laughs. When it comes to socks, shoes, suits and much else besides, no one delivers more than Marchetti. He is the boss of the world’s largest fashion etailer, after all. Yoox, his vast publicly quoted Milan-based company, is about to seal a takeover of London-based Net-a-Porter to create the very unfashionable-sounding YNAP. Its first day of trading on the Milan stock exchange is tomorrow. The new outfit will be worth almost €4bn (£3bn), have 2m customers, €1.3bn sales “and half a billion euros’ worth of luxury products in our warehouses”, he says.
Strong trading at River Island has helped to stitch together a big dividend for the family of its founder. Rising sales and profits at the fashion retailer, which launched a childrenswear range last year, contributed to a healthy set of accounts for the empire overseen by Bernard Lewis, 89. A subsidiary of the family’s holding company paid £30m to him and relatives, including his son Clive, who is River Island’s chairman, and nephew Ben Lewis, the chief executive. River Island, which grew out of a fruit shop run by Bernard Lewis’s parents after the Second World War, performed well last year as it tapped into the rise of smartphone shopping. Sales grew 10% to £926m and pre-tax profits leapt by 70% to £149m. The chain targets youthful consumers and two years ago struck a collaboration with the singer Rihanna.
Sales rose at Savile Row tailor Gieves & Hawkes last year, but it continued to lose money as its reinvention under two Hong Kong billionaires progressed. The company, which traces its roots back to 1771 and made ceremonial outfits for Nelson and Wellington, was bought by Victor and William Fung three years ago. Under their ownership it has refurbished its flagship store at 1 Savile Row and slimmed down its British business, closing two shops elsewhere in London. Like-for-like sales rose 2.9%, according to accounts at Companies House, but Gieves & Hawkes made a £666,000 pre-tax loss.
The company behind greeting card website Moonpig.com is set for a £400m sale to the owner of Radio Times. Photobox, which also runs a photo printing service, had been aiming for a stock market float later this year. However, sources said the company will be taken over by the private equity house Exponent, which owns the publisher of Radio Times and the sightseeing company Big Bus Tours, in a £400m deal within a few weeks. The deal means that Photobox will join the swelling ranks of companies to have abandoned float plans in recent months. Ticket website Thetrainline.com and leisure park chain Center Parcs shelved listings after receiving knockout bids from suitors.
Dave Lewis made a good start but, as the share price slides again, the City wants him to spell out his plan for revival. Last month a gang of former Tesco executives and their indus- try friends gathered for a weekend at Les Bordes, a golf resort in the Loire Valley. For years, Britain’s biggest grocer ran a lavish annual golf weekend — known as the Badgers trip after Tesco’s coat of arms — until it was scrapped on cost grounds by Dave Lewis, who took over as chief executive last year. Paying for themselves, about 40 Tesco veterans and their supplier contacts continued the tradition anyway, calling themselves the Dead Badgers. As they worked their way round the course, Lewis was getting married for the second time. The Tesco boss, who turned 50 this year, quietly tied the knot with his long-term partner, Helena Wayth, 45. The weekend capped a dramatic year for Lewis, who won the nickname Drastic Dave during his time at Unilever for his ruthless approach to turning around its British business. After he was parachuted in early to deal with Tesco’s profit overstatement scandal and a collapse in trading last autumn, Wayth joked that she did not expect to see him for six months. Even she could not have known how intense it would be. Lewis moved rapidly, shutting unprofitable stores, cutting thousands of middle-management jobs and announcing the closure of its head office. He managed to produce better figures over Christmas — sales fell by 2.9%, a drab result but better than the 5.4% drop of the previous quarter — and then booked a staggering £7bn of write-downs in April. He promised to change Tesco’s culture, saying it would no longer be “slavishly driven” by profit targets, and overhauled how it booked payments from suppliers after the accounts debacle.
Mail on Sunday.
Over the past three months, millions of holidaymakers have spent hours at airports and railway stations across Europe and beyond. Arriving early, waiting for delayed flights or whisked through security faster than expected, they have mostly whiled away their time, shopping, eating and drinking. Many will have eaten or drunk at restaurants, bars and cafes operated by a company few people have ever heard of: SSP. Floated in July 2014, it runs about 2,000 outlets at 124 airports and 270 stations worldwide. Some brands belong exclusively to the group, such as Millie’s Cookies, Upper Crust and Caffè Ritazza. But in many cases, SSP uses a franchise model, running sites for well-known names such as Nando’s, Burger King, YO! Sushi and Starbucks and paying these companies a royalty in return. SSP was also the first to open an M&S Simply Food outlet in a travel location – Liverpool Station in 2001. Now it runs stores around the country in stations, airports and hospitals.
The Volkswagen emissions scandal deepened last night as it emerged that half of Britain’s company car buyers could dump the firm. In a survey of 460 UK fleet managers, 49 per cent said they were reviewing their deals with VW in the wake of the furore. The biggest fear of large scale buyers is that the resale value of VW vehicles will plummet, leaving them seriously out of pocket. Company car drivers themselves are also turning their backs on the German car giant, believing the brand no longer carries the kudos it had.
Lady Astor, mother of Samantha Cameron, unveils plans for more stores of her upmarket furniture business. Annabel Astor, the Prime Minister’s mother-in-law, has spoken of her ambition to double the number of OKA luxury furniture business shops after a surge in sales last year. Lady Astor, who founded the company, known for its upmarket painted furniture and chinoiserie fabric, said that OKA was bouncing back after one of her shops in Froxfield was burnt to the ground last year.OKA, which has ten stores across the country’s market towns and in London’s affluent neighbourhoods such as Chelsea and Parsons Green, plans to open a small shop in Marlow, Buckinghamshire, later this month and a further three before spring. “Our intention is to open three to four shops a year for the next three to four years, there’s a huge growth potential as there’s a mass of market towns, particularly in southern England”, Lady Astor said.
Financial Reporting Council writes to supermarket over income received from suppliers. The UK’s accounting watchdog has written to J Sainsbury to question the supermarket retailer’s accounting of supplier income disclosures in the wake of last year’s Tesco scandal. Sainsbury’s received an exploratory letter from the Financial Reporting Council (FRC) after it failed to disclose its income from its suppliers in its annual report. Sainsbury’s promises store ‘reinvention’ to fight discounters. In December, the FRC issued a warning to all retailers, saying that they should provide investors with sufficient information on their accounting policies in the wake of the discovery of a £263m hole in Tesco’s accounts, caused by caused by booking income from suppliers too early and costs too late. As a result, the FRC has made retailer’s supplier agreements a key area of focus when reviewing audits.
Music chain in talks about rolling out its online business internationally after revival of the retailer. HMV is plotting an audacious international expansion just two years after the music retailer toppled into administration. The revival of the chain has seen it open 14 more stores this year and it plans to open another three before Christmas. The music chain’s dramatic comeback has already seen it overtake Amazon as Britain’s biggest music seller earlier this year, according to record industry figures. In June HMV also launched an ecommerce website in the UK after a successful trial in Ireland now means online sales outstrip sales from HMV stores in the country. HMV has already registered 1m active online users.
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