Sunday Retail News Roundup
Topshop’s sales fell heavily over the crucial Christmas trading period, cranking up pressure on its billionaire owner Sir Philip Green as he tries to negotiate a settlement over the BHS pensions scandal. Like-for-like sales at the fast fashion chain dropped by almost 11% over the seven-week period between Black Friday in November and the first week of the New Year. Overall sales at Arcadia Group, the empire behind Topshop and older brands such as Dorothy Perkins, Evans and Wallis, fell by about 6.5%. Arcadia share of the fashion market shrank by about a quarter in the past four years. It is on course to make underlying earnings of about £140m this year, down from its original target of £175m, significantly less than the £222m it made in the year to August 2015. Green has not yet filed accounts for the year to last August. Arcadia also has a big pension deficit. It stood at £189.6m in the year to August 2015.
Amazon has begun searching for high street locations in prime areas of central London ahead of the potential launch of a checkout-free grocery chain later this year. It suggests a stepping up plans to bring futuristic convenience stores to Britain. It is testing the first Amazon Go store near its base in Seattle, where the employees are able to buy goods without queuing at a till. In December, the company registered a trademark in the UK for the Amazon Go format. The spectre of Amazon opening up physical stores on UK high streets will alarm the big four supermarkets. Tesco and Sainsbury’s have already seen profit margins crushed by German discount chains Aldi and Lidl. In June, Amazon escalated its assault on Britain’s supermarkets with the launch of fresh food deliveries in parts of London
How do you cut the amount of sugar in a chocolate bar? Simple. Make it smaller. Brands such as KitKat, Mars bar and Dairy Milk have come up with a sweet trick to meet government targets for reducing sugar in their products. Most high-sugar products, including yoghurt, fizzy drinks and breakfast cereal, can be reformulated using artificial sweeteners, but chocolate makers say doing this ruins the taste of their products and can even have a laxative effect. Mars, Nestlé, the owner of KitKat, and Mondelez, the American food giant behind Cadbury, are preparing to take a bite out of chocolate bars to avoid being named and shamed in a series of Public Health England (PHE) reports on childhood obesity, the first of which will be released next month. The manufacturers have held meetings with PHE officials and suggested reducing the size of their products by 20%, the amount by which the agency is seeking to cut sugar across a wide range of food and drink products by 2020.
Mail on Sunday.
Tesco has rejected a £170 million claim by a group of shareholders and denied allegations there was pressure on its staff to achieve profit targets by ‘dishonest means’. The supermarket group is facing legal claims from investors after the accounting scandal of 2014 in which it emerged Tesco had overstated actual and expected profits by £284 million. In its latest defence, filed at the High Court by Tesco, the group rejected responsibility for any losses suffered by the investors. Tesco also rejected claims that its senior executives were ‘motivated by profit rather than serving customers’. The documents are in response to the £170 million claim against the company from US investors Manning & Napier Fund and Exeter Trust Company. Tesco faces a separate claim from 111 investors including the Kaiser Foundation, an American non-profit organisation, the Church Commissioners and the American Red Cross, which it is also defending. Tesco shares plunged after the scandal emerged and the retailer reported a £6.3 billion loss in 2015. In the latest set of documents, Tesco said senior executives were aware staff were ‘under pressure to meet financial targets’.
Aldi is poised to overtake the Co-op this week to become Britain’s fifth largest grocer. It is a big step for the German discount retailer, putting it next in size to the Big Four supermarkets. Figures due this week are expected to show that Aldi attracts 6 per cent of the UK’s spending on food, behind only Tesco, Asda, Sainsbury and Morrisons. Sales at the budget chain last year reached an estimated £8.5 billion, having more than doubled in four years, with record sales over Christmas. Aldi has opened almost 200 shops in the past three years and was the fastest growing supermarket by sales over the festive period. This month it will open its 700th store, and plans another 300 by 2022 especially in the South of England.
The struggling rent-to-own electricals chain BrightHouse has made a bid for survival by offering permanent reform of its controversial practices in talks with lending watchdogs. The company, owned by private equity firm Vision Capital, has submitted a detailed business plan to the Financial Conduct Authority (FCA) in an attempt to ward off circling bondholders who are preparing for the worst. The FCA is due to scrutinise the plan and assess whether BrightHouse should be allowed to continue to lend on the basis of it. The situation is increasingly urgent for the chain, quarterly rent payments loom on its 311 stores at the end of March and its heavy debts due to be called in. The regulator has cracked down on the hire purchase sector over alleged overcharging and hard-sell tactics targeting vulnerable consumers. Last week BrightHouse said it would shut 28 stores before the next rent demands are due, saying “part of our plan requires us to be leaner and more cost effective”.
The convenience store market is facing renewed scrutiny after Tesco announced a £3.7bn takeover of cash-and-carry giant Booker. Around 80% of the UK’s 41,000-plus convenience stores are still independents or belong to buying groups such as Costcutter or Nisa (known as the “symbol groups” in the industry). Convenience stores are an increasingly important player in the UK food market, ringing up £37.5bn of last year’s £179bn total grocery sales. The convenience pie will increase by 11.7% over the next five years to £42bn as Britons turn their backs on the weekly shopping trip in favour of more frequent top-up shops. One of the reasons the proposed Tesco deal is causing so much consternation in the sector is that Booker has 125,000 retailers on its books, including the 5,400-odd stores that are part of Booker’s own symbol networks, taking in the Premier, Londis, Budgens and Family Shopper brands. Tesco, meanwhile, operates close to 2,500 convenience stores under its Express and One Stop banners, some analysts also count its 300 Metro high street supermarkets in this group. Tesco already has 30% of the UK grocery market, and the controversial deal promises to hand it control of another 2%. Just under half of Booker’s £3.2bn cash-and-carry sales are trade with shopkeepers in its symbol-group networks. Estimates are Booker will add about £2bn-£3bn to Tesco’s current £45bn of buying power. Meanwhile, Tesco says it will save £175m a year in costs, £96m from improved procurement.
Email this article to a friend
You need to be logged in to use this feature.
Please log in here