Sunday Retail News Roundup
Debenhams woos Mothercare boss, Tesco turns corner sales rise, Dominos halted bonuses, Tesco set to unveil surprise sales lift, Amazon delivery tie-up Barclays, Could online revolution prove to be saviour of bank branches, Vodafone's communications breakdown, Target managing director resigns, 7-Eleven should have acted earlier staff underpayment, Asda warns more retail turmoil.
The boss of Mothercare has emerged as a contender to run Debenhams. Mark Newton-Jones, at the baby and maternity wear retailer for two years, is understood to be among final candidates for top job at the department store chain. Sir Ian Cheshire, Debenhams’s new chairman, is searching for a replacement for Michael Sharp, due to stand down after shareholder pressure over lacklustre performance. Other candidates interviewed include Mike Shearwood, former boss of Karen Millen chain, and Stuart Machin, managing director of Target in Australia. Machin is believed to have withdrawn amid supplier income scandal at Target. He resigned on Friday, saying he would “accept his share of responsibility” despite not having been aware of the accounting debacle until it was revealed. The internal candidate for the Debenhams job is Suzanne Harlow, trading director. On Thursday, the chain is expected to reveal 2% rise in first-half profits to £91m.
Tesco is set to report first quarter of positive sales in more than three years, fuelling hopes of a turnaround at Britain’s biggest supermarket. Analysts predict 0.8% increase in like-for-like sales for three months to February. An increase would hint at more green shoots after Tesco delivered 1.3% uptick over crucial six-week Christmas period. Dave Lewis chief executive since September 2014, after Phil Clarke was sacked, has been trying to fight back against Aldi and Lidl whilst dealing with fallout of supplier income scandal. The Serious Fraud Office is still investigating profit overstatement that claimed scalp of chairman Sir Richard Broadbent. Shares rallied by more than a quarter since then, closing at 190.55p on Friday, valuing Tesco at £15.5bn. Annual results on Wednesday forecast to announce operating profit of £932m, close to £940m announced last year once the contribution of the South Korean business it had sold stripped out. Signals stabilisation but far from £3.3bn trading profit posted in 2014.
Domino’s Pizza halted share-based bonus scheme after HM Revenue & Customs rules crack down on “disguised remuneration”. Between 2003 and 2010, bosses were rewarded by shares in offshore trusts. In annual report last month, the company warned that HMRC had served notices, known as “protective assessments” on some of these, meaning the taxman has reserved the right to pursue for unpaid taxes. Stephen Hemsley, chairman, and Colin Halpern, vice-chairman, were at Domino’s during the time bonus schemes were running. Lance Batchelor, became chief executive in 2012, before leaving in 2014 to run over-50s services group Saga, did not participate. Domino’s stopped using the bonus schemes in 2011 after HMRC new regulations on employee benefit trusts to tackle arrangements it thought were being used to avoid or defer income tax. Domino’s said there will be “uncertainty” around the potential tax hit it could face for the past years’ bonuses until HMRC clarifies.
Mail on Sunday.
Tesco management is increasingly confident of gaining momentum. The news, due on Wednesday, that Dave Lewis has a firm grip on the company’s turnaround is likely to send a chill through rivals’ boardrooms. Lewis, ‘Drastic Dave’, arrived in September 2014 to a business in turmoil. Within a month he uncovered a £326 million accounting black hole, resulting in the suspension of several directors and an ongoing investigation by the Serious Fraud Office. Lewis expects operating profit, an underlying figure that strips out one-off costs, to be no higher than about £950 million for the year to February 2016 and has vowed to plough any additional funds raised straight back into the business. Tesco lost £6.4billion the previous year on a pre-tax basis, which includes costs of rescuing the business from its accounting crisis. Forecasts for this year’s pre-tax profit range from £294million to £897million. Lewis hopes that own-label Farm brands will establish a battle line to combat discounters Aldi and Lidl and is expected to say he cut debt to about £5billion by selling Tesco’s South Korean supermarket chain. Tesco is facing Government measures that will lift its costs amid uncertain consumer spending, including rises to the minimum hourly wage and the Apprenticeship Levy expected to cost businesses £2billion a year.
Barclays has teamed up with internet shopping giant Amazon to use its outlets as collection points for deliveries in an attempt to breathe new life into its branch network. The bank has been trialing delivery lockers across sites in London. If successful plan could be extended across Barclays network. Amazon already delivers to hundreds of click and collect sites around the country, with customers able to pick up packages from Post Offices, newsagents and train stations. The Barclays plan could open up 1,500 more. Barclays is also trying to expand outside its branch network, by offering services in Asda supermarkets and through Barclays Collect, a new cash takings pick-up service.
The online revolution has cut a swathe through our high streets. Shopping on screen for home delivery has wrecked the business strategies of a host of retailers, making their bricks and mortar properties a liability rather than an asset.
But could the online revolution now prove to be the saviour of that other declining high street asset – the bank branch?. Barclays’ trial to allow Amazon to use its outlets as click and collect locations is a sign of the ever encroaching online empire. It may also provide a new revenue stream for the branches, providing them with just a little more reason to stay open. Bank branches were in fact among the first to suffer from new technology. First telephone and then internet banking have meant fewer and fewer people ever need to set foot in one.
Vodaphone employees can block disputes and are powerless to resolve snowballing errors. There were more complaints to Ofcom about Vodafone in the last three months of 2015 than the total for all of the other major mobile providers combined. Among pay-monthly users, there were 32 complaints to Ofcom per 100,000 Vodafone customers in the last three months of 2015, more than double the figure in the first half of last year and more than the total for all of the other major mobile providers combined. These complaints reflect only the number of people who have aired their grievances with the regulator and do not take into account customers who complained to the company direct or to independent arbitrators such as the Communications Ombudsman. Total number of complaints about communication providers made to the Ombudsman in the first three months of this year is 53 per cent higher than in the same period last year. The Ombudsman said it could not disclose how many relate specifically to Vodafone.
The Target boss, Stuart Machin, has quit his position with immediate effect as investigations continue into allegations the department store artificially boosted profits via deals with suppliers. In an announcement released to the Australian Stock Exchange on Friday, Machin said he was “dismayed to learn of the accounting issues” and had decided to resign. Wesfarmers, which owns the Target business, is investigating allegations that Target used supplier rebate deals to artificially boost its earnings for the first half of 2015-16.
The convenience store chain 7-Eleven should have acted on information some of its franchisees were making deliberate attempts to underpay workers sooner, the Fair Work Ombudsman says. An inquiry launched in June 2014 has found the payroll section of the company’s store review process had a reasonable basis to inquire and act on claims operators were entering false information into the system. The ombudsman has recommended that 7-Eleven enter a compliance partnership “accepting that it has a moral and ethical responsibility to ensure its stores meet community and social expectations”. The chain should also review its operating model, set up a staff consultative forum and implement effective governance arrangements that ensure compliance
Asda is to pump in another £500m into slashing prices, chief executive, Andy Clarke warns of another tough year for the retail sector. Asda is expected to report sixth quarter of falling revenue next month, although slump in sales is forecast to have slowed from 4.5pc to around 3.5pc. Next, Marks & Spencer, Waitrose and Sports Direct have all revealed grim sales figures and the City is braced for another flurry of bad news next week. Wm Morrison is forecast to post 2pc slide, though that would be a slight improvement on the 2.6pc fall in the previous quarter, while Tesco is on course to post a 2.5pc drop in like-for-like sales. Asda’s latest investment comes on top of the £1bn of price cuts over five years first announced in 2013. Mr Clarke said that £600m had already been spent in rolling back prices, taking the total of reductions to £1.5bn by 2018. Asda launched its “Project Renewal” to trim the number of products on its shelves in order to reduce its cost base. It sells up to 30,000 items in its stores, compared to Lidl and Aldi, which have up to 2,500. Asda joined Europe’s largest grocery alliance, which combines £178bn of buying power to lower the cost of goods for private label products. Swiss-based EMD includes 14 European supermarkets such as France’s Groupe Casino and Germany’s Markant Deutschland. Mr Clarke said that the alliance would help it lower costs and improve the quality of its premium Extra Special range. Despite falling revenues, the Wal-Mart owned grocer posted a 2.3pc rise in post-tax profits to £708m last year. Mr Clarke said he would “watch with interest” whether rival Sainsbury’s pursues its Home Retail Group takeover attempt and said that it had been “interesting to read the analyst notes so far”. Sainsbury’s is expected to be crowned the winner of the major supermarkets with analysts forecasting a 0.7pc dip in like-for like sales in its festive trading update.
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