Sunday Retail News Roundup
BHS lines up windfall from flagship store, Matalan bonds tumble, £1.5bn battle for Travelodge, Feminist T-shirt maker pays price of expansion, Sex, threats and lawsuits at American Apparel, Royal Mail profits down 12%, Britain biggest prices drop since 1960s, Black Friday is still to come, Sales up yet Whistles falls into red, Sour truth behind Morrisons For Farmers milk, Aldi and Lidl plot to open five times as many new stores as Big Four, Sports Direct pushing to put Lillywhites in House of Fraser, Poundland count pennies in changing fortunes, Mothercare to update City, Booths supermarket price war pain as profits cut by half.
BHS is nearing a deal to raise tens of millions of pounds by closing its flagship store. The struggling retail chain, which was sold for £1 by Sir Philip Green in March, is in talks to sublet its shop on London’s Oxford Street to two other retailers. The move comes amid seismic changes on the high street, with old-fashioned clothing and homeware outlets under attack from faster-moving rivals such as H&M, Zara and Dunelm. BHS, advised by property agency Cushman & Wakefield, is close to handing the front part of the store to Reserved, a fashion brand run by Polish conglomerate LPP. It is also close to a deal on the rear section with Ikea, the Swedish furniture giant.
Fears over Matalan’s trading and borrowings have led to a slump in the value of its debt. Two bonds listed in Luxembourg crashed after the cut-price retailer, led by billionaire former market trader John Hargreaves, warned of a steep drop in underlying profits on October 12. The fashion and homeware chain said the need to mark down an “unprecedented” amount of spring stock because of problems with a new warehouse had contributed to a 90% drop in earnings for the quarter to the end of August. It said the distribution centre’s performance had improved but expectations for online growth had to be scaled back to avoid putting too much strain on the facility in Liverpool.
Two of America’s biggest investment funds are locked in a £1.5bn battle for control of budget hotel chain Travelodge. Starwood Capital, the hotel and property giant, is fighting it out with New York private equity firm Apollo Global Management. The pair are seen as frontrunners in an auction to buy Travelodge, which has more than 500 sites and employs nearly 10,000 people in Britain and Ireland. Suitors are scrambling towards a final bid deadline at the end of the month. The increasingly competitive process is likely to value Travelodge at £1.5bn or more.
The fashion label whose “This is what a feminist looks like” T-shirt made a stir last year has boosted its sales by 11%. Whistles, run by former Topshop fashionista Jane Shepherdson, saw turnover hit almost £63m. However, it swung from a pre-tax profit of £1.9m to a loss of £2.3m as it was hit by costs related to expansion in America, the launch of a menswear range and the revamp of its website. Whistles crossed the Atlantic with the opening of four stores in Bloomingdale’s in the year to January. It now has 10 outlets.
Paula Schneider is battling to rebuild the US fashion chain and erase the ‘seventies porn’ style of founder Dov Charney. Eight months into her tenure at American Apparel, a crowd of workers beat up a likeness of Paula Schneider outside its Los Angeles headquarters. The dummy was stuffed with chocolate coins — suggesting the new chief executive’s avarice — and holding an orange Birkin bag, one of the first things she bought after landing the job. “The magical piñata event,” Schneider says with a tight smile, remembering the fracas in August. Those involved argued that it was a legitimate protest against the sacking of three workers, including the leader of a recently established union, Esmerelda Bermudez. Schneider, 57, saw it differently. “It’s not really a union,” she says. “They have never taken a union vote. We do not recognise them as a union. Behind all of it was former management. And I fired the people who beat the piñata.”
Mail on Sunday.
Royal Mail is poised to report half-year results which are expected to show a fall in profits as the company’s letters business continues to slide.The parcel side of the firm is growing slowly as online shopping increases and the number of packages handled is likely to be up 3 per cent. However, the volume of letters delivered by Royal Mail is likely to have fallen by about 5 per cent with revenues down 3.7 per cent, reckons Royal Bank of Canada. On Thursday chief executive Moya Greene is expected to report that pre-tax profits for the six months to the end of September are down by about 12 per cent to £251million. Royal Mail prefers investors to judge it on its operating profits, which exclude pension charges, but which are likely to be down by about 6 per cent to £327million. City analysts reckon the postal business will have benefited strongly from cost reductions in the previous financial year which saw 5,500 staff axed and £40million in cuts at its head office. The postal firm has been fully privatised since the Government sold its final 13 per cent stake in the business for nearly £600million last month. It gave free shares to Royal Mail’s 143,000 employees when it did so, taking their stake in the business to 12 per cent.
Britain is experiencing the biggest price falls seen since the 1960s, official figures are expected to show this week.
Analysts at consultancy Capital Economics expect deflation of 0.2 per cent for the year to October, compared to the 0.1 per cent figure seen last month. But they believe the latest decline in prices will mark the low point for the Consumer Prices Index. The last time there was such a fall in prices in Britain was in March 1960 when deflation hit 0.6 per cent. The current dip in prices has been largely caused by the collapse in the price of oil.
Whistles, the high street store whose clothes are worn by the Duchess of Cambridge, increased sales by 11 per cent to £62.9million last year. Last week it opened a 2,000 sq ft flagship store in Westfield, West London, housing the full collection of womenswear and menswear.It now has 48 stores and 59 concessions, and is looking to open its first standalone menswear store. Directors at the company said that profitability had been ‘impacted by one-off costs associated with the launch of menswear, expanding into the US and [investment in] the Whistles website, as well as a difficult trading environment.’
Profits from supermarket’s Union flag-emblazoned range go to giant cooperative based in Scandinavia to be distributed to farmers across Europe including the UK. It was a gesture that has proved a huge hit with shoppers. With a crash in the wholesale price of milk, Morrisons launched a new dairy range emblazoned with the Union flag, and carrying the promise that an extra 23p on every four-pint bottle would go to struggling farmers. However, only a quarter of the 23p extra on the “For Farmers” range actually goes to British dairy farmers. Instead, the extra money - equivalent to 10p a litre - is sent by Morrisons to a massive milk co-operative, whose headquarters are in Denmark, to be divided up among farmers there and in Sweden, Germany, Belgium and Luxembourg as well as in the UK.
Aldi and Lidl have lodged planning applications for 171 new stores, in comparison to just 29 between all the major supermarkets. Fresh industry figures show that this year Aldi has filed 93 planning applications to open new stores, while its German low-cost peer Lidl has lodged 78. This is more than double the number suggested earlier in the year. In stark comparison, Tesco, Morrison’s, J Sainsbury and Asda have filed a total of just 29 planning applications. Aldi's and Lidl’s expansion comes at a time when the major supermarkets have called a halt to the “space race” in the wake of sliding sales and profitability, and are now urgently seeking ways to repurpose their stores. While the budget supermarkets currently have just a 9.9pc share of UK consumer spending this is forecast to rise to 15pc. They have recenlty launched an assault to lure more middle-class shoppers by selling upmarket goods such as lobsters for £5.99 and cases of wine online.
Sports Direct’s chief executive, Dave Forsey, is understood to have held secret talks with House of Fraser about introducing outposts of London’s Lillywhites shop in some of the Chinese-owned group’s department stores. Mike Ashley, Sports Direct’s deputy chairman and majority owner, attempted to gatecrash the takeover of House of Fraser last year by acquiring an 11pc stake. However, the £480m takeover by China’s Sanpower was sealed last September after months of legal wrangling. Mr Ashley is understood to have bought the stake from Scottish tycoon Sir Tom Hunter, but it does not entitle the Newcastle United owner to a board seat.
Poundland and B&M Bargains, two of Britain’s largest high street discount chains, are reaping diverging fortunes from the trend for bargain-hunting. Since the recession, consumers have increasingly abandoned the big weekly shop in favour of small, frequent trips to the supermarket and top-ups with cheap household staples and treats from discounters. B&M Bargains appears to have been the biggest beneficiary from the boom in cut-price shopping. The chain is expected to have outperformed the wider UK retail sector over the last six months. Analysts forecast a 25pc jump in pre-tax profits to around £87m for the six months to September, despite a slowdown in sales in July.
Analysts expect Mothercare underlying half year pre-tax profits to have more than doubled to £7.9m from £3.3m last year. The company, which saw off a takeover approach from Destination Maternity last year, opting for a £100m rescue rights issue instead, is being steered by new chief executive Mark Newton-Jones. Mr Newton-Jones has tried to revive the business by refurbishing its UK stores and culling the number of promotions it runs throughout the year.
Profits at Booths more than halved last year after the group, known as the “Waitrose of the North”, suffered bitterly from food deflation and the supermarket price war. The family-owned upmarket grocery chain posted a drop in pre-tax profits to £1.3m from £2.9m the year before. Sales at the grocer, which has stores across Cumbria, Lancashire and Cheshire, fell by 0.5pc to £280m for the year ending March 28. The company, which counts the Prince of Wales as a shopper, blamed the fall on “a number of factors, not least the significant degree of deflation on input prices and continued downward pressure on retail prices as our competitors fight for market share”. “Despite signs of a recovery UK economy, business growth in our sector remains difficult to achieve for all with the exception of the discounters”. Booths said that it was gearing up for Christmas and had put in a “considerable amount of work” in guaranteeing its supply chain over the festive period. Last year, a strain on operations meant it failed to deliver some orders which hit “availability and sales at stores”. Booths said there were plans to open four new stores during the course of the year but two of the stores would be replacing older formats. It added that two convenience stores would also close while raising the possibility of further “non-core properties” being sold to pay down debt.
Email this article to a friend
You need to be logged in to use this feature.
Please log in here