Sunday Retail News Roundup
Big four celebrate but discounters really won Christmas, Perks for athletes, Mellon thwarts backers bid to derail fashion comeback, Next plans Oxford Street landmark, Cheshire no silver bullet for Debenhams, Argos boss we can live without Sainsburys, Fashion sales looking sharp SuperGroup, Lord Sainsbury boosts supermarket group's board gives blessing to £1.2bn Argos bid, Sales sparkled over Christmas but Royal jeweller Asprey records loss, Equistone £100m bite of Gaucho chain, Sports Direct investor voices concern relationship with Nike, Christmas greetings cheer sales Paperchase, Walmart to shutter 269 stores, Morrisons closures hit home central Bradford shuts.
In the run-up to Christmas, Morrisons decided to order a few extra truckloads of winter vegetables, carrots, onions, parsnips, potatoes and swedes. The supermarket offered two generous bags of any of them for £1. It was one of several simple but effective ploys the struggling chain used to lure back shoppers from discount rivals. And after three years of falling Christmas takings, Morrisons managed to turn the tide: last Tuesday, it posted a 0.2% rise in like-for-like sales over nine weeks, paltry by the standards of other industries, but a significant achievement given the price war ravaging the “big four” of grocery retailing. Staff crowded into the atrium of the head office in Bradford and raised champagne flutes as David Potts, chief executive since last March, announced the results.
Tesco moved into the lead on Thursday by revealing a surprise 1.3% rise in British sales over the six weeks to January 9 after two years of festive misery. The country’s biggest supermarket chain attributed the recovery to a 5% sharpening of prices on key lines compared with a year ago and the introduction of 4,000 more staff to stores. Even its Extra hypermarkets saw a return to sales growth, helped by clothing concessions such as Burton and Dorothy Perkins. Tesco’s sales fell by 1.5% over the full quarter, however, which it blamed on comparison with a period of “unsustainable” £5-off-£40 vouchers last year.
Asda, owned by the American giant Wal-Mart, did not put out numbers but it is expected to have been the laggard with quarterly sales down by about 3.5%. The flurry of upbeat statements seemed to confound predictions of a Christmas rout by the German insurgents Aldi and Lidl. The bosses of the three listed supermarkets emerged unscathed, each having gone into the crucial trading season needing a decent result. It was Potts’s first test as a FTSE 250 leader (Morrisons fell out of the FTSE 100 at the start of December).
Mike Coupe at Sainsbury’s is trying to build shareholder support for a takeover of Argos in an attempt to bolster defences against Amazon. And Dave Lewis had set himself a high bar after almost yanking Tesco’s sales into positive territory last year. Their share prices jumped and analysts enthused about a fightback from the mainstream players. “For Tesco, the dynamic has changed,” said David McCarthy at HSBC. “That business is now in a better strategic position than it has been for years. It’s the fastest-growing retailer in Britain for suppliers, meaning it is entering a virtuous circle where it will be able to grow sales and margins while using its scale to lower prices.”
Triathletes Simon and Helena Hills woke up, smelt the coffee and decided they could do better. Now the Bristol couple have developed a coffee, Truestart, which allows athletes to control their caffeine intake. And just months after starting up, the coffee is on the shelves at NutriCentre outlets in Tesco Extra stores and will soon be stocked by Holland & Barrett. The pair recently received seedfunding, “in the hundreds of thousands of pounds”, from a private investor to support growth, which will see the Truestart team grow to 10 by the end of the month. The idea to produce a coffee with set levels of caffeine came two years ago when the pair realised that coffee before training could play havoc with their performance. “We would be out on the bikes one day having heart palpitations and the next day, nothing,” said Helena, 28, who worked in software sales. That led them to investigate caffeine’s effects on athletes. “It’s insanely unpredictable even in the same brands,” said Simon, 28, who worked in construction project management. They used developers in Colombia to create their coffee, with the first jar off the production line last May.
Tamara Mellon has defeated her former backers in a bitter legal dispute that will allow the designer’s fashion brand to emerge from bankruptcy. An American court approved plans to restructure the business, which include a $10m (£7m) investment from venture capital firm New Enterprise Associates and $2m from Mellon herself. In a hearing that lasted long into Friday night, the three high-profile British investors who objected to the restructuring were accused by Mellon’s lawyers of wasting the court’s time with “petty squabbles” and “distasteful” attacks on the her character.
Next has signed a deal to open a landmark store on London’s Oxford Street in three years. The FTSE 100 fashion retailer, which this month blamed warm weather for a rare patch of disappointing Christmas trading, has agreed to take over three floors of the Plaza shopping centre. The Plaza’s owner, German landlord Sirosa, is planning to redevelop it, knocking together 20 units to create a bigger selling space. Next’s plans come as retailers flock to the east end of Oxford Street, once the most unfashionable part, in anticipation of Tottenham Court Road’s access to Crossrail in 2018. Primark opened a store in 2012, which it intends to extend because trading has been so strong. Zara followed suit. Benetton and New Look have signed up for a new scheme due to be built by the FTSE 250 property company Great Portland Estates in two years. According to the property agency Savills, 11 brands have opened “statement” stores on Oxford Street in the past year.
The former boss of Kingfisher has said there is “a lot of interesting upside to be exploited” at Debenhams after agreeing to chair the struggling department store chain. Sir Ian Cheshire, who left the conglomerate that is behind B&Q and Screwfix in 2014, said that while there was “no silver bullet” for Debenhams, there were “multiple opportunities to go after”. “There’s a genuine chance to talk about new Debenhams rather than hark backwards all the time,” he said. Having been hit by disastrous trading in 2013, when it issued two profit warnings, Debenhams has been trying to wean itself off a diet of promotions and special offers. It managed to surprise the City with a 1.8% increase in like-for-like sales over the Christmas period. Michael Sharp, the outgoing chief executive, said the result was “evidence that our strategy is working”. Sharp announced his departure last October after taking the heat over poor performance from big shareholders, including Schroders.
The boss of Argos described a takeover bid from Sainsbury’s as “opportunistic” this weekend, and said his attempt to turn around the high street catalogue retailer was “not finished by a long shot”. John Walden, chief executive of Home Retail Group said “we didn’t pursue this strategy thinking we needed partners”. He said: “We do believe, as we build the transformation of Argos, we are building for a business that anticipates a digital future, and that’s unfolding as we expected.” However, he left the door ajar to a deal with Britain’s second-biggest supermarket, saying: “If there’s a way for us to realise this in a faster way with a partner or multiple partners, that’s certainly something we and the board would consider.” Sainsbury’s stunned the City this month when it revealed it had made an approach for Argos’s parent company in November.
Mail on Sunday.
Retail trading updates are a feature of early January but rarely has there been such a stark divide between winners and losers. SuperGroup has been one of the winners. The company, which owns the trendy but comfortable Superdry brand and recently began a fashion collaboration with London-born Hollywood superstar Idris Elba, delivered rising sales during the festive season and early January. Before Christmas, concerns were raised that it was offering shoppers hefty discounts to boost sales. Last week chief executive Euan Sutherland stressed that this was not the case. Despite this reassurance, SuperGroup shares fell as the trading statement was announced last week, suffering from the broader malaise affecting stock markets worldwide. They closed on Friday down 1.3 per cent over the week at 1539p. Midas last looked at SuperGroup in September 2014, when the shares were 1200p.
Lord Sainsbury has emerged as a key backer for the supermarket group’s £1.2 billion bid for retail chain Argos. Lord Sainsbury, a former chairman of the chain his great-grandfather founded, controls about 3 per cent of the shares. His support will boost the board, which has started canvassing shareholders after the company was forced to reveal its interest in buying Home Retail Group, which owns Argos, two weeks ago. Some shareholders have raised questions about the plan, which they fear could distract management at a time when key rivals Tesco and Morrisons appear to be improving their performance. The Qatar Investment Authority is Sainsbury’s largest shareholder with 25 per cent, a holding that could block any acquisition. According to City analysts, Sainsbury’s could benefit from more than £100 million of cost savings if it merges with Argos boosting the rationale for a deal. The board has until February 2 to table a bid.
Christmas shopping figures sparkled for Royal Warrant holder Asprey as it revealed retail sales were 158 per cent up on the festive period a year ago. But the jeweller, whose designs have been worn by members of the Royal Family, including the Prince of Wales and the Duchess of Cambridge, still recorded its fifth consecutive annual loss. Figures just filed by the 235-year-old firm for the 12 months to March 31, 2015, show that turnover fell slightly to £15.3 million while losses shrank a fraction to £11.8 million. The company said that sales through its retail partners had fallen over the year, but that these had been offset by a rise in exports. Christmas sales at the flagship store in London’s New Bond Street grew by 176 per cent on last year, with customers looking for investment pieces, particularly coloured diamonds, watches and leather goods. Asprey is owned by US private equity group Sciens Capital Management.
Equistone buys a majority stake in Argentinian steak restaurant, its second time round owning the company. Gaucho, the Argentinian steak restaurant chain, has sold a majority stake to private equity in a deal understood to be worth more than £100m. The takeover by buyout firm Equistone is the latest in a flurry of restaurant deals and comes as official figures show British spending on eating out is rising by 4pc a year. In the last 18 months Côte, Byron, ASK and Zizzi, Strada, Prezzo, Pizza Express, Las Iguanas, La Tasca, The Real Greek and Yo!Sushi have all changed hands. The Gaucho chain, which is known for presenting diners with wooden boards covered with cuts of beef, runs 14 restaurants across the UK and has a restaurant in Buenos Aires, Dubai and Hong Kong. The business also owns sister chain CAU, which sells steak sandwiches and burgers, and has grown to 16 outlets across the UK and one in Amsterdam since its launch in 2010. Equistone is buying the company from Intermediate Capital Group, (ICG) which invested in the restaurant chain in December 2007 after Gaucho’s then owners, Phoenix Equity Partners, scrapped a £115m stock market flotation amid the choppy markets of the global recession.
Sports Direct's investors have become even more spooked after JD Sports upbeat trading highlighted issues at the Mike Ashley owned retailer. One of Sports Direct’s largest shareholders has voiced concern about the retailer’s fragile relationship with sporting goods giant Nike. The investor is concerned that Sports Direct’s growth is slowing because it does not stock enough of Nike’s latest ranges, which lure shoppers, and instead is filling stores with its own cheaper brands. These fears have been exacerbated by the contrasting forturnes of JD Sports which last week upgraded profit forecasts by 10pc just six days after Sports Direct issued a profit warning in the wake of poor Christmas trading. Sports Direct shares are 29pc lower than a year ago. Trevor Green, head of UK equities at Aviva Investors, said “JD Sports is fascinating in relation to Sports Direct. JD is completely switched on, it is right at the cutting edge of athletic fashion.”
A Christmas card revival has helped Paperchase to post an 11.2pc jump in sales over the festive season. The stationery and gifts retailer sold 9m Christmas greeting cards during the five weeks to the 27 December, lifting total sales to £30m and nudging UK like-for-like sales up by 5.9pc during the period. “Reports of the death of Christmas cards are grossly exaggerated”, Timothy Melgund, chief executive said. “There is an anti-technology theme playing its part, cards are retro and people can personalise them to convey the right message. You can show you care so much more with a card than an email.” An upbeat Christmas is crucial for the retailer as Paperchase makes 20pc of its sales for the entire year in the five week period.
Walmart is closing 269 stores, more than half of them in the US and another big chunk in its challenging Brazilian market. The stores being shuttered account for a fraction of the company’s 11,000 stores worldwide and less than 1% of its global revenue, but according to workers’ group Making Change at Walmart, this announcement will affect 10,000 US employees. More than 95% of the stores set to be closed in the US are within 10 miles of another Walmart. The Bentonville, Arkansas, company said it is working to ensure that workers are placed in nearby locations. The store closures will start at the end of the month, and many closures will be of the company’s Walmart Express stores: all 102 of them (out of the 154 locations to be shuttered in the US). In 2011, Walmart Express marked the retailer’s first entry into the convenience store arena. The stores are about 12,000 square feet and sell essentials like toothpaste. But the concept never caught on as the stores served the same purpose as Walmart’s larger Neighborhood Markets: fill-in trips and prescription pickups. The announcement comes three months after Walmart CEO Doug McMillon told investors that the world’s largest retailer would review its fleet of stores with the goal of becoming more nimble in the face of increased competition from all fronts, including from online rival Amazon.com
Morrisons is planning to shut its only store in the centre of Bradford, the supermarket’s home city, as part of a seven-store closure plan revealed earlier this week. The closure of the store in Bradford’s Westgate with the loss of more than 80 jobs is a blow for the city which is attempting to rebuild itself after several years of difficulties. Morrisons has also begun consultation with staff about the closure of stores in Wigan, Boston in Lincolnshire, Stowmarket in Suffolk, Braintree in Essex, Tunbridge Wells in Kent, and Hounslow, west London. The stores are expected to close over the next few months. Nearly 700 jobs are at risk as a result of the closures which were announced despite Morrisons achieving a surprise increase in sales over Christmas. David Potts, the chief executive, said the supermarkets were unprofitable and he could not find a way to sufficiently improve performance. The latest closures follow those of 21 supermarkets last year and the sale of Morrisons’ 140 convenience stores, known as M Local.
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