Sunday Retail News Roundup
Unilever lines up brands sale, Fat cat pay curbs, Britain and retail EU workers, Waitrose and Tesco lead sign up of more small British suppliers, Bijou Commerce investment via crowdfunding, Inflation and retail sales, Indian takeouts from Morrisons store, Next braced for profits drop, Unilever investors sent Kraft packing, JD Sports ban lifted, House of Fraser plans, Easter becoming a second Christmas, Next slump, Lord Paul Myners urges takeover crack down, Paperback fighter.
Unilever is preparing a £6bn sale of brands including Flora and Stork as part of its response to the ill-fated takeover bid from Kraft Heinz. Chief executive Paul Polman will unveil cost-cutting and restructuring measures next month following shareholder pressure prompted by the unwanted $143bn (£115.3bn) bid from the American food giant. The bid fell apart amid trenchant opposition from Unilever’s board. A strategic review had already started and is now being accelerated. Polman is expected to earmark the sale of the margarine and spreads business as one of a number of possible responses. Kraft Heinz, backed by Warren Buffett and Brazil’s 3G Capital, stunned the City with its unsolicited approach last month. Polman’s refusal to countenance a deal exposed simmering tensions among shareholders. 53% of investors supported engagement with the American suitor. Bankers have begun plotting a carve-up of the company broadly split between food brands including Knorr and Ben & Jerry’s and personal care products such as Dove soap and Lynx deodorant. Polman is unwilling to consider a break-up of the entire company but selling a raft of underperforming spread brands would be a victory for shareholders wanting better returns. Margarines and butters sales have fallen partly because of low-carbohydrate diets discouraging eating bread. Unilever separated its spreads division into a standalone company three years ago.
Shareholders could win the legal right to block excessive pay deals for company bosses, as part of Theresa May’s attack on fat cat pay. A white paper on corporate governance due in coming weeks is expected to include proposals that force companies to respond to protest votes by investors in regard to executive remuneration. At present, votes on pay are simply “advisory” and can be ignored by boards, if they choose. New plans would force errant companies to go back to the drawing board and then hold a second shareholder meeting if an executive bonus package, pension payment or long-term incentive scheme fails to pass muster. More than half of Britain’s biggest quoted companies are preparing to put their pay plans to binding shareholder votes in coming months and several high-profile proposals have already been rebuffed. Tobacco giant Imperial Brands caved in to pressure from shareholders in January and scrapped a £3m pay rise for chief executive, Alison Coope
Mail on Sunday.
Bosses of two leading companies have warned that expelling European Union workers from Britain will deal a massive blow to the economy. Mike Coupe, chief executive of Sainsbury, said it would be 'unacceptable' to force 8,000 of his staff to leave the UK after Brexit. Coupe employs 163,000 workers across Sainsbury's 1,300-store empire, about 5 per cent from the European Union. Meanwhile, Tim Martin, founder and chairman of pubs group JD Wetherspoon said it was vital that immigration stays close to current levels to keep the economy dynamic. Earlier this month, sandwich chain Pret A Manger revealed that just one in every 50 job applications it receives are from British citizens.
Waitrose and Tesco are leading the way taking on more small British suppliers. A new report, Buying British In 2017, by supply chain member organisation GS1 UK, said that of the major supermarkets, Tesco as Britain's largest retailer, has afforded the most opportunities to GS1 UK's new joiners over the past five years, trading with 33 per cent of them. But Britain's seventh-largest supermarket, Waitrose, sits in second place, defying its 5.3 per cent market share by providing opportunities to 18 per cent of GS1 UK's new joiners. Many of the 2,500 local and regional products Waitrose stocks regularly outsell their big brand equivalents. Asda and Morrisons came at the bottom of the list of supermarkets, offering opportunities to 8 per cent and 3 per cent of joiners respectively. They were beaten by Lidl, Co-operative, Iceland, Sainsbury's, and Aldi. Morrisons last week revealed more than 500 small producers have signed up to its new search for local and British food in the first two weeks since launch.
Tennis champ Sir Andy Murray has invested in British firms via crowdfunding site Seedrs this year including Bijou Commerce, a mobile platform for leading retailers. He feels that Bijou Commerce is a ground-breaking tech firm which will hopefully revolutionise retail.
Inflation will this week rise above the Bank of England's 2 per cent target for the first time in more than three years as sterling's collapse prompts a surge in prices. The Consumer Price Index hit 2.1 per cent in February, up from 1.8 per cent in January, official figures are expected to show. Food prices, which had previously been falling are increasing too. Rising inflation has been putting the brakes on economic growth and consumer spending is slowing. Retail sales are expected to have been lacklustre in February after weakened performances in January and December. Consumers are now limiting their spending as rising inflation increasingly squeezes purchasing power.
Morrisons is to start offering takeaways that shoppers can have delivered to their home by introducing a Bombay Spice outlet to its Bradford stores as it looks for ways to entice shoppers into stores. Customers can eat in-store, collect or have it delivered by Just Eat. It is not alone in searching for ways to increase footfall and boost revenue. Sainsbury's £1.4billion deal to buy Argos last year was aimed at attracting customers from both brands into one place and has also offered space to The Gym Group, which has opened four no-frills health centres alongside supermarkets. Tesco, on the other hand, has sought to grow by snapping up wholesaler Booker Group in a £3.7billion deal.
Clothing giant Next is poised to unveil its first annual profit fall for eight years after it was caught between a clothing market squeeze and a slump in sterling. On Thursday the £4 billion company is expected to report a 4 per cent drop in profits to £789 million for the year to the end of January. The decline would be the first since 2009 when the UK was still reeling from the banking crisis.
American investors were less than impressed with the ruthless speed that Paul Polman and Unilever dispatched Kraft Heinz when they came a-calling with a £115billion bid last month. Some 53 per cent of shareholders felt it was all a matter of money, and had the premium offered by Kraft Heinz been 40 per cent above Unilever's share price, instead of a mere 19 per cent, it should have been all systems go. Fortunately, 60 per cent of British investors felt differently. Unilever is a company with heritage in the UK and a research, development and testing budget of £250millions a year. The art deco headquarters in Blackfriars, and all the vital business services provided to it, would have been endangered and 88,000 UK pensioners placed at risk. Polman, rightly, is promising investors a quickie business review. But he is ready to resist short-term demands to do the splits and sell great brands such as Marmite.
The Department for Work and Pensions has lifted a two-month ban on retailer JD Sports' main warehouse receiving staff from the local job centre after concluding an investigation. The DWP visited the Rochdale site after a TV report compared it to 'a prison'.
Struggling department store House of Fraser is to launch champagne bars, yoga studios and wellness studios in a bid to boost sales. It will also cut back on the number of clothing brands it sells and wants to oust about 30 young fashion and older brands and instead boost labels such as Jigsaw, Barbour and All Saints. The shift will also see it scrap four of its house brands to focus on five others including Linea, Biba and Label Lab. Those facing the chop include Episode, Therapy, Grey & Willow and Dickens & Jones. The review is being led by former Asos clothing executive Maria Hollins, who joined in May.
Easter was once celebrated with an egg hunt in the garden and a simple Sunday roast but now is becoming a "second Christmas" as supermarkets have started selling Easter crackers as part of a new, expanded range of themed decorations and gifts. According to Waitrose, demand for Easter crackers is soaring with sales rising by 63pc this year alone, amid a resurgence of the traditional family Easter lunch. Despite a major Government crackdown on childhood obesity and sugar consumption, Easter egg sales were up by more than 12pc last year. A major fall in Cadbury's Creme Egg sales has been attributed to a decision by its parent company, Kraft, to change the recipe.
Next Chief executive Lord Simon Wolfson is predicted to post profits of around £792m, a full £100m below earlier forecasts, and a 4pc drop on the previous year. It will be the first time Next has failed to grow profits since 2009.
Around £1bn was wiped off the company’s share price this January when Next spooked investors with a surprise drop in sales and an unexpected profit warnings. Meanwhile its rivals had a relatively upbeat festive performance. Next’s early online shopping gains, via its Directory catalogue business, have now been entirely erased and the likes of Asos, Boohoo and Missguided have overtaken it.
Former City minister Lord Myners has weighed into the debate over the UK’s takeover regime, urging the government to toughen up the rules to protect prized companies from foreign bidders. His comments come days after Unilever boss Paul Polman called for the takeover code to be strengthened in the wake of a shock £115bn approach from Kraft Heinz, the first ever major threat to the Anglo-Dutch giant’s independence. At Unilever a sale of the non-core margarine division, which controls just under a third of the entire global margarine market, is now top of the agenda, along with an escalation of its cost-cutting programme. Unilever is planning to boost shareholder payouts through buybacks or dividends. The results of the strategic review are expected to be unveiled in the coming weeks. The future of the division has been the subject of regular speculation after Unilever made it a standalone entity in 2014 with separate accounting and management. It generates around £480m in earnings which is 4pc of Unilever’s entire revenue.
At the start of this decade publishers feared the death of the paperback. Britons abandoned bookshops at an alarming rate, seduced by e-readers and cheap digital books. Even Jeff Bezos, the Amazon founder, was shocked by the speed of readers’ defection when Kindle downloads outsold hard copies on the website for the first time in 2011. Sales of physical books increased 4% in the UK last year while ebook sales shrank by the same amount. Smartphones and tablets last year overtook dedicated reading devices to become the most popular way to read an ebook. Michael Tamblyn, chief executive of Kobo, which makes e-readers and sells ebooks, including for WH Smith and Waterstones, reckons the decline is simply down to pricing. Traditional publishers are setting the prices, which limits retailer ability to discount or run price promotions. Previously a book that a publisher would have published at £10.99 Kobo could have sold for £7.99. What Kobo like to see is a nice healthy distance between a print book and an ebook which is usually still the case but often isn’t as wide as they would like it to be.
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