Sunday Retail News Roundup
Dunelm price rise, Fortnum & Mason owner millions to charity, Sale of Weetabix, Cadbury licence, Heineken publican rebellion, Sainsbury's green aisles trials.
Mail on Sunday.
John Browett, chief executive at Dunelm, one of the UK’s biggest homewares groups worth £1.4billion, imports most stock and prices rises are expected on more than two-thirds of products. There will be price increases around 5 per cent. Of 30,000 lines, prices of 7,500 will stay the same or be lower. It’s not the dollar that’s important but the Chinese renminbi rate, the Indian rupee or the Bangladeshi taka because that is where imports are from. On his first day in the office, the Dunelm share price was more than £9. It now stands at 672p. The fall amounts to several hundreds of millions of pounds knocked off the value of the group. Dunelm failed to impress the City with its Christmas trading, sales were flat. Two main causes are the Brexit vote and the internet. Six weeks prior to the referendum, the homewares market was growing at about 2 to 3 per cent. Since Brexit it has gone to minus 2 to 3 per cent and has stayed there. Dunelm opened a brand new distribution centre as well and had some disruption from that. There is also the huge challenge to store sales from the internet. The change to internet shopping is the biggest change to the retail market ever. For any retailer over the next 20 years it is going to be very hard to get like-for-like growth (from existing stores) because of online growth.
Billionaire owners of retail brands such as Fortnum & Mason, Heal’s and Primark gave millions of pounds to good causes last year thanks to record dividend payouts. Accounts just filed show pre-tax profits of £1.1billion year to September 17, 2016, up from £727million the previous year. Sales were £13.6million, up from £12.9million. Wittington Investments, an investment arm of the Weston family, paid out £109million according to its latest accounts, with another payment of £47million coming after the end of the financial year. Just under 80 per cent will go to The Garfield Weston Foundation which supports around 1,500 causes in health, education, youth and the environment, including the Salvation Army, Bletchley Park Trust and Demelza children’s hospice.
Weetabix, the UK’s second biggest cereal brand, is being circled by rivals as owners look to offload it, having struggled to crack the Chinese market. Cheerios maker Nestle and Lucky Charms owner General Mills are understood to have expressed an interest through their existing Cereal Partners Worldwide joint venture. Quaker Oats owner PepsiCo is also understood to be involved in the process, as is Turkish group Pladis, which bought Jaffa Cakes maker United Biscuits in 2014 for £2bn. Bankers say that it is unlikely that Kellogg’s, the world’s biggest cereal maker, would be able to overcome the competition concerns surrounding a deal and as a result will opt out of the bidding war. China’s Bright Foods has already hired Goldman Sachs to sell the 84-year-old brand.
Premier Foods could face an unmitigated disaster if it fails to extend its lucrative licensing deal with Cadbury’s parent Mondelez. Shares in the Mr Kipling maker were given a pounding last week after the company issued a major profit warning less than a year after lifting its sales guidance for the year and rebutting a £1.5bn takeover approach. Now, doubts are emerging over its Cadbury cake licence, despite the company saying last week it continues to enjoy an excellent working relationship with Mondelez and is making good progress with licence negotiations while planning to launch new Cadbury cake flavours in the fourth quarter of the year. Premier Foods’ cake division has provided a glimmer of hope for the company, but its long-standing licence to manufacture Cadbury-branded produce, which include Mini Rolls, expires in June after being extended in 2012.
Heineken faces a publican rebellion following its £400m takeover of Punch Taverns over plans to fill the 1,900 new pubs with its own beer and cider brands. A shareholder vote is due to take place in less than three weeks sparking an urgent appeal by Punch publicans to officials within Government and the regulator. The tenants are maddened by the takeover plans because the Dutch beer giant typically aims to stock the taps and fridges of its existing pub estate to ensure Heineken-owned brands make up 85pc of what is on offer. The brewer has not ruled out implementing a similar strategy in Punch pubs but justified the deal to its investors by saying it will use the Punch platform to improve the visibility and sales of Heineken UK’s beer and cider brands in high-quality pubs.
British shoppers are to become the subject of an experiment aimed at making them eat their greens. In a bold move to rebalance the contents of supermarket trolleys, Oxford academics have teamed up with supermarket chiefs to persuade consumers to buy less meat.The project, in which Sainsbury’s is a key collaborator, is being funded as part of a £5m Wellcome Trust programme, Our Planet, our Health, which aims to improve human health in a world going through profound climatic change. Eating more vegetables and fruit and less red meat will benefit people’s health and the environment. In the project, to be launched this week, Oxford University scientists will work with Sainsbury’s executives in a programme that will see supermarkets redesigned. Proposals include: placing vegetarian alternatives on the same shelves as meat products; giving vouchers and loyalty points to shoppers who choose vegetarian products; and providing recipes and leaflets that outline how shoppers can eat less meat. Sainsbury’s said a range of its outlets, from local stores to its superstores and its online shopping service, would be used in trials.
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