Sunday Retail News Roundup
Holiday giant Thomas Cook will this week reveal the cost to its business of the terrorist attacks in Tunisia and Egypt. The tour operator is expected to take a £25m hit from disruption to its schedules in Tunisia — where gunmen massacred tourists on a beach in June — and from uncertainty over Greece’s future in the eurozone. Further costs are likely to be incurred in Egypt. The airport at Sharm el-Sheikh was closed last month after a Russian passenger plane crashed in what investigators now believe to be a terrorist attack. Analysts at the investment bank Jefferies calculate that it could cost Thomas Cook an additional £5m. Overall, the company is expected to report underlying profits of £307m, down 5% on the year before. The attacks in Paris this month fall outside Thomas Cook’s financial year. Its business in the French capital is relatively small, but investors will seek reassurance from chief executive Peter Fankhauser. The shares are down more than 15% in the past month.
Nisa Retail plans to bolster its takeover defences as a wave of dealmaking sweeps through the grocery industry. The convenience store mutual, which has 2,500 shops and £1.6bn of sales, has asked members to approve an increase in the shareholding threshold a predator would have to cross to gain control. The takeover protection is one of several crucial reforms — many of them proposed by former City minister Lord Myners — set to be put to a crunch vote at Nisa’s annual meeting tomorrow. The vote is expected to be close. Nisa needs 75% of its members to back the changes. In a letter circulated to members, chairman Christopher Baker said it was “the most crucial AGM in the company’s history”. He added: “Last year was a dreadful year for Nisa. We suffered from leaks of confidential information, two member directors were dismissed from the board for bringing the company into disrepute, and we lost more than £11m. We need to make sure, as far as humanly possible, that none of this can happen again.”
The two entrepreneurs behind safari holiday operator Audley Travel are on the verge of a multimillion-pound payday after receiving a knockout bid from American investment giant KKR. Audley, which has held talks with private equity firms 3i, CCMP Capital Advisors and Cinven, is in detailed discussions with KKR about a deal. Insiders said KKR was in “pole position” and determined to win the auction, tabling an offer well above the £200m asking price. They said the other suitors were waiting in the wings. Audley runs tailor-made luxury holidays to more than 80 countries. It employs about 360 people, 250 of whom are based in Witney, Oxfordshire. The sale, likely to be completed by Christmas, is expected to bring a huge windfall for Craig Burkinshaw and John Brewer, who started the business in 1996. Burkinshaw set up Audley in a post office in Northampton, where he met Brewer, the son of the post office’s owner.
A fast-growing shopping club for sportsmen and women has secured a £9.5m injection to fuel its overseas expansion. SportPursuit, a four-year-old London business that sells discounted sportswear through online “flash” sales, has rustled up the cash from Scottish Equity Partners, Grafton Capital and existing investor Draper Esprit. The company offers 1,000 sports brands, including GoPro and Berghaus, at discounts of up to 70%. The new money will be used to expand the company’s 40 overseas markets. “It’s basically Black Friday every day,” said Adam Pikett, 35, one of SportPursuit’s four co-founders and the chief executive. Early investors included William Reeve, co-founder of Lovefilm; Alex Chesterman, founder of Zoopla; and Alex Saint, chief executive of Secret Escapes. SportPursuit made sales of £10m last year and expects £15m for this year. It has 55 staff and plans to keep hiring.
Mail on Sunday.
Almost 15,000 Worldpay retailers were left unable to accept credit and debit card payments last week just a month after the financial services giant completed a £5billion stock market float. Worldpay’s private equity owners, Bain Capital and Advent, cashed in £1.2billion from the listing and chief executive Philip Jansen netted around £50million. However, customers of the London-based firm began encountering issues around lunchtime on Monday. By Wednesday many were still struggling to get through to Worldpay’s call centre. It said the glitch affected about 5 per cent of its customers and it claimed ‘the majority’ were reconnected within 24 hours. The company has 300,000 customers in the UK and Ireland – including retail businesses of all sizes – and controls 42 per cent of the point-of-sale payment processing market. Advent and Bain acquired Worldpay from Royal Bank of Scotland in 2010 for £2billion.
Shoppers are forecast to spend £1.9billion in a single day as online retailers turn the heat on high streets on Friday. The sum will include £721million spent online, an increase of 17 per cent on the ‘Black Friday’ frenzy of last year, according to card payments firm Visa Europe. The £1.2billion spent in face-to-face transactions will represent a 4 per cent rise on last year. However, both increases suggest that enthusiasm for Black Friday, an import from the US, is levelling off. Last year online sales increased 44 per cent on the year before and face-to-face spending increased by about 15 per cent. The lower predictions for face-to-face transactions, which include not only sales in high street shops but also in restaurants and pubs, suggest that many stores are resisting promotions on the day, for fear of disrupting pre-Christmas spending and losing money. There is also evidence that the promotional event leaves many shoppers unhappy. A quarter of shoppers said that they regretted purchases on the day and returned at least some of the items bought, according to a survey by retail consultancy Blue Yonder.
The chief executive of supermarket group Morrisons is in line to pocket a multi-million pound bonus even though the company is expecting sales to fall. Under new objectives David Potts and his fellow directors will not be expected to increase grocery sales over the next three years from the £13billion achieved in the year to February. The previous remuneration scheme dictated that a bonus linked to sales would have been payable if sales rose to £15billion by 2017. But the company has now promised to begin paying out bonuses in 2018 if sales stand at just £12.7billion. The company has already consulted major shareholders about the bonus plan. But the decision is likely to reignite criticisms over executive pay at the retailer. In January, Morrisons ejected its previous chief executive Dalton Philips, who presided over a collapse in profits after being blindsided by the expansion of German discounters Aldi and Lidl. More than a third of investors rejected the last pay plan after it was revealed in March that Phillips would get a £3million pay-off. Potts was allotted 1.3 million shares in April as part of the executive Long Term Incentive Plan, which at the time were worth £2.6million – more than three times his salary. The value of the company’s shares has since dived by a quarter. At the time the shares were awarded to Potts the group did not reveal the targets at which the bonus would be released. A spokesman for Morrisons said last night: ‘These targets reflect that we are operating in an extremely competitive market, where we are reducing prices and running a business with a smaller number of stores as we concentrate on our core supermarkets.’
Sofa and carpet specialist ScS floated on the stock market in January at 175p. By May, the shares had climbed to 220p, and then the company admitted sales had slumped in recent weeks and profits would be lower than expectations. The group blamed uncertainty ahead of the General Election and warm weather over Easter and the May Bank Holiday. Shareholders took a dim view, the stock sank to 152p and stayed at that low ebb over the summer. Over the past few weeks, however, the price has begun to recover as City analysts and big investors have started to believe that the downturn was a blip rather than the beginning of a trend. The stock is now 186p, a level at which it offers good long-term value. The company is making progress, it is expanding steadily and should benefit from the UK’s gradual economic recovery. ScS is generous with its dividends, too, paying out 14p per share in its first year on the stock market. It is expected to maintain that payment this year, putting the shares on a dividend yield of more than 7.5 per cent.
Superdry will launch its highly anticipated new fashion range designed by actor Idris Elba at its Regent Street store on Thursday. The 250-piece range will initially appear exclusively in its flagship London shop as well as at department store Selfridges and through the internet. Next weekend the range will be available in a further 29 stores in Britain and five on the Continent. Elba played Nelson Mandela in the film Mandela: Long Walk To Freedom. He also appeared in the American crime drama The Wire, the BBC 1 series Luther and the film Thor. Analyst John Stevenson at broker Peel Hunt, who has a ‘buy’ rating on Superdry owner SuperGroup, described the range as ‘a more mature, premium line’. He said: ‘These are early days for a range, but it looks likely to develop over many seasons.’ SuperGroup shares have increased 91 per cent in the past 12 months and on Friday closed at 1591p. That values the fashion business at £1.3billion.
Belaguered travel firm Thomas Cook is expected to reveal a fall in turnover and profits when it announces its full-year figures on Wednesday. The group has been beset by problems over the past year, with the terror attacks in Tunisia and the Greek finance crisis both affecting business. A health and safety investigation into the deaths of two children in Corfu on a holiday nine years ago found this month that Thomas Cook put profits before safety as customers were exposed to safety risks because of cost-cutting. Analysts expect revenues to fall more than 5 per cent to between £7.7billion and £8.1billion, with pre-tax profits falling £20million to £162million. Thomas Cook hasn’t paid a divided since 2011. Shares in the firm closed on Friday at 104 pence.
Bonfire Night may be over, but betting giant Ladbrokes is bracing itself for fireworks at its extraordinary general meeting on Tuesday. Irish billionaire and rebel shareholder Dermot Desmond is planning to disrupt in person the City meeting, in which shareholders will vote on a proposed £2.3billion mega-merger between Ladbrokes and its rival Gala Coral. With about 3 per cent of Ladbrokes shares, Desmond hasn’t the firepower to do this by himself. The vote requires only a straight majority to pass. But the rebel investor spent last week in London meeting at least half a dozen major shareholders who could affect whether or not the merger goes ahead. Desmond realises that affecting the vote on Tuesday is unlikely, but he is understood to have been very pleased by the response. His objections to the merger have been known by Ladbrokes management for some time, as he is a commercial partner as well as a shareholder. Ladbrokes bought Desmond’s Betdaq betting exchange business in 2013. As well as airing his views directly to the company, Desmond openly criticised its chairman Peter Erskine at the company’s annual meeting in May. However, none of the board could have predicted that Desmond would, just days before the crucial merger vote, publish an open letter to shareholders demanding they vote against the merger on Tuesday.
They may be overhyped US imports, but Black Friday and its online counterpart Cyber Monday are now as much of the British Christmas countdown as an advent calendar. Bargain hunters wanting to cut the cost of Christmas are hoping for juicy discounts from retailers on Black Friday. This is the first Friday following the Thanksgiving public holiday in the US and kicks off the Christmas shopping season. The annual event – this year it falls on November 27 – earned its ‘black’ label back in the 1960s because shops saw it as an opportunity to get into the black, or into profit. Although Black Friday incorporates both real and virtual shopping, Cyber Monday is a more recent phenomenon with retailers encouraging shoppers to seek online bargains. Last year British shoppers spent £1.39billion on Black Friday alone, according to a report by discount website VoucherCodes and the Centre for Retail Research. That is £2.9million every minute.
William Chase, the potato trader who founded Tyrrells crisps and Chase Distillery, has told struggling suppliers and farmers to stop complaining and warned they have no divine right to exist. His comments follow a warning from farmers’ leaders that British cucumbers face extinction in the face of cheap imports and supermarket price wars. Unlike many in farming, he praised supermarkets for ushering in improvements to agriculture and the food industry, but said that in doing so they gained too much power. ‘They did a fantastic job for farmers and food consumers in the 1980s and 1990s because they cleaned up the whole food market,’ he said. ‘Before it was a real pickle – farmers with straw coming out of their hair loading up spuds with rats running with them. Tesco and all the supermarkets did actually get it all cleaned up.’
The activist hedge fund run by American billionaire Daniel Loeb has launched a major bet against Morrisons, becoming the latest in a long line of funds shorting the supermarket’s shares. Third Point, which manages $17.5bn, has this week built a short position worth almost £20m, or more than 0.5pc of Morrisons’ market value. Morrisons is now one of the most shorted stocks in the FTSE 100, with 20pc of its total shares on loan, according to data from Markit. Short-sellers try to profit from a falling share price by borrowing stock to sell to another investor, only to buy it back later at a cheaper price. Large funds including Lansdowne Partners, Marshall Wace and UBS have this year placed multi-million pound bets on the ailing supermarket losing more ground to the discounters as well as its larger rivals. The supermarket’s share price has fallen 14pc so far this year, and based on its current market value is in danger of being relegated from the FTSE 100 in next month’s quarterly index reshuffle. The grocer has struggled to bounce back from a profit warning in 2014, despite a pledge to spend £1bn on a price war with the other supermarkets. David Potts joined as chief executive in March, replacing Dalton Philips, although quarterly sales have continued to fall.
Bodle will make screens that require no power but can be seen in direct sunlight. An Oxford University spin-out has invented a new smart material that promises to slash the energy required to power a smartphone screen. The creation threatens to shake up the smartphone and wearable device market, because more than 90pc of the battery power in a mobile device is used to illuminate its display. Dr Peiman Hosseini, founder of Bodle Technologies, has secured an undisclosed but “significant” amount of seed finance from the Oxford Sciences Innovation (OSI) fund, the university’s innovation investment arm, which commands £320m in growth capital. The company is also in talks with some of the world’s largest consumer electronics corporations, although they cannot be named for legal reasons. The innovation, based on the technology that is used for rewritable DVDs, uses electrical pulses to create vivid, hi-tech displays that require no power and can be viewed clearly, even in direct sunlight.
Debenhams has angered its suppliers in the run-up to Christmas for the second time in three years after controversially demanding a discount in return for bringing payment terms closer in line with the industry standard. In recent weeks, the department store chain has contacted suppliers asking for a reduction of between 1pc and 2pc on bills in exchange for paying them 30 or 60 days earlier than their current terms. In 2013, Debenhams sparked an outrage after forcing some suppliers to cut their prices by at least 2pc just eight days before Christmas. The controversial move was dubbed the “Santa tax”. Debenhams says that the window for shorter payment terms will last only for a set period between Nov 24, 2015 and May 26, 2016. The scheme will come into effect from this Monday.
Whittard of Chelsea is making the bold move of turning history on its head by selling tea to China.The 129-year-old British retailer is considering opening stores in the country and an online shop on Tmall, the Chinese online marketplace of web giant Alibaba, after a surge in interest from Far Eastern shoppers for its teas. The company, which was bought out of a pre-pack administration in 2008 by Epic, a private equity firm, after the collapse of its Icelandic owner Baugur, was first established in 1886 by Walter Whittard as a tea shop in Fleet Street, London. It was left with 51 shops across the UK after closing down a raft of loss-making stores and is now undergoing a turnaround, led by managing director Mark Dunhill, the former chief executive of jeweller Fabergé. Mr Dunhill said that the chain was now looking at ways to grow the business overseas after spotting sales in foreign markets had jumped.
Radley is planning to push its British heritage with a new marketing campaign as it readies a potential sale of the business. Justin Stead, the former chief executive of the retail group behind Mappin & Webb, Watches of Switzerland, and Goldsmith jewellery chain, has completed a strategic review of the company that will focus on pushing the group internationally and reposition its branding. “We don’t want to offend or lose our loyal female customers, but we might want to introduce their daughter to the brand as a choice for value, design and quality”, he said. The company, which is the best-selling handbag brand in John Lewis and house of Fraser, has recorded a 5pc rise in like-for-like sales during the first six months of the year, while half year sales have risen by 6pc to £30.6m. Radley currently names all of its handbags after London areas, such as Long Acre in Covent Garden, Fleet Street, Clerkenwell and Chelsea.
There's a lot riding on November 27. Many retailers will place massive discounts on big ticket items for one day only, allowing savvy shoppers to get their hands on the latest laptops and newest TV sets for less than usual. But there's an art to getting the most out of your Black Friday and avoiding the chaos that resulted in punch-ups and police calls at several large stores last year.
Survey by trade union Usdaw reveals more than half of shop assistants suffered abuse last year. Shoppers keen to grab a pre-Christmas bargain are being urged to show restraint during this week’s controversial Black Friday shopping frenzy, following concerns over the number and severity of physical attacks on shop workers during last year’s event. The leader of Usdaw, which represents shop and retail workers, has appealed to consumers to exercise calm after reports of “worryingly high” levels of violence and abuse in 2014. The union has welcomed recent announcements by some stores, including Asda and Tesco, that they will scale back their activities on Friday by restricting opening hours or increasing crowd control measures. But John Hannett, Usdaw’s general secretary, said shopworkers still had real concerns that the chaos and violence that marred last year’s events could happen again. “The last two years have seen unprecedented scenes of mayhem in some stores, as bargain hunting turns into a frenzy,” he said. “We have been talking to retailers on behalf of our members, who have responded positively about organising their events to maximise safety and security for staff and customers alike. We also welcome the interest of the police, who have urged retailers to organise these sales events safely.”
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