Sunday Retail News Roundup
Break up Unilever says top 10 shareholder, Nation of shoppers need new growth model, AO World’s boss, Unilever top brands shake-up, Deloitte and Ladbrokes tax scheme, Metail clothes fit technology, Franklin & Sons sales sparkle, Travellers secretly enticed by Heathrow Airport ambassadors, Waterstones accused, City Unilever blessing, Business rates final chapter.
Unilever’s food production began in Holland in 1872 in a small margarine factory. Half a century later, the margarine business merged with Lever Brothers, a British soap maker, to form Unilever. One of Unilever’s top shareholders has called for the consumer goods giant to be broken up in the wake of the failed takeover attempt by US rival Kraft Heinz. The top 10 investor said the maker of Ben & Jerry’s ice cream and Lynx deodorant should sell off some or all of its £10.6bn food empire to “enhance the value” of its underperforming business. “They need a full appraisal of everything”. Unilever chief executive Paul Polman has come under pressure from investors since his dramatic rebuffal of the £115bn bid. Kraft Heinz, controlled by Warren Buffett and 3G Capital, the private equity firm led by the Brazilian billionaire Jorge Paulo Lemann, walked away from the deal last weekend. It had been preparing to talk directly to Unilever’s shareholders until it became apparent that the board of the FTSE 100-listed company would go to extreme lengths to block the bid. A hostile bid was still backed by 3G Capital, but not by Buffett. Polman announced a “comprehensive review” last week promising to boost profit margins this year to the top end of expectations. Review to conducted by Unilever’s board, results announced in April.
Can the consumer continue to be economy’s mainstay during 2017; will imports and exports respond to weak pound; are businesses already throttling back on investment and will they continue to do so?. Can Britain move to a growth model more successful and sustainable?. The London School of Economics’ Growth Commission published a second last week. The second release of gross domestic product figures for the final quarter of last year was bitter-sweet, confirming expected upward revision of growth to 0.7% for the quarter, which is above-trend, but showed a surprise downward revision of growth for 2016 from 2% to 1.8%. Given the uncertainty of last year, 1.8% growth was perfectly respectable, exceeding most of G7, though just below Germany. But was driven, to an embarrassing extent, by consumer spending. Economy grew by 1.8%, consumer spending rose 3.1%. Consumer accounted for all of Britain’s growth and a little more last year, 1.9 percentage points. Government spending also contributed 0.2 points of growth. Circle is squared by the fact that business investment fell, subtracting 0.1 points from growth. Net trade, exports minus imports, acted as a drag on growth, 0.4 percentage points. Investment and export-led growth it was not. Last year’s £2.7bn fall in business investment was first since 2009, confirming investment has been persistent weak spot for the economy. GDP is 8.6% higher than peak prior to the 2008-9 recession, while GDP per head is up 1.8%. Overall investment in the economy, including business investment, was lower last year than in 2007. What about exports? Net trade boosted growth in the final quarter of 2016, but may have been distorted by trade in gold, according to the Office for National Statistics. Export volumes were down on a year earlier, with imports up, part of consumer spending accounted for by retail sales.
John Roberts, founder of online electrical retailer AO World, who set up the business after making a £1 bet with his mate in the pub, is moving aside to a specially created “executive founder” role. His more conventional No 2 will now run the business. It’s a familiar script for the City, entrepreneurs viewed as phenomena who should be seen but not heard. Fund managers who claim they love risk-takers often go cold on the relationship after a few bad quarters. When Roberts brought AO to market it was his entrepreneurial zeal and ambition that fund managers claimed had persuaded them to part with their cash. The company sold washing machines and fridges, but the Roberts growth story was such that investors priced it at 100 times earnings — the Amazon of white goods. Three years on, the shares have more than halved closing on Friday at 147.15p. Not every entrepreneur is suited to running a public company — Sports Direct’s Mike Ashley being one. Yet if the stock market cannot deal with colourful tycoons such as Roberts, pension funds and investments will be much poorer over longer term. Remember, Steve Jobs never stuck to the rules either.
Mail on Sunday.
Consumer goods giant Unilever is on brink of unveiling a cull of top products including Flora margarine and Bertolli spreads. A sell-off of the household names could come as early as April as the group battles to reassure its shareholders after last week’s takeover drama. Shareholders endured a roller-coaster ride after US giant Kraft Heinz launched a £115billion approach a week ago only for Unilever to flatly reject the bid. Just two days later Kraft Heinz announced it was walking away. Investors, surprised by the speed of bid rejection, are demanding an urgent shake-up, prompting Unilever to pledge action within weeks. Unilever’s spreads division, which includes I can’t believe it’s so Good ... , known until last month as I can’t believe it’s not Butter, is set to be at the top of the ‘for sale’ list. The division has already been split off into a separate subsidiary which makes annual sales of £2.5billion or about a quarter of Unilever’s total food sales.
Accounting giant Deloitte and Ladbrokes have been savaged by MPs after a court ruled against a complex tax avoidance scheme hitting the bookmaker with a £70million bill. The arrangement was thrown out by the Upper Tribunal of the Tax and Chancery Chamber after a long dispute with Revenue & Customs. The Revenue’s director general for customer compliance, Jennie Granger, said: ‘Ladbrokes would have been better off just paying the tax but instead they pursued this lengthy legal dispute. The bookie gambled and lost when the odds of success could not have been lower’. The scheme, devised by Deloitte, involved Ladbrokes' subsidiaries Travel Document Service and Ladbroke Group International, an artificially manufactured fall in the value of shares in one company used to create a loss in the other company for tax purposes. But Revenue & Customs argued there had been no real economic loss.
A British technology firm that enables fashion shoppers to ‘try on’ clothes online expects to digitise up to 200,000 garments for retailers this year, up from 40,000 last year. Metail co-founder Tom Adeyoola had the idea to create ‘3D’ versions of online shoppers in 2008. Technology allows shoppers to create models of themselves by inputting their body measurements. Selected items of clothing are then superimposed over the models, and can be viewed from 360 degrees. Launched commercially in 2012, the firm worked with the likes of Tesco and Warehouse early on. Metail can now deliver website model imagery for way cheaper than existing methods, allowsing a come back to the UK market.
Adeyoola says ‘We’re very focused on intellectual property. We’ve got eight patents and 23 pending. We’re sub $10 now’. The company, which has raised more than $20million (£16million) in funding over the years and has a team of about 60, including 14 PhDs, is about to do a deal with Korea’s third-largest fashion group, Kolon.
British tonic and mixer brand Franklin & Sons entered its 30th market less than two years after exports began in October 2015, reported a four-digit percentage rise in sales in the past year and invested in further facilities in Chesterfield, Derbyshire, to cater for growth. Established in London in 1886, the company had been mothballed but was acquired by independent drinks firm Global Brands and revived in 2015. From this month, the range will be sold in six new territories, including the UAE, Norway, and Colombia. The company expects to add eight new products across its range of mixers and soft drinks this year and beyond. Steven Perez, chairman of Global Brands, said: ‘The export arm of our business already accounts for 30 per cent of total sales and is growing rapidly. This is due to the global premium spirits and gin renaissance, the rise in popularity of artisanal, natural mixers and the Franklin & Sons range’s UK positioning.’
Travellers are being secretly enticed into spending money at Britain’s biggest airport by so-called Passenger Ambassadors, who are supposed to be there to help people find their way through the terminals. An undercover investigation into the ambassadors at Heathrow has revealed that they are paid to promote special offers and promotions across the airport. They are set targets of up to £4,000 worth of sales a day, earned by directing passengers into shops, rented by brands that include Burberry, Cartier and Prada, and are paid bonuses for hitting the targets. Heathrow employs about 250 ambassadors, who wear distinctive purple uniforms and assist travellers once through security. The most successful claim to generate £10,000 in sales a day.
Book giant Waterstones has been accused of ‘dishonesty’ after opening quaint unbranded high street shops that appear to be independent. The move has sparked claims that the company is sneakily avoiding the backlash against the growing homogenisation of Britain’s high streets. But the smaller shops have been such a success that Waterstones is keen to launch more. Southwold Books, which occupies a Grade II listed building in the Suffolk town, is one of three incognito stores to have opened. The others are in Rye, East Sussex, and Harpenden, Hertfordshire.
The City has given its blessing to a dramatic break-up of consumer goods goliath Unilever, which could see the food arm that makes Hellmann’s mayonnaise and Knorr stock cubes spun off into a new £30bn-plus company. The Anglo-Dutch giant has launched a far-reaching strategic review just days after its independence was threatened by an audacious £115bn takeover approach from Kraft Heinz. The company is giving serious thought to a spin-off of its food business into a separate listing. The move would give greater visibility between the higher earnings in its booming home and personal care division, which includes Dove soap, Lynx, Persil and Domestos brands, and its more sluggish food division.The group’s personal care division accounts for about 60pc of the business and sales are growing at a rate of 4.2pc. Its food division has sales of €10bn and is growing sales at less than half that rate, as consumers shun established packaged food brands in favour of healthy or artisanal products.
Bookshops could be wiped off the high street as a result of changes to the business rates system, the industry has warned the Treasury. In a letter to David Gauke, chief secretary to the Treasury, the Booksellers Association said many bookshops will be crippled by rate increases and described the tax as “archaic”. It also criticises the lack of tax paid by multinational online retailers such as Amazon and called on the Treasury to give bookshops the special status of “community asset value”, reflecting the benefits they bring to the local area, which would allow them to qualify for a 20% discount on their business rates. The letter cranks up the pressure on the government to take action on business rates in the budget next month. Business rates payments are changing because of a new revaluation of Britain’s property, the first in seven years, which takes effect from April.
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