UK retail results
PageGroup shows referendum jitters while Asos bucks the UK retail trend with strong sales and housebuilder Galliford Try expects postive results. FT Opening Quote is your early Square Mile briefing, with deputy companies editor Matthew Vincent. You can sign up for the full newsletter here.
Last year, retailer N Brown hiked the interest rate it advertised to customers who buy on credit. The move was a fairly large one, from 44.9 per cent to 58.7 per cent, the highest advertised annual percentage rate for any equivalent retailer, but it didn’t get much attention. The London-listed company, which owns brands like Jacamo, J D Williams and SimplyBe, didn’t shout about it in filings or on calls with analysts. Which might be because nothing had really changed — N Brown had previously been advertising the wrong rate to customers.
Remember Sir Terry Leahy, driver of the Tesco retail steamroller for more than a decade? New stores, lower prices, chug chug chug. Well, we wonder if we should be paying more attention to what he is up to these days, after Kingfisher, owner of the B&Q DIY retail chain, offered profits on Thursday that the market and analysts judged disappointing.
Debenhams, a UK department store chain that was once the plaything of private equity, has been back in the market buying up its own stock. Debenhams plc (the “Company”) announces that on 9 October 2013 it purchased 375,000 of its ordinary shares of 0.01p each through Citigroup Global Markets Limited at an average price of 102.56 pence per share. The highest and lowest prices paid for these shares were 104.00 pence per share and 101.20 pence per share respectively. The purchased shares will all be held as treasury shares.
We know that one day UK high streets will be windswept vistas of pubs, charity shops and discount grocery stores, with the odd place to pick up your online purchases from Asos. On the way to that utopian dream, however, a great deal of disruption lies. And Citi have spotted that for the likes of Tesco and Morrisons, it looms sooner rather than later.
The WSJ talks of “iPhone-like hype” around the next Samsung smartphone model. And Bloomberg notes that in China, iPhones are way behind. It must be that time again! Yep, Apple reports its first-quarter earnings at 5pm EDT, so feast your eyes on this five-year chart in the meantime :
We are going to lay the blame for this — right up front — on the idiotic Financial Markets and Services Act. (Or at least the utterly dumb implementation of such by Lord Sants and colleagues.) The “markets abuse regime” has led us to…where do we start? Okay, with this chump:
FT Alphaville loves futuristic research reports. Here’s Espirito’ Santo’s Caroline Gulliver with a look at what we can expect from “shopping in the future”. Some of the points echo our own beyond scarcity and multiple currency/payment method thoughts very closely… such as the idea that quality will become ever more important to customers while pricing will increasingly become a function of who you are and your relationship with the retailer. One price will fit fewer and fewer people. While supply chains and inventory holdings will respond ever more dynamically to demand in order to stay competitive.
Tesco is set to announce that it will create 20,000 jobs in the UK in the next two years, equal to seven per cent of its current British workforce, the WSJ reports. Plans to open new stores and upgrade existing ones in Britain account for the hiring increase. Tesco’s renovation bid comes as its share of the market dipped to its lowest since 2005 last month, and following an unexpected UK profit warning in January, Reuters reports. Tesco will take on more unemployed young people and also expand its apprenticeship programme to provide 10,000 places, says the Guardian. Tesco’s plans to offer more fresh food will however be met by a store expansion strategy by Wm Morrison this week, and a possible shift by J Sainsbury towards fresh produce, the FT says.
The FT reports that US retailers recorded better than expected sales in February as positive economic news and warm weather prompted an early start to spring shopping. New fashion items at Gap helped generate its first sales growth in seven months as overall retail sales grew 6.5 per cent from a year ago among the 20 or so companies that report monthly figures. The gain was the biggest since June 2011, according to Retail Metrics. Sales at Target, the mass-market discounter, rose 7 per cent and Macy’s, the department store, posted a 4.6 per cent increase.
Apple has finally named a successor to Ron Johnson as head of its retail store operation, choosing John Browett, chief executive of the British electronics retailer Dixons, the FT reports. Mr Browett will join in April as senior vice-president of retail, reporting to Tim Cook, Apple’s chief executive. Mr Johnson was named last June as the new chief executive of JC Penney, the US department store chain. His successor has been chief executive of Dixons since December 2007 and will take responsibility for Apple’s retail strategy and the expansion of its retail stores worldwide. “Our retail stores are all about customer service, and John shares that commitment like no one else we’ve met,” Mr Cook said in a statement. According to the Wall Street Journal, the company considered a range of executives from the US and Europe, including Steve Cano, an Apple retail executive who was one of Mr. Johnson’s lieutenants.
JC Penney’s new chief executive has torn up the retailer’s past practice of putting on hundreds of sales a year, promising more control over pricing, the FT reports. Ron Johnson, a former Apple executive, said in a presentation that said that JC Penney unveiled 590 promotions last year. Customers had ignored them “99 per cent of the time,” he said. In addition to a three-tier pricing structure, Johnson also promised to restructure the firm’s 1,100 stores, in a fresh bid to turn the corner on its flagging battle with department store rivals, the WSJ says.
Tesco has been boosted by the revelation that Warren Buffett’s Berkshire Hathaway group spent about £500m raising his stake in the embattled retailer after its shock profit warning last week, the FT reports. A regulatory filing showed on Thursday that the US billionaire’s investment vehicle increased its stake in the world’s third biggest supermarket chain by sales from 3.21 per cent to 5.08 per cent over two days – January 12, the day Tesco issued its first profit warning in 20 years, and January 13. The move by Berkshire Hathaway, which controls investments in listed entities worth about $67bn, is likely to be taken by some other investors as a sign of confidence in Britain’s biggest supermarket chain by market share.
Tesco issued a profit warning after suffering a disappointing Christmas in its UK heartland and pledging to invest more heavily in wooing customers, reports the FT. In a shift that could signal a turning point in the evolution of the UK retail sector, it also said it was planning to open fewer very big hypermarkets in the UK and prioritise online sales more. Tesco shares slumped as much as 15 per cent to 326.5p in early morning trading in London on Thursday after its sales update. The share drop was the biggest one-day decline since September 1988, according to Bloomberg. Philip Clarke, chief executive, said the company had been outgunned by rivals’ promotions in the UK over the holiday period. “We chose in those critical six weeks not to hit customers with a blizzard of coupons but to invest mainly in cutting prices,” he said. For more see FT Alphaville.
India’s cabinet has agreed to open up its retail sector to allow 100 per cent foreign ownership of single brand stores in India, in a bid to reassure global investors that the ruling Congress government is committed to pushing through key reforms, reports the FT. The liberalisation move will allow global retailers such as Ikea, Adidas, and Marks and Spencer to operate in India without an Indian partner. The breakthrough decision follows a serious setback for investors last year when Indian politicians blocked the entry of foreign supermarkets such as Tesco and Walmart in the country’s lucrative retail sector. The prospect of foreign groups being allowed to own up to 51 per cent of supermarkets triggered protests, both on India’s streets and inside its fractious parliament. Opponents feared the move would undermine small traders and farmers, destroying jobs and businesses.
KPMG could announce the sale of Blacks Leisure through a pre-pack administration deal as early as Friday, says the Telegraph, adding that unnamed City financiers believe the entire company will be sold to a single buyer in January. Mike Ashley, Go Outdoors, and Edinburgh Woollen Mill were said to be interested in buying the outdoor retailer. Meanwhile the FT says retail sales are finally beginning to pick up after slow pre-Christmas trading. Sales at John Lewis, the department store chain, rose 20.7 per cent year-on-year in the four days to the end of Wednesday. John Lewis’s figures compare with a period affected by snow disruption last year, and the group is widely expected to outperform the high street. Supermarket chains are also seeing strong demand in the final few days before Christmas. However some analysts said a last minute rush would be insufficient for many retailers to offset slower sales to date.
Retail sales on Black Friday rose by their biggest margin since 2007 to hit a new record, the FT reports, while online sales grew even faster, according to initial estimates. Store sales on the frenetic shopping day that follows the US Thanksgiving holiday expanded by 6.6 per cent from the previous year to $11.4bn, according to ShopperTrak, which said the number of people in stores rose 5.1 per cent from last year. The National Retail Federation said traffic had been “incredibly strong”. But concrete data are still unavailable for how many items the shoppers bought and whether they snapped up anything other than the heavily discounted goods. However retailers are heartened by the response and are planning more discounts throughout the key retailing period, says the WSJ. The earlier opening hours may have helped attract greater numbers of young customers, says Bloomberg. It also isn’t clear how much retailers had to spend to attract customers. The FT noted last week that free shipping has been biting into profit margins. Increased advertising costs may also come into it, as well as stores extending credit through “layaway” sales.
Retail sales on Black Friday rose by their biggest margin since 2007 to hit a new record, the FT reports, while online sales grew even faster, according to initial estimates. Store sales on the frenetic shopping day that follows the US Thanksgiving holiday expanded by 6.6 per cent from the previous year to $11.4bn, according to ShopperTrak, which said the number of people in stores rose 5.1 per cent from last year. The National Retail Federation said traffic had been “incredibly strong”. But concrete data are still unavailable for how many items the shoppers bought and whether they snapped up anything other than the heavily discounted goods. However retailers are heartened by the response and are planning more discounts throughout the key retailing period, says the WSJ. The earlier opening hours may have helped attract greater numbers of young customers, says Bloomberg.
Tesco posted a 12 per cent increase in first-half profit on Wednesday as Asian growth and reduced US losses offset what the supermarket group described as the most challenging UK trading conditions in a generation, as well as setbacks at its banking arm, the FT reports. Pre-tax profit from continuing operations in the 26 weeks to August 27 was £1.88bn, up 12 per cent from a year earlier. Sales rose 8 per cent to £31.8bn. Trading profit at Tesco’s UK supermarket arm – by far the biggest part of the group – rose 5 per cent to £1.27bn on sales that rose 6 per cent to £21.2bn. However, when the contribution from new stores was stripped out, sales were down 0.5 per cent for the half, excluding petrol sales and sales tax fluctuations. This like-for-like sales decline accelerated over the period, hitting 0.9 per cent in the second quarter after a drop of 0.1 per cent in the first quarter. Sales of “non-food” items such as electrical goods were particularly weak.