The key retail headlines that caught my eye this week.
Debenhams up for sale
Debenhams is reportedly pushing forward with a plan that could see a change of hands after the retailer fell into administration for the second time within a year during lockdown. According to The Mail on Sunday, investment bank Lazard has been appointed to oversee a process that could determine Debenhams’s future and handle any talks with potential buyers. Possible outcomes include the current owners retaining the business, potential joint-venture arrangements that could involve new investors, or a sale to a third party, Debenhams said in a statement.
Hammerson obtains £75m government support
Hammerson has reportedly been forced to receive government support after only 16 per cent of retail tenants paid their rent last month. According to The Sunday Times, the shopping centre giant issued £75 million of debt under the government’s Covid corporate financing facility (CCFF) this month, after the vast majority of its tenants couldn’t pay their quarterly rent due last month amidst financial constraints from the coronavirus pandemic. It comes after Hammerson revealed earlier this month that it had accessed the UK Government’s coronavirus support scheme to bolster its balance sheet, as well as secure some breathing space from lenders. Hammerson’s CCFF support comes after shares in the Bulling and Brent Cross owner have plunged 77 per cent this year to 70p. This values the retail property giant at £537 million. The CCFF scheme entails the Bank of England buying debt issued by larger companies. Hammerson’s rental income has been affected by the moratorium on tenants being evicted if they cannot pay rent, which is due to expire at the end of September. Meanwhile, the firm is slated to reveal its half-year results on August 6.
Arcadia makes plans for restructure
Arcadia Group is reportedly on the verge of launching another restructure for the second time in just over a year, after the retail giant was battered by the coronavirus lockdown. According to The Sunday Times, the Sir Philip Green-owned company recently put forward a cost-cutting plan to the Pensions Regulator. The exact details of the cost-cutting plans are not yet known, but Arcadia reportedly has a deficit of £727 million in its pension funds. The news comes less than a month after the parent company of Topshop, Burton, Dorothy Perkins, Evans and Wallis confirmed plans to scrap 500 jobs from its head office, which houses 2500 staff. Arcadia chief executive Ian Grabiner told staff at the time that the group was continuing to live through an “unprecedented global crisis”, especially after its 550-strong store estate and head office went into lockdown on March 20. While Arcadia’s digital platforms provided much-needed sales revenue, it was not enough to offset the loss of sales from its stores and franchise partners. Arcadia has been reducing its store estate over the last few years but Grabiner said it needed to generate further cost savings and restructuring its head office was one of those initiatives. During the lockdown, Arcadia furloughed all shop floor and almost all head office staff while senior leadership and board members took a 25 per cent to 50 per cent salary cut.
Dr Martins owner joins suitors for Gymshark stake
Permira, which has owned Dr. Martens since 2014, also backs popular dress label Reformation and Swedish fintech startup Klarna. According to Sky News, Permira has recently made a bid for a stake in Gymshark. American growth equity firm General Atlantic Partners, which has investments in Sezanne and Depop, and TSG Partners, whose portfolio includes Revolve and Huda Beauty, are among the other suitors alongside L Catterton and Inflexion Private Equity.
LVMH revenues drop 38% despite sales improving since lockdown ease
Louis Vuitton owner LVMH has seen its sales pick up in June as stores reopened following a government-mandated lockdown. Revenues came in at €7.8 billion (£7 billion) in the April to June period, down 38 per cent on a like-for-like basis. The group increased its prices by five per cent at its flagship brand Louis Vuitton at the end of June — marking the third price increase since March. LVMH’s sales saw an improvement across Asia excluding Japan in the second quarter, with comparable revenue falling by 13 per cent versus a 32 per cent fall in the previous three months. However, due to current travel restrictions which is affecting its duty free stores in airports, LVMH is not raking in revenues similar to 2019 levels. LVMH had temporarily closed stores and halted its manufacturing process as the coronavirus pandemic spread from its key Chinese market to Europe.
Greggs swings to a loss in half year results
Greggs is still struggling to reach the heady heights of last year even after reopening hundreds of sites across the UK since lockdown restrictions eased, the bakery chain has revealed. Last week the foot-to-go retailer said it only sold around 72 per cent of the pasties, drinks and sandwiches that it did in the same seven days in 2019. However, it said it is finding sales encouraging as things slowly get back to normal. Greggs bosses will hope for even more growth as the business contends with a swing to a major loss. Last year, the high street chain made a pre-tax profit of £36.7 million in the first half of the year, but swung to a £65.2 million loss in the six months to July. Sales across the six months were down 45 per cent year-on-year to £300.6 million. This comes despite the fact that life-for-like sales were up by 7.5 per cent in the first nine weeks of the year.
Halfords launches governments bike repair vouchers
The UK Government’s delayed £25 million bike repair scheme has launched today, Halfords has announced. Halfords said customers in England will be able to use £50 vouchers towards the cost of fixing bikes. Up to half a million of the vouchers to help the public “drag bikes out of retirement” were initially due to be issued from June as part of efforts to promote more two-wheeled journeys as lockdown eases.
Selfridges announces 450 job cuts
Selfridges has told staff it plans to cut 450 jobs as it warned annual sales are expected to be “significantly less” than last year due to the coronavirus pandemic. The luxury department store said it would reduce its total workfroce by 14 per cent to cope with the impact of the virus and subsequent lockdown. In a message to staff, group managing director Anne Pitcher warned the recovery would be “slow”, stressing 2020 will be “the toughest year we have experienced in our recent history”. She also said the retail sector was changing even before Covid-19 gripped the UK, and the retailer was now forced to make “fundamental changes”. “As you would expect at such a critical time, we have been carefully examining every aspect of our business – our structures, our costs, our ways of working – from top to bottom, leaving no stone unturned to ensure we are fit for purpose and the future,” Pitcher said. “This has involved reviewing all non-essential expenses as well as pausing projects and initiatives where prudent to do so. “The task ahead is significant and, as we look to reinvent retail and prepare to build back, we will need to go further.”
Retail sales return to meagre growth
Retail sales returned to anaemic growth in the year to July as shoppers made their way back into shops, but there is still a long way to go before normality returns, new figures show. Sales were up by four per cent, according to a closely-watched survey from the Confederation of British Industry (CBI). It came mainly as grocery sales grew, up by around a third in the year to July. Sales of hardware and DIY products were also up, while cards, flowers and stationery sales returned to growth. However, the high street fashion industry is still feeling the pinch. Clothing, footwear and department stores continued to report big falls, although slightly less stark than in recent months.
Game sells its Belong esports gaming arena to Vindex in a deal worth $50m
Game Digital is set to sell its Belong Gaming Arenas to US start-up Vindex in a deal thought to be worth $50 million. Belong Gaming Arenas’ brand and intellectual property will now be owned by Vindex, but Game will continue to own and operate the arenas with an exclusive licence.
Game, which was purchased by Sports Direct and House of Fraser mogul Mike Ashley last year for £52 million, will also see its chief executive Martyn Gibbs join Vindex’s management team as head of Belong Gaming. Since launching in 2017 21 Belong gaming arenas have been opened, often next to or as part of Game’s retail stores. The arenas feature a range of high-end gaming PCs, consoles and accessories like VR headsets, allowing players to try out new games and technology before investing in a purchase. Crucially these arenas host competitive gaming tournaments, marking Game’s attempt to shift its reliance on dwindling hardware sales towards the increasingly lucrative esports sector. Vindex is understood to have big plans for the Belong franchise and has raised $300 million in funding to drive a rapid expansion over the next five years.
Next on road to recovery after weak Q2
Next is slowly working its way back to health following the initial shock of the coronavirus crisis. But full-price sales in Q2 still fell 28% year-on-year, it said on Wednesday, without giving a monetary figure. However, it said this was “much better than we expected and an improvement on the best-case scenario” given in its April trading statement. And it now has more visibility on what it expects for the rest of the year with the firm predicting full-year profit before tax of around £195 million and a reduction in net debt of around £460 million. The firm’s warehouse capacity has come back faster than it had planned, and store sales have been “more robust than anticipated”. As a result, its Q2 sales were significantly ahead of its internal plan. It all meant online sales were up 9% and like-for-like sales in retail stores, since they reopened, were down ‘only’ 32%. The company has modelled three new scenarios based on full-price sales for the year being down 18%, 26% or 33%. The -26% scenario is in line with its internal forecast and assumes that sales in the second half are down 19%. As this shows, there’s still a lot of uncertainty and the company pointed out that it can't give the same sort of reliable guidance that it usually issues. “The duration of social distancing rules, post-lockdown consumer behaviour, earnings, unemployment, and, most importantly, whether there will be a second wave lockdown, all remain unknowable,” it said.
John Lewis and Waitrose to roll out "revolutionary" electric delivery vans next year
John Lewis and Waitrose are dramatically expanding the use of electric vehicles in their supply chain in a move expected to save over 20,000 tonnes of CO2 every year. Waitrose food deliveries and smaller John Lewis orders will be carried out by new “revolutionary” electric vans starting next year. As part of the group’s pledge to end the use of fossil fuels across its entire transport fleet by 2030, it has worked with manufacturers and data scientists to source the most efficient and environmentally friendly vehicles available. By rolling these electric vehicles out across large portions of its supply chain, John Lewis and Waitrose hope to save the equivalent of 2500 UK households’ annual carbon footprint. Not only will these vehicles create far less pollutants, but they also have greater delivery capacity than their fossil fuel counterparts meaning three diesel vans can be replaced by two electric vans. The electric vehicles can also be upgraded as the technology advances, enabling the vans to last as long as 20 years.
Argos scraps catalogue after 47 years as consumers shift online
Argos has reportedly scrapped its catalogue division after 47 years as more customers use the Argos website either to order products for home delivery or collect in-store. In recent years, the retailer had been publishing its catalogue just twice each year as online shopping became preferable to print. The Sainsbury’s-owned chain informed its staff of the move on Wednesday, Daily Mail reported. Argos chief marketing officer Mark Given said the decision to scrap the catalogue “weighed heavily” on him, even though the team had been contemplating it for “some time”. He added that over the past decade, the number of catalogues printed dropped from 10 million to three million. Prior to the Covid-19 pandemic, shoppers were shifting towards online shopping anyway, but the crisis enforced consumers to learn the technicalities of ecommerce as many were forced to shield and stay at home. Separately, Big 4 grocer Sainsbury’s acquired Argos in 2017 after paying £1.4 billion for Home Retail Group. The takeover marked the beginning of the end for the catalogue, with the retailer removing printed catalogues from a small number of stores to test demand.
900 jobs at risk as TUI shutters 166 stores in response to covid19
Multinational travel and tourism company Tui has announced that 166 stores will shut across the UK and Ireland as shoppers shift online due to the Covid-19 pandemic. Tui said the closures will also take place due to the downturn in travel as a result of the ongoing crisis, which has left many people choosing to stay home for the summer. At least 350 shops will remain operating following the store closures, which has currently put around 900 jobs at risk. The company said that it would seek to move 70 per cent of the 900 staff affected to homeworking sales and services roles. Meanwhile, other employees will be encouraged to relocate to the remaining high street stores. The outlets set to close have been selected due to a number of reasons – including local market data, consumer trends and predictions on the future of travel, Tui said. Moreover, at least 8000 jobs are set to be scrapped worldwide, in what is described as “the greatest crisis” the travel industry has witnessed.
M&S expands Mobile Pay Go tech to 310 stores
Marks & Spencer is more than tripling the number of stores offering its Mobile Pay Go technology, allowing users to pay for goods with their smartphone without visiting the till. M&S has made yet another bold tech move as part of its “Never the Same Again” programme, and has expanded the rollout of its scan-and-go technology from 100 to 310 stores. Driven by the shift towards contact-free shopping amid the pandemic, M&S is aiming to bring its Mobile Pay Go technology to shoppers outside of London, where it has largely been focused since launch. Over 10,000 new customers have used Mobile Pay Go since March, and now customers in Belfast, Aberystwyth, Falkirk and Dover will have access to the technology. “As part of our Never the Same Again programme, we’re accelerating the pace of our transformation – and that includes creating digitally connected stores that are fit for the future,” M&S director of stores Helen Milford said. “This rollout takes our increasingly popular Mobile Pay Go technology nationwide for the first time, allowing more customers to enjoy a seamless checkout-free experience through the M&S app. “With more customers starting to return to the workplace, this provides a quick and convenient lunchtime solution – making it easy to pop in, grab your items and be on your way.”
ScS encouraged by reopenings as orders skyrocket 92.2%
ScS has experienced a high level of orders to almost the same level as they were prior to the impact of the Covid-19 pandemic. The furniture retailer said that since May 24, orders had increased by 92.2 per cent compared with the previous year. However, store sales plummeted by 92.5 per cent during the lockdown period as stores temporarily shut and consumers had to stay at home. The increase in order levels came as a result of “pent-up” demand, with both online and in-store revenue increasing since the reopening of its distribution network. For the 52 weeks ended July 25, ScS has seen sales of £268 million, compared with £333 million in the previous year. “Whilst it is too early to provide clarity on the outlook for the weeks and months ahead, the group is encouraged with its trading performance since reopening on May 23, 2020,” ScS said. “ScS is a resilient business, with a strong balance sheet, coupled with a flexible cost base, and is well positioned to navigate these difficult circumstances and maximise opportunities as and when they arise.” ScS said at the time of reopenings that it had been put it in a good position to survive the coronavirus pandemic.
Plastic bag usage drops 59% since 2019
New research has found that the use of plastic bags in England has dropped by 59 per cent in just a year as shoppers reused their own bags. Sales of single-use carrier bags have dropped by 95 per cent in main supermarkets since introduction of 5p charge in October of 2015, according to the Department for Environment, Food and Rural Affairs (Defra). Over the past year, grocers including Asda, Marks & Spencer, Morrisons, Sainsbury’s, the Co-op, Tesco and Waitrose sold 226 million bags, which were 322 million fewer than in 2018-19. Defra found that the average person in England now buys just four bags a year from the main supermarket retailers, compared with 10 last year. The 5p charge was introduced in England to help reduce plastic waste after seven major supermarkets witnessed consumers’ plastic bag usage rise by by 200 million in 2014. The charge applies to all retailers that employ more than 250 staff. However, the government is currently discussing whether to extend this to all businesses while also increasing the minimum price to 10p per bag.
M&S opens new-format clothing and home store
We’ve become more used to retailers closing stores than opening them in recent periods, but on Thursday, M&S said that it has opened a brand-new store as part of its plan to create an estate “fit for the new world”. And unlike many other locations that have put food as the core focus, the company said it's a complete Clothing & Food store. It’s located at Nottingham Giltbrook, which is easily accessible to family customers in both Derby and Nottingham. The area was previously the biggest population in the UK not served by an out-of-town M&S store. This is M&S’s second major opening that includes Clothing & Home this year and a third opening is taking place in Maidstone next month at Eclipse Retail Park. The store has been seamlessly integrated with the M&S App, making it work with the Sparks loyalty programme and its checkout-free technology Mobile Pay Go. Overall, it has been set up so digital technology makes it easier for customers to shop, with features such as customer wifi. And the Click & Collect desk is integrated with M&S.com.
John Lewis Partnership announces new strategic direction
The plans, outlined in a letter to the retailer’s 80,000 partners from chair Dame Sharon White, include a “rebalance” of the store estate, a focus on home and nursery, a “digital-first” approach in department stores and the provision of Waitrose products “through other routes” than shops.
Key themes of the week - Retail sales / Bikes / Innovation
Key article of the week - Argos scraps catalogue after 47 years as consumers shift online
Key question of the week - Will local covid19 restrictions and local lockdowns impact national consumer sentiment?