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Two weeks in retail – 13th February 2013

The last fortnight’s news has been dominated by doubts over the integrity of our food chain after a horsemeat scandal, which started with value burgers but has since extended across a number of retailers and products. The latest revelation - that some samples of Tesco’s Everyday Value Spaghetti Bolognese contained up to 60% horsemeat.

It is likely that tests will now extend into all processed beef while there have been calls from the industry for testing of other meat products to check that what is being sold is what is actually on the food label.

Not only will the crisis impact current sales, but could change customers perceptions about value products at a time when retailers have been doing their utmost to win customers loyalty through purse pleasing value offerings.

It’s not been a good fortnight either for former Bauger boss Jon Asgeir Johanneson – who once headed the Icelandic company that had significant stakes in the likes of House of Fraser, Hamleys and Oasis – after he was charged by Iceland’s Supreme Court for tax evasion in excess of £1.5 million for the period between 1998 to 2003. The Icelandic company filed for bankrupty four years ago next month.

Meanwhile the administrators of HMV have announced the closure of a quarter of the store portfolio over the next couple of months as stock runs out after it revealed the closure of 66 of the chain’s 220 store portfolio following its administration in January. Its CEO Trevor Moore, who took over the chief executive role six months earlier, was also made redundant by the administrators.

There was better news for the company previously run by Moore when it was revealed that a surprise suitor had emerged from the wings to buy the Jessops brand with the purchase by a number of buyers that included Dragons’ Den star Peter Jones. However none of the closed 187 stores were purchased.

There was some positive news for retailers after the BRC/KPMG Retail Sales Monitor suggested the strongest growth in sales for more than a year in January. Total sales in the UK were up by 3% compared to a 2.1% rise the January before.

Meanwhile the like for like retail sales value rose 1.9% year on year. Online sales increased 10.1% compared with January 2012, when they had risen by 11.3%. The results were despite the snow that hit in January.

The BRC also revealed that shop price inflation had fallen to its lowest level in January for nearly three years. The level of shop price inflation fell to 0.6% in January – down from 1.5% the month before and the lowest level since November 2009.

Although good news for consumers it suggests an even tougher time for retailers with the fall driven by clothing and electricals.

BRC director general Helen Dickinson said poor demand meant retailers had to slash prices.

“Weak demand for clothing necessitated big price cuts. Clothing prices were down 7.7% on the year before, their biggest drop in the six years of this survey. But clothing suffered its worst sales fall since last Easter,” she said.

Inflation figures were less optimistic from the Office Of National Statistics today which said that annual inflation grew by 2.7% in January 2013.

The figure has been unchanged for four months in a row – the longest time there has been no change.

The ONS said that the biggest upward pressures came from alcohol and air fares however like the BRC measure it suggested that clothing provided one of the largest downward pressures on the figures.

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