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Two weeks in retail - 4th July 2012

With the start of school holidays now little more than a fortnight away there is a sense of things beginning to wind down in the retail market as it heads to what is traditionally one of its quietest periods. But the sector remains as ever, dominated by the inclement weather affecting both sales and sentiment.

Figures from the Office of National Statistics claimed sales volumes were up 1.4% in May and 2.4% compared to the same month a year ago with a £26.4 billion spend between 29 April 2012 and 26 May 2012. Sales values are estimated to have increased by 3.3% compared to the same month a year ago. Meanwhile it showed that store price inflation slowed to 0.9%, its lowest annual rate since October 2009.

The figures were largely attributed to heavy discounting in the department store market as well as a rise in fuel sales.

Indeed figures from PwC show that discounting is having a major effect with retailers forced to slash prices to get shoppers in with nearly nearly three-quarters of stores - 73 per cent - putting on sales last week, up from 40 per cent three years ago, according to PwC. Discounts were also deeper than a year ago too, averaging 47 per cent.

Year end results from discount chain Poundland this week showed that its move to offer more household name brands as shoppers continue to look for value has increased its sales and shopper numbers – up to 4 million a week – with profits soaring by a quarter to more than £40 million. Sales rose by 21.6% to £780 million for the year to April 1.

Affordability was also on the mind of Tesco who revealed it was to begin using the mass of customer data it collects on its customers through its loyalty card programme to begin better targeting ranges online according to customer incomes. Its boss Philip Clarke, said the aim was to treat customers “like friends” by targeting with products they can afford.

Although the discounting is good news for shoppers pockets it does little to boost confidence in the market as a whole.

Indeed last week’s latest figures from the GfK UK Consumer Confidence Index showed that it remained at -29 for June with the bad weather offsetting the effects of the double bank holiday. Confidence in the general economic situation over the next 12 months meanwhile has slipped 5 points to -31, compared to June last year.

The figures are a worrying indicator of the depression in the market with the index having been at -29 or worse for an entire 12 month spell – the worst run in its 40 year history according to GfK.

This means that the summer’s sporting events will now have a more important role to play in boosting consumer confidence than ever. New figures from Visa Europe suggest high street retailers are to enjoy a £210 million uplift in sales and the grocers a £88 million surge as a result of the Olympic Games. It predicts a total £803.6 million increase in consumer spending – including £54.3 million from domestic consumers and £749.3 million from shoppers visiting from outside of the UK. Long term it predicts a £5.33 billion boom up to 2015 as the country basks in post-Games attention, according to the company.

And as retailers look ahead to next season too it seems a merry-go-round of job swapping has already begun with a number of retailer changes announced in the past fortnight. At N Brown major changes are afoot with chief executive Alan White and chairman Lord Alliance both leaving the home shopping group.

At Shop Direct Group former Lombards bank boss Alex Baldock has been announced as the chief executive as from September replacing Mark Newton-Jones while at Morrisons the market was surprised at the news that group finance director Richard Pennycook is to leave this time next year to concentrate, like White, on a portfolio career.

At Bhs it was announced that Richard Price, currently menswear trading director at Marks and Spencer, is to become managing director of the chain and at Kingfisher the group announced the appointment of Karen Witts, chief financial officer of Vodafone, as group finance director, replacing Kevin O’Byrne who becomes divisional chief executive for B&Q.

Meanwhile at eBay, its own increasing importance as a force in UK retailing was illustrated with the news it had poached Sainsbury’s head of online Tanya Lawler who is director for digital and cross channel at the grocer, to take a new post of vice president of UK trading at eBay.

All the candidates are due to start their new roles this Autumn, with the exception of Pennycook and White.

The fortnight also saw Alliance Boots and US pharmacy giant Walgreens announce a strategic partnership that will make it the “global leader in pharmacy and health retailing” with more than 11,000 stores in 12 countries. The US chain is taking a 45% equity share in Alliance by September 1, with the aim of merging the two giants within three years.

It seems times really are achanging in the retail world.

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