Attention to Retail

The post-mortem on the Christmas period is coming in and it does not make pretty reading. No-one was expecting rosy trading results, but a rise of 0.3% on a like-for-like basis was worse than most analysts predicted. When new stores are taken into account, the growth is 2.3% - still below an average prediction of 2.9%.

Individual stories vary (and the Guardian has a cute way of monitoring incoming reports here) but the one that has captured today's headlines is Marks & Spencer's announcement that sales fell by 2.2% over the third quarter's trading which, at time of writing, has wiped 20% off their share price to leave them at 398p - below the 400p Philip Green was looking to pay in 2004.

Retailers are now looking to the Bank of England to cut interest rates at its meeting this week to stimulate spending. The Bank will probably not do more than a quarter-point cut owing to continuing inflation risks which may lower borrowing costs, but will probably not be enough to shake the public mood that battening down the hatches is the best thing to do at the moment. Retailers may well take the same approach with their expansion plans - particularly in light of the fact that the rise in food prices (set to continue) is inflating the figures of the market as a whole. There is 14 million sq ft of retail scheme floorspace set to come online this year - how much of it will be occupied is another question

Yesterday's interest rate cut was welcomed by retailers and consumers alike and comes as the industry faces another anxious Christmas trading period. Last year's jitters, in the end, turned out to be sighs of relief as sales figures ended up being surprisingly positive. This year however, Experian footfall figures for November show shopper numbers on the high street, reflecting the start of the Christmas rush, down 2.9% on 2006, indicating the seasonal boost is later than expected. This tallies with ONS figures for October showing a 0.1% slide in sales. The cut in interest rates should make shoppers loosen their purse strings a little more, but a combination of early discounting and the the low rate of inflation once food prices are discounted (electrical goods, a major investment at Christmas, are barely registering a 1% rate) plus a disappointing first weekend in December means that the industry will struggle to show satisfactory year-on-year growth.

Yesterday's preliminary report from the competition commission on supermarkets has managed to leave the investigated being happiest with the outcome and those hoping for a tough verdict pretty disappointed.

Much of the liberal commentariat has been united in reaction at the commission's verdict, believing it to be a bad thing (Guardian, Independent) whilst a note of 'read the small print' is sounded by the Telegraph and FT and Robert Peston at the BBC. Richard Hyman, also in the Telegraph, points out that the supermarkets provide a service that enables other aspects of our current lifestyle. The supermarkets are generally happy (Waitrose, Asda, Morrisons and unspoken commission target Tesco), others happy as long as further action gets taken (the NFU, BRC, the British Property Federation, Spar and the Federation of Wholesale Distributors) and the small stores are plain unhappy (FSB).

Continue reading "The commentary on the commission" »

Developments afoot in the hedonistic, drug-fuelled rollercoaster that is rock'n'roll. Rock'n'roll retailing, that is.

Virgin has sold the Virgin Megastore chain to a management buyout team called Zavvi Entertainment Group for an undisclosed sum. The total sum paid is not the only question remaining - Who has funded the buyout? What's their strategy? (Zavvi has already announced plans to open new stores in Liverpool, Belfast and Bristol over the next year.) Will they continue to push towards selling more DVDs and computer games, reducing their reliance on physical music sales? What is the future for download service Virgin Digital, set to be rebranded? I have no idea, but it will be interesting to see if Zavvi's expectations match the sales reality.

I would start this entry with an 'illustrative' picture of a woman in Ann Summers lingerie, as seems customary in the media when reporting on this retailer or for that matter any lingerie retailer or even such an unprepossessing subject as permitted use of warehouse space (EG 04/08/07 for the original article with helpful photographic example). But I won't, for I think the story can speak for itself without such gratuitousness. Also the security settings at the office don't let me look at the Ann Summers site (and I'm not going to google for pics after the fallout from the "Ronald McDonald" + "sex pest" search).

Continue reading "Summers Not So Hot" »

A recent rent review arbitration between Standard Life Investments and Homebase regarding Homebase's unit at the Ladymead Retail Park in Guildford has had the side effect of setting a new record rent in DIY retail of £35 per sq ft, beating the previous mark of £27.50. This is likely to be a one-off though, as rents generally in this market have stagnated over the last couple of years owing to a lack of demand. Ladymead is an exceptional case though, being the only retail park in the area and having open A1 consent. Property Week highlights that some retailers, including B&Q and Sainsbury's, have begun to buy in leases where rent reviews are due. B&Q has also embarked on a remodelling programme at several of its stores to downsize and sub-let to other retailers.

Two prominent mixed-use developments in Birmingham had significant pieces of news over the last week. The Birmingham Alliance, comprising Land Securities, Hammerson and Henderson, is set to sign a development agreement with the council for the £600 million Martineau Galleries scheme. The council has been looking for a development partner since 1998 for the scheme, which will comprise 2.9 million sq ft of mixed-use development linking the Bullring shopping centre to the Eastside regeneration zone.

Continue reading "Midlands' Mixed-Use Mixed Times" »

Pub sector update: Mitchells & Butlers confirmed yesterday that plans for a £4.5 billion property joint venture have been suspended. The pub company has been in talks with financiers to finance a 50:50 joint venture with Robert Tchenguiz's R20 investment vehicle, involving approximately 1,300 pubs and £240 million of rent. City analysts had previously been skeptical about the likelihood of such an arrangement, as I mentioned in an earlier post. The company said: "The Board believes that it is now not possible to execute the joint venture due to the current disruption of the debt markets which has resulted in a significant widening of credit spreads." Nils Pratley details the context and potential pitfalls here.

As an adopted South Londoner and regular frustrated user of its roundabout, I was pleased to see the long-delayed announcement that Lend Lease has finally been selected as the preferred developer for the redevelopment of Elephant & Castle. The Australian developer, in a consortium with Elliot Lipton’s First Base and Oakmayne Properties, had beaten shortlisted rival St Modwen with Salhia Real Estate. The masterplan for the 170-acre site, designed by Ken Shuttleworth’s MAKE and released by the council last August, aims to create a sustainable "non-car parking destination", with 6,000 homes and 800,000 sq ft of retail.

Continue reading "An Elephant Never Forgets, It Just Takes A Really Long Time" »

And we're off! The Financial Times reports today that Delta Two has offered 610p a share for Sainsbury's, valuing the supermarket group at about £12 billion. Sainsbury's has not made a statement yet, but the family or management are understood not to support the bid. This would be consistent with their position since the bid by CVC was rebuffed in April. The FT says "Delta Two is now considering two options: making a full-blown takeover bid or using its shareholding to force a restructuring of Sainsbury’s property portfolio." This would require the support of Robert Tchenguiz who has a declared 5% stake in the grocer, although this is likely to be closer to 10% with derivatives. That support would almost certainly be forthcoming given his previous vocal support for an Opco-Propco arrangement that would return cash to shareholders.

Continue reading "Buy something new today" »