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UK Retail Briefing - July 2008

ANALYST COMMENT
 REALITY STRIKES – FOR SOME
Consumers in denial
In new territory
Young vs old
Where next?
THE MONTH IN UK RETAILING
 CO-OPS (RETAIL)
Co-op to reward customers as profits surge
 GROCERS
Aldi plans for one UK store opening per week
Asda and Tesco start price war to win back consumers
Iceland to acquire up to 30 Somerfield stores
Julian Graves
…to be sold off?
…receives multiple bids
Morrisons creates family meal for £4
Sainsbury's
…Q1 sales up
…website goes into meltdown
Tesco
…sees Fearnley-Whittingstall move for better welfare for chickens
…challenges Competition Commission
 OFF-LICENCES
Majestic reports 3% increase in FY profit
 CLOTHING RETAILING
House of Fraser implements data synchronisation service
Jacques Vert sees FY profit fall
Matalan sees FY profits double
Moss Bros’:
… Q1 LFLs drop 1.5%
…tie sales up despite tightening market conditions
…Gee family stake acquired by Simon Berwin
…shareholders call for new chairman
Mulberry FY sales defy gloom
Primark
…drops factories that use child labour
…drives ABF growth in Q3
Topshop boss: Things can only get... worse
Zara forces factory closure following BBC exposé
 MIXED GOODS RETAILING
Argos workers prepare to strike at four distribution centres
Instore
…receives bid from Crown Crest
…rejects 'undervalued' £11.4m bid
Woolworths fined £350,000 for contravention of disclosure rules
 MULTI-SECTOR RETAILING
Pessina and KKR to invest more in Boots
M&S
…reports fall in Q1 LFLs
…lets 140 UK brands onto its shelves
…pulls out of Taiwan
 DEPARTMENT STORES
Beales unveils H1 results
Debenhams
…delays paying suppliers amid "deteriorating" trading conditions
…posts results early to quell investors' fears
…denies sales rumour
 ELECTRICAL RETAILING
Kesa reports disappointing FY results
 MUSIC AND VIDEO GOODS RETAILING
HMV reports FY results
Zavvi launches first sale
 CARPET RETAILING
Carpetright publishes FY results, predicts difficult year ahead
 FURNITURE RETAILING
Land of Leather
…to finalise underwritten equity sale
…seeks £15m from share issue
ScS Upholstery
…credit insurer withdraws supplier coverage
…appoints Ernst & Young in move to restructure
…receives takeover approach, shareholders likely to get little
…to be taken over by Sun Capital
…goes into administration
 HOME SHOPPING
Asos
…to launch online discount operation in September
…reports staggering FY results
…prepares to expand overseas
Flying Brands shuts Greetings Direct following US flop
N Brown
…plans German offshoot
…publishes interim trading statement
 SPORTS AND LEISURE GOODS RETAILING
Blacks rocked as insurers scale back on suppliers' cover
Sports Direct profits plummet
 JEWELLERS
Theo Fennell posts FY results, predicting tough trading ahead
 TOYS AND GAMES RETAILING
Game Group posts better-than-expected H1 LFLs
EXECUTIVE APPOINTMENTS
Alexon chief appoints brand boss
Dune to poach Shoe Studio's Egan
Fortnum & Mason's chair steps down
Habitat UK chief resigns in midst of restructuring
Halfords names new chief
Hobbs CEO steps down
Ideal Shopping Direct appoints new commercial director
JJB set for lifestyle overhaul
Littlewoods appoints new group finance officer
LK Bennett to get Jimmy Choo boss?
M&S shareholders expected to vote against Rose promotion
Moss Bros chairman departs
Primark:
…appoints executive to ramp up European expansion
…poaches New Look director
Safeway appoints Dietz as new VP and CMO
Sainsbury's:
…appoints new menswear merchandise manager
…merchandise chief leaves for Tesco
Stylo appoints non-executive director
Tesco Clubcard chief replaced by Janet Smith
Woolworths' CEO resigns
Wyevale pushes the online route
PRODUCT DEVELOPMENT – FRUIT AND VEGETABLES
 ASDA
 ICELAND
 MARKS & SPENCER
 SAINSBURY’S
 SOMERFIELD
 WAITROSE
ADVERTISING NEWS
 NEW CAMPAIGNS
Lisa Snowdon signs up for new Avon lingerie campaign
Co-op to sponsor Pride of Britain awards
Dixons launches activity on Facebook
Littlewoods launches £4m ad campaign
Roulette revamps website
Specsavers to sponsor Fashion Fix
Tesco to merge school programmes
Waitrose first food retailer to sponsor football club
Whole Foods Market launches its first-ever UK marketing campaign
RETAIL ADVERTISING REVIEW
 ADVERTISING EXPENDITURE
Figure 1: Total advertising expenditure by all advertisers (£m), Apr 2004-Apr 2008
Figure 2: Total advertising expenditure by all retail advertisers (£m), Apr 2004-Apr 2008
 USE OF MEDIA
Figure 3: Use of media by retail and all advertisers (£m), Apr 2007-Apr 2008
Figure 4: Use of media by retail and all advertisers (%), Apr 2007-Apr 2008
 TOP 25 RETAIL ADVERTISERS
Figure 5: Top 25 retailers by adspend (£), Mar 2008-Apr 2008
Food
Furniture
Optical retailers
DIY
Other
Nielsen Media research/definitions
RETAIL SALES AND INFLATION
 RETAIL SALES
Office for National Statistics
Figure 6: Retail sales trends: May 2007-May 2008
Figure 7: Non seasonally adjusted % value change on previous year, May 2007-May 2008
Figure 8: Seasonally adjusted % volume change on previous year, May 2007-May 2008
Significant features of May’s ONS statistics
Confederation of British Industry
British Retail Consortium
 RETAIL PRICE INFLATION TRENDS
Figure 9: Annual percentage change in retail price index for selected product groups: May 2007-May 2008
Figure 10: Annual percentage change in retail price index for selected product groups: May 2007-May 2008
Retail prices index
Consumer prices index
British Retail Consortium: Shop price index
SECTOR ANALYSIS – CLOTHING AND FOOTWEAR
 SALES TRENDS
Figure 11: Clothing & footwear retailers: Sales trends, 1998-2008
Figure 12: Clothing and footwear retailers as % all retail sales: 1999-2008 (e)
 RETAIL PRICE INFLATION
Figure 13: Indices of retail prices for product categories (clothing and footwear), Jan 2000-Jan 2007
 SALES BY SUB-SECTOR
Figure 14: Breakdown of clothing retailers’ sales by sub-sector, 1998-2008 (e)
 CONSUMER EXPENDITURE
Figure 15: Consumer expenditure on selected product categories, 1995-2008 Q1, (£m current prices including VAT, not seasonally adjusted)
 CLOTHING RETAILERS: LATEST TRENDS
Figure 16: UK: Leading clothing specialists: Share of all clothing specialists’ sales, 2006
Footwear retailing: latest trends
Figure 17: Where they buy footwear, 2004, 2006 and 2008
SECTOR NEWS REVIEW: CLOTHING RETAILING
 FEBRUARY
Baugur
…revamps fashion management team
Elvi and Base Menswear enter administration
Kinnaird
…in talks to combine with Envy
…then gets Alexon unit for £1
Peacocks sees FY LFLs rise
Primark growth drives AB Foods sales
Whistles to be split off from Mosaic
 MARCH
Debenhams/French Connection hit by Chinese inflation
French Connection profits slump
Moss Bros
…sees shareholder move to scupper Baugur's plans
…as Gee makes shares move
Select collapses into administration
SRG sold to Egyptian investor
Ted Baker FY profits rise 10%
 APRIL
Alexon FY LFLs slump, profit rises
Arcadia
… owner Green expects record year at Topshop
… owner considers selling Bhs
Baugur to raise £430m for retail investment
Ethel Austin to be rescued?
Moss Bros
… stake raised by Laura Ashley, fuelling bid speculation
…posts FY loss
…sees Greenwoods boss pull out of race
…bid abandoned by Debenhams
Next FY profit rise, forecasts "difficult" trading
 MAY
Austin Reed plans expansion, following sales rise
Burberry sees sales growth
Ethel Austin:
…collapses into administration
…receives 40 potential bids
Fat Face signs for eight new stores
Internacionale:
…goes into administration
…sold to unnamed buyer
Jaeger's FY sales rise 16%
MK One
…put up for sale by Baugur
…sold to Hilco
Matalan sets aside £20m for revamp
Mosaic reports FY loss, on sales up 49%
Baugur may sell Moss Bros stake
Next reports drop in Q1 sales
ABF H1 profit boosted by Primark
 JUNE
Ann Summers takes it down a notch
Burberry posts 23% FY profit rise
Fat Face signs for eight new stores
French Connection 's Q1 LFLs "broadly flat"
Laura Ashley posts 7.6% drop in 17-week LFLs
MK One
…goes into administration
…bought by Brafman
Moss Bros
…has £40m offer withdrawn by Baugur
…subject of stake increase by Laura Ashley
…in talks with Berwin & Berwin
Primark prepares to take on Europe
Ted Baker reports 8.4% rise in sales
TJX opens 5 HomeSense stores in UK
 JULY
Things can only get... worse, says Arcadia boss
House of Fraser implements data synchronisation service
Jacques Vert sees FY profit fall
Matalan sees FY profits double
Moss Bros’:
… Q1 LFLs drop 1.5%
…tie sales up despite tightening market conditions
…Gee family stake acquired by Simon Berwin
…shareholders call for new chairman
Mulberry FY sales defy gloom
Primark
…drops factories that use child labour
…drives ABF growth in Q3
Zara forces factory closure following BBC exposé
SECTOR ADVERTISING REVIEW – CLOTHING
 ADVERTISING EXPENDITURE
Figure 18: Total advertising expenditure by clothing retailers, Apr 2004-Apr 2008
 USE OF MEDIA
Figure 19: Use of media by clothing retailers and all retailers (£), Apr 2007 and Apr 2008
Figure 20: Use of media by clothing retailers and all retailers (%), Apr 2007 and Apr 2008
 TOP 10 CLOTHING RETAIL ADVERTISERS
Figure 21: Top ten clothing retailers by adspend, Apr 2007 and Apr 2008
 RETAILER FOCUS
Marks & Spencer
Figure 22: Marks & Spencer, media use by adspend and as share of total, Apr 2007-Apr 2008
Figure 23: Marks & Spencer, top five brands by adspend, Apr 2008
Matalan
Figure 24: Matalan, media use by adspend and as share of total, Apr 2007-Apr 2008
Figure 25: Matalan, top brands by adspend, Apr 2008
Clarks
Figure 26: Clarks, media use by adspend and as share of total, Apr 2007-Apr 2008
Figure 27: Clarks, top five brands by adspend, Apr 2008
New Look
Figure 28: New Look, media use by adspend and as share of total, Apr 2007-Apr 2008
Figure 29: New Look, top five brands by adspend, Apr 2008
Nielsen Media Research/definitions
REPORT FOCUS: WOMENSWEAR RETAILING
A challenging market
Underlying drivers
Outside competition
Total clothing sales
Figure 30: Sales through all clothing retailers, 2000-07
Total sales of womenswear
Figure 31: Retail sales of all womenswear, UK, 2003-08
Total sales of women’s outerwear
Figure 32: Retail sales of all women's outerwear, UK, 2003-08
Impediments to sales growth
On the plus side
Looking to the future
 CONSUMERS: WHERE, WHY AND WHO
Figure 33: Where they buy clothing, May 2008
Where do they go?
Figure 34: Where women have bought clothing for themselves, 2002-08
Marks & Spencer remains strongest for over-45 ABC1 women
Next’s customers getting older
Primark is not just a magnet for teens and twentysomethings
George and Tesco battle it out for family shoppers
Figure 35: Where they buy clothing, by age and socio-economic group, May 2008
Debenhams needs to boost spend from younger women
Matalan’s core budget shoppers could be wooed by supermarkets
River Island taking over from Topshop?
Figure 36: Where they buy clothing, by age and socio-economic group, May 2008
Charity/second-hand shops get a boost
Mail order/Internet polarisation
John Lewis yet to attract younger women
Figure 37: Where they buy clothing, by age and socio-economic group, May 2008
Gap needs to stem the tide
Sainsbury’s has the M&S appeal
Figure 38: Where they buy clothing, by age and socio-economic group, May 2008
Figure 39: What they think of shopping for clothing, May 2008
Special occasions offer an opportunity for all womenswear retailers
Shopping is social and therapeutic
Keeping up with the latest fashion is expensive
Figure 40: What they think of buying clothes for themselves, by age and socio-economic group, May 2008
Are women tiring of fast fashion?
Where are the key basics?
Figure 41: What they think of buying clothes for themselves, by age and socio-economic group, May 2008
Figure 42: Women’s attitudes towards clothing, May 2008
The eco/ethical issue
Figure 43: Women’s attitudes towards clothing, by age and socio-economic group, May 2008
Getting the balance right
Unconfident 45-54s?
Figure 44: Women’s attitudes towards clothing, by age and socio-economic group, May 2008
Clothes shopping enjoyment declines with age
Financially challenged more likely to hate clothes shopping
Figure 45: What they think of buying clothes for themselves, by age and socio-economic group, May 2008
Fashionable forties/fifties are a key opportunity
Young remain keen on fashion, but some lack confidence
Figure 46: What they think of buying clothes for themselves, by age and socio-economic group, May 2008
 PROFILES OF LEADING WOMENSWEAR RETAILERS
Marks & Spencer
Figure 47: Marks & Spencer: Womenswear own-brand portfolio, 2008
Figure 48: Marks & Spencer: Clothing price architecture, 2004-08
Figure 49: M&S: Financial performance, 2005-08
Next
Figure 50: Next: Financial performance, 2004-08
 INDUSTRY INSIGHTS
The market – women’s spending trends
Product categories – what’s selling
Pricing – the trading up movement …
Collaborations with celebrities/designers
 THE FUTURE
On the plus side
Looking ahead

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