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Retail FreeView - Healthy vines support Majestic Wine

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This week's highlights: Majestic has reason to toast its performance, while Ocado’s gloom over the Jubilee and its uncertainty about the Olympics produced a big drop in share price. Meanwhile in the …

This week's highlights: Majestic has reason to toast its performance, while Ocado’s gloom over the Jubilee and its uncertainty about the Olympics produced a big drop in share price. Meanwhile in the value fashion space we have H&M growing sales and opening more stores in Greece, while New Look is shuffling debt and closing stores in the UK. For every winner there is a loser; this is now the climate for retail.

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  • 1. June 28, 2012 Verdict Retail FreeView A synopsis of retail news and opinion About us Verdict is a retail information Retailers are producing contrasting performances across different sectors and geographies this specialist within the Informa Group. week. Majestic has reason to toast its performance, while Ocado’s gloom over the Jubilee and its With almost 30 years experience, uncertainty about the Olympics produced a big drop in share price. Meanwhile in the value fashion Verdict publishes unrivalled space we have H&M growing sales and opening more stores in Greece, while New Look is shuffling independent analysis. We provide a complete picture of the UK and debt and closing stores in the UK. For every winner there is a loser; this is now the climate for retail. increasingly the international retail Maureen Hinton, Verdict Practice Leader arena, helping retailers, manufacturers, service suppliers, analysts, and consultants to fully exploit opportunities within the “Carpetright looks to be emerging from a period of turbulence in industry. the UK with quarterly LFLs returning to growth for the first time for two years, albeit against weak comparatives. While investors will Latest analysis be disappointed that profits were at the lower end of its estimates, John Lewis | Verdict Company Briefing that it is producing a profit, given Allied Carpets was sold in a pre- pack administration for the third time in three years and United Global Department Store Retailing | Carpets is reviewing its store portfolio, is a credible performance.” Verdict Channel Report Matthew Walton, Verdict Analyst, in Retail Week, June 26 Footwear Retailing in the UK | Verdict Market Report “While Debenhams remains rightly cautious for the rest of the year, particularly in relation to the impact of the Olympics, having seen Sears | Verdict Company Briefing a positive uplift from recent UK celebratory events we expect Waitrose Food & Grocery | Customer Debenhams’ strong offer to resonate well with shoppers visiting Insight London, particularly as it makes headway with refurbishing its UK Consumer Satisfaction Index 2012 Oxford Street flagship.” Honor Westnedge, Verdict Analyst, in Retail Week, June 28Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
  • 2. June 28, 2012 Verdict View Healthy vines support Majestic Wine By Andrew Stevens, Retail Analyst Majestic has posted another year of solid growth as it scale and buying power of a larger retailer with the Majestic opened its 181st store in late May, moving it continues to dominate specialist wine sales. In a personal service and product knowledge of a local one store closer to its ambitious target of 330 stores in market that has been increasingly difficult for independent wine merchant, enabling it to defy the the UK. While the company has said that it is confident specialists, Majestic has managed to use its strengths in current pressures that are forcing wine specialists out of in its abilities to reach this goal it is highly likely to be a customer engagement alongside a knowledgeable the market. long-term objective rather than a priority for the workforce to secure loyal customers. While its goal of business, especially when its focus remains on 330 UK stores seems ambitious, Majestic is working on Service has long been one of Majestics stronger customer service. Wine is a product that retails well improving its online proposition. points. It employs most of its staff through its online, as has been proven by many competitors and management training scheme and gives them the wine subscription services. While Majestics store-based Majestic Wine has again managed to produce healthy opportunity to work towards widely recognized services such as free tastings and its instore events will growth this year, with total sales increasing by 8.9% qualifications from the Wine and Spirits Education Trust. mean that a strong and potentially larger store and UK retail like-for-like sales increasing by 2.6% during Not only does this equip staff with professional levels of portfolio will remain core to the Majestic proposition, a the 53 weeks to April 2, 2012. Majestic has published product knowledge, it encourages them to engage multichannel focus will allow the retailer to challenge several key performance indicators to support this better with customers; this level of service is difficult to its competitors on multiple fronts. growth, including an 11.1% increase in customer achieve within supermarkets, which are largely unable numbers (to 568,000), a 1.6% increase in the average to provide specialist wine advice. The future looks bright for Majestic. It recently reduced transaction value (to £128), and an 8.3% growth in its minimum online order from 12 to six bottles, mirroring transaction numbers (to 2.2 million). All of this seems Engaging closely with its customers is a priority for the a successful move made for instore purchases in 2009. impressive, especially when we take into account the retailer. During the 53 weeks to April 2, 2012, 37,000 If Majestic can replicate the estimated 12.9% increase aggressive pricing strategy of Majestics grocery customers attended events hosted in stores across the in customer numbers and 14.6% rise in transactions – competitors. Majestic portfolio. These events are free to attend and with only a 4.0% decline in the average transaction enable Majestic to showcase both its range and the value – reported following the reduction in the Wine retail, and alcohol retail in general, has been product knowledge of its staff. Majestic also recently minimum instore purchase, it is likely to be toasting yet difficult throughout the downturn. While sales of launched its first multimedia advertising campaign in another successful year. Moreover, online contribution alcoholic drinks are estimated by Verdict research to London, the initial results of which are reportedly to overall sales has been stable at 10.0% for two years have grown by 34.0% between 2002 and 2012, over encouraging. By enabling its customers to engage with now; a move to make online purchases more the same period sales via off-licenses and tobacconists its stores, products, and people via instore tastings and accessible is sure to increase the channels share of declined by 36.6%, indicating just how tough it is to events, Majestic is able to build a solid relationship that revenues, as well as introducing new customers to the operate against those retailers with scale. However, is unparalleled in supermarkets. retailer. Majestic has a unique proposition that combines theWeb: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
  • 3. June 28, 2012 News Review Following a property review in August 2011, New Look plans to close Clothing & Accessories approximately 60 stores over the coming years – of which seven closed in By Kate Ormrod 2011/12. However, whether or not this will help to stem the flow remains to be seen. The dominance of Primark in the value clothing sector in the UK is H&M keeps faith in the Greek market unlikely to stop in the short term, despite New Look’s efforts to promote its Despite the current financial turmoil taking place in Greece and the value for money credentials. Furthermore, New Look has a far larger store uncertainty surrounding its future in the eurozone, Swedish fast fashion estate than its competitor – the company has 600 stores in the UK, retailer H&M has stated that it still sees potential for growth, highlighted by compared to Primark’s 156 – and should look to address the issue of store the recent opening of its 24th store in the country. Although the company closures sooner rather than later in order to minimize costs. has stressed that it is prepared for the worst, it has reason to be optimistic, as it recently posted a 22.0% sales increase in the country in Q2, ending May 31, 2012. Furthermore, it is not alone in having faith in the Greek market, as Food & Grocery only last week electricals retailer Dixons pledged to stay in the country. By Cliona Lynch However, the fact remains that expanding in Greece at this current time is a particularly high-risk strategy. Unemployment in Greece hit a record high Ocado share price falls, despite 12% sales growth earlier in June of 21.9%, resulting in low consumer confidence and even Online grocer Ocado has posted a sales growth of 12% for the 24 weeks to lower disposable incomes; thus, regardless of whether the country stays in May 13, 2012 to reach £332.3m ($518.3m), along with operating profit of the eurozone or reverts to the drachma, discretionary spending in Greece £14.9m ($23.2m) and a pre-tax profit of £200,000 ($311,960). However, will be severely restricted for the foreseeable future. despite this growth, the company’s share price fell by more than 20% in the 24 hours following the announcement, due to a gloomy prediction from the New Look announces debt reshuffle following poor results company’s CEO, Tim Steiner, in which he stated that the company had not Struggling UK fast fashion retailer New Look has announced its full-year benefitted from the Queen’s Diamond Jubilee in the same way that bricks results for 2012, posting a decline in like-for-like sales of 5.7%, a fall in total and mortar grocers had, and he could not predict the effects that the sales of 2.0%, and a pre-tax loss of £54.5m ($85m). At the same time, the Olympics could have on its service. Furthermore, the company faces a company also revealed that it has amended its existing borrowing of £1.1bn mounting threat from Waitrose, which is increasingly encroaching on ($1.7bn), extending the start date for repayments from 2013 to 2015, Ocado’s market share, due the similarity of their offerings – Ocado sells providing the company with, according to CEO Alistair McGeorge, Waitrose-branded goods – and the regions in which they operate. In light of “breathing space to invest.” this increasing competition and the uncertainty surrounding the company’s H2 trading period, Ocado’s record of having never made a full-year pre-tax profit looks set to continue.Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
  • 4. June 28, 2012 News Review Tesco to tailor its online offering Home & DIY UK grocery giant Tesco has announced plans to personalize its online By Matthew Walton shopping experience by using data collected via its Clubcard loyalty scheme; for example, promoting its Finest range to higher spending customers. The initiative follows a successful trial run that saw sales of IKEA requests permission to enter India mattresses – the item used for the test – increase by 10%. The scheme has IKEA has asked the Indian government for permission to invest €1.5bn attracted some negative attention, as it has been perceived in some ($1.9bn) in 25 new stores in the country over the coming years. The plan to quarters as creating “a class divide” among Tesco customers; however, increase the group’s worldwide portfolio from its current 298 stores is likely to such segmentation makes a great deal of sense for the retailer, and does come up against complications. Despite the recent relaxation in the rules not represent Tesco simply attempting to split its customer base into rich and regarding foreign investment in the country, no global retailers have moved poor. The company is looking to re-engage with consumers following the fall forward with expansion into the Indian market. In addition to regulatory in sales it recorded over the second half of fiscal 2011/12 and the first uncertainty surrounding 100% foreign ownership, IKEA will have to overcome quarter of fiscal 2012/13, and the disappointing performance of its Big Price the government directive that 30% of inventory must be sourced from small- Drop campaign, and it should be able to rebuild relationships at both ends scale local industries, which is made particularly difficult given the poor of the financial spectrum by promoting its value proposition to price- transport infrastructure in place. While no timescale has been laid out, if the conscious consumers and the quality of its produce to higher spenders. application is successful, IKEA will not only have the opportunity to grow into a retail sector estimated by Verdict research to be worth £552.5bn ($886.9bn) in 2011, but will also act as a test case for other multinational Electricals & Entertainment retailers looking to invest in India. By Matthew Rubin Carpetright’s profits dive eBay snatches Sainsbury’s digital boss UK underlying operating profit at Carpetright has taken a nosedive from Tanya Lawler has been poached by eBay to take up a newly created £17.8m ($27.7m) to £2.8m ($4.3m) in the year to April 28, 2012. Life-for-like position of vice president of UK trading. Lawler, who will take up the position sales were down 0.2% for the year, which would have been worse but for a later in 2012, has held her current position of director for digital and cross strong second half performance, where sales rose by 1.9%. Total group channel at Sainsbury’s for five years, and has previously worked at Argos turnover fell by 3.1%; however, net debt was drastically reduced from and Capgemini. The appointment will put her in charge of developing £46.6m ($72.5m) to £19.1m ($29.7m). The overriding performance was in line eBay’s customer strategy and driving growth in the retail sector, including with expectations, as trading conditions continue to force retailers into building on current partnerships such as Superdry and House of Fraser. heavy discounting to attract shoppers. The retailer has also acknowledged eBay’s vice president of marketplaces UK and the rest of Europe, Claire the shift in its customer base using the Internet to make purchases by Gilmartin, believes the UK is one of its fastest-growing European markets, shutting 49 stores, with more expected to close in the coming year. reflecting the importance to the pureplay retailer of selecting someone with vast knowledge of the UK retailing industry.Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk
  • 5. June 28, 2012 News Review By continuing to stay profitable, Carpetright is managing the challenging conditions admirably, and not ignoring the need to downsize. With demand likely to pick up in the coming years, it is well placed to rebuild lost margins and increase profitability. Stay in touch Contact us to see how we can help John Lewis to push for click and collect Tel: +44 (0)20 7551 9664 The managing director of John Lewis, Andy Street, has announced that the Email: enquiries@verdict.co.uk department store is in talks with various unnamed parties to arrange local click and collect services. Online John Lewis shoppers can already arrange Share your views with our analysts and the Verdict community through our to collect their goods from their local Waitrose; however, the new goal is to social media channels. create a tie-up with a retail chain that has wide coverage across the UK. LinkedIn The new strategy is part of Street’s belief that UK retailers will need no more Twitter than 70 outlets to reach every customer in the country, instead targeting sales via shops, online, mobile phones, and through click and collect. Any Sign up to our emails for news from the UK and across the globe. potential click and collect tie-up for John Lewis would not only be great Verdict FreeView news for its middle-class shopping base, but with less need to build further department stores, costs can also be controlled during less stable trading conditions.Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk

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