UK Department Stores 2011: The department store channel proved to be resilient in 2010 and is forecast to grow again in 2011, despite disposable incomes coming under significant pressure from rising prices of basic commodities including food and fuel. We forecast that sales via department stores will grow by 3.9% in 2011, outpacing the whole retail sector for the third consecutive year.

1. UK Department Stores 2011
UK Department Stores 2011: The department store channel proved to be resilient in 2010
and is forecast to grow again in 2011, despite disposable incomes coming under significant
pressure from rising prices of basic commodities including food and fuel. We forecast that
sales via department stores will grow by 3.9% in 2011, outpacing the whole retail sector for
the third consecutive year.
Buy Now: UK Department Stores Market
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Features and benefits
Benchmark your performance against competitors, through comparing market shares, sales
densities and profitability to other department store players
Uncover how inflation pressures will challenge your business performance and what is
required to justify charging more for product
Achieve revenue growth by identifying the most successful product sectors and utilising
space for the best performing categories
Highlights
VAT and sourcing cost rises will cause department store prices to increase by 1.2% in 2011,
only the second year they have done so since 1998, which will affect customers’ willingness
to buy, subsequently bringing 2011 sales volume growth down to just 2.7% from 5.8% in
2010
Department stores are planning a new wave of growth having put expansion plans on hold
during the recession. However, figures show that retailers with high operating margins tend
to be those who have avoided opening space. Retailers may need to reassess their approach
to new investment to establish whether it really adds more to sales than to costs
Online sales have now reached the point where their growth is accounting for a larger and
larger share of turnover, impacting performance in physical stores. We believe retailers will
need to start a review of their physical store requirements to decide which are the most
profitable formats, layouts and product ranges to serve their future needs
Your key questions answered
Who are the top performing department stores in terms of UK turnover, profitability and
market share?
How are my competitors expanding through new store formats within the UK and how are
they increasing their international presence?
What are the benefits of own-brand ranges and which of my competitors have them?
Table Of Contents
Executive Summary
Main conclusions
[Missing title]
OVERVIEW
Key findings

2. Department store market growth slows to 3.9%
Increased VAT and sourcing costs create inflation
Market leader M&S recovers 0.1 of a percentage point to reach a 31.6% share
John Lewis adds the same amount to make 21.0% market share
Debenhams loses share as it focuses on own brand and margins
Harrods and Selfridges outperform at the top end
TJ Hughes struggles
Store expansion may hurt profits
Online kills instore sales growth in UK
International growth increasingly tempting
MARKET ANALYSIS
Market definition and methodology
Department store market spending trends
Department store sales growth weakens in 2011
Tourism continues to help London department stores
John Lewis drives the market in 2010
M&S just ahead of the market in 2011
Department stores outperform retail sector
Inflation intensifies
Home related spending in decline
More attractive as leisure destinations
New ranges boost homewares share but not sales
Clothing & footwear exposure increases
Smaller gain in health & beauty
Rising share of troubled furniture & floorcoverings market
Electricals remain a problem
Space growth slackens
Expansion moderated by caution
Department stores gain in non-food and retail overall
COMPANY DATA ANALYSIS
Department store market shares
Top 10 department stores market shares
Winners and losers
Upmarket stores gain the most since 2006
Key operating statistics
Selfridges leads on profitability
Sales growth
Beales buys growth with stores purchase
Operating margins
Selfridges profits rocket
Space growth
Greatest increase by Beales
Sales densities
Harrods space most productive
Space allocation

3. OUTLOOK
Key issues
Inflation vulnerability
More focused on three categories
Volumes suffer
Value communication is key
Staff training also important
Store expansion
Pace of growth down in 2010/11
John Lewis expansion derailed by recession
but may restart: shopping centres are key
Cut down formats
Format flexibility
Expansion and profitability
Growth in a time of uncertainty
Is space growth damaging profitability?
Exceptional cases
Sales density key to profit
Optimism bias
Reasons for underperformance
Organic store expansion may have cost dangers
New assessment needed of expansion returns
Selfridges the example
Development of own brand
Own brand grows further
Creating brands rather than labels
Impact of online
Three market leaders dominate
Overseas sales investment
Store only sales set to flatline
Impact on store development
Effect on store operations
Covering for non-availability
Longer run impact
Tourism and Olympics
Rapid recovery after the recession
Tourists drive luxury sales
London not the only destination
Olympics prospects muted
International development
Wholly-owned stores return to favour
Acquisition or store openings?
M&S prefers store opening
Franchising the core model
Market positioning
Older, more upmarket segment dominates
Summary and strategies for success
Inflation challenge
Store expansion may be costly

4. Own brand drives profits
Online impact on stores
Targeting tourism
International expansion
Market positioning
BEALES
Adds scale with Co-op acquisition
Recent key events
Takes total store portfolio to 32
Proposition
Financials
Store acquisitions and VAT effect flatter sales
Reduces losses
Space
Acquisition makes Beales a more significant player
Space allocation
Market share
Outlook
Takes a risk with acquisition
DEBENHAMS
Strong own label helps in tough UK market
Recent key events
Own brand, multichannel and international main growth pillars
Proposition
Financials
Acquisition of Magasin du Nord boosts sales
Online speeds ahead with multichannel services expanding
UK sales growth comes to a standstill
Space
Presses on with expansion programme
Space allocation
Market share
Outlook
Opportunities in own label, online and internationally but also risks
FENWICK
Increasing competition could threaten profitability
Recent key events
Makes the most of existing stores
Proposition
Financials
Sales growth grinds to a halt
Profitability recovers
Space
Static store numbers
Space allocation
Market share

5. Outlook
Needs to review strategy as competition grows
HARRODS
New owners continue to invest
Recent key events
Concentrates on developing core business
Proposition
Financials
Sales continue double digit growth
Second highest margin in the sector
Space
Densities highest in the sector
Space allocation
Market share
Outlook
New owners promise future stability
HARVEY NICHOLS
Beauty standalones may protect UK growth
Recent key events
UK beauty stores and international growth
Proposition
Financials
Sales revive in 2010
Focus on building margin
Space
UK to see return to expansion
Space allocation
Market share
Outlook
Beauty Bazaar zeros in on greatest demand
HOUSE OF FRASER
Further own label push needed to boost margins
Recent key events
Strengthens own label and reduces debt
Proposition
Financials
Menswear leads sales increase
Slow recovery in operating margin
Space
Growth on hold for now
Space allocation
Market share
Outlook
Further margin improvement needed’

6. JOHN LEWIS
Online impact will grow
Recent key events
Major investment in new stores plus online growth
Proposition
Financials
Margins recover in 2010/11 but 2011/12 will be much harder
Space
At Home stores add to portfolio
Densities reach new peak
Space allocation
Market share
Outlook
Online plays major role
MARKS & SPENCER
Reinforces brand and expands internationally
Recent key events
Bolland pursues evolutionary change
Proposition
Financials
Good performance across year especially for international
Space
Steady rise in floorspace
Space allocation
Market share
Outlook
Gradualist long term approach but consumer climate will get harder
SELFRIDGES
Tourist spend to drive sales
Recent key events
Refurbishment and new brands keep stores exciting
Proposition
Financials
Healthy growth thanks to tourist spend
Profit margin highest among Top 10
Space
Maximises use of existing space
Space allocation
Market share
Outlook
Selfridges appears a late adopter in some areas like online but hard to argue with high
margins
TJ HUGHES
Calls in administrators as it struggles to overhaul product, sourcing and stores
Recent key events
New owners and new management fail to turn around performance

7. Proposition
Financials
Tough retail conditions hit performance
Slim margins disappear
Space
Possible store closures on the cards
Space allocation
Market shares
Outlook
Merchandise and stores both need major shakeup
APPENDIX
Financial Statistics – VAT
Trading Profile
Key Operating Ratios
Physical Development
Abbreviations
Methodology
Further reading
Ask the analyst
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