Retail spending in December rose by 3.9% year on year. Month on month sales rose by 19%, 2% up on 2011.
£3bn was spent on Boxing Day, one of the best shopping days ever, but sales arrived later this year than before. Supermarkets were up 6.5% and online spending rose by 12%. Luxury spending was down overall by 1.4% but not In London.
Some 40% of Christmas sales were reported as being done on line and now accounts for 10% of all retail sales. With 92% of UK adults having a mobile phone, the opportunity to compare prices is readily available to most shoppers. The trend is shown in those hardest hit sectors, namely music sales being 14.9% down while internet sales were up by 15.1% ; Games were 26.4% down and internet sales 7.07% up; Book sales 11.4% down and 20.3% up on the internet.
House of Fraser’s online sales rose by 48% in the 6 weeks to 5 January and with a company 6.3% rise in overall sales. John Lewis overall sales were 15% up year on year and they say 25% of all their sales are now from the internet.
Despite there being 194 retail administrations in 2012, 18% more than in 2010. (Deloitte),Sir Phillip Green of Arcadia told retailers to “stop moaning and raise your game.”
Retailing is doing well as failed brands are being replaced in the High Street although one in ten High Street shops stands empty (BRC report).
Mega centres continue to perform well, such as Stratford City and spend was up by 12% year on year, while all others towns were down by 2%. Dwell time fell by 5% outside the major centres where dwell time is unchanged.
Shopping Centre development has fallen by 90% in 2012 from 2011 the lowest since the 1960’s but some recovery is due when in 2013 with some 2 M sq ft will be built.
Deals are still available from landlords for taking retail space out of London but the best positions are holding up well with still strong competition. Large space is particularly in demand from mamy budget retailers and food retailers.
London
London remains a different story to the rest of the UK and continues to flourish and climb in value and retail demand and for example £50M was spent in London’s West End on Boxing Day, despite the tube strike, with the Chinese and Middle Eastern customers. Footfall was up by 20% according to Experian.
The West End though has not affected Westfield’s Strafford City, which is now achieving over 40M shoppers annually the highest of any UK centre.
John Lewis sales were up 70% on last Christmas on the same day and they made £150M in the week before Christmas while Selfridges had 3000 customers within the first hour on Boxing Day spending £1.5M.
Luxury markets continue to grow with £3bn being spent a year focused around 42 Streets and a 1000 brands. With 2/3rds of the top international brands are already in London and as a result rents are expected to continually climb as a result maybe to £1500 Zone A in Bond Street, £1000 in Sloane Street and Regent Street to £700. They rose by about 20% on average in the last 5 years but some shopping streets have shown much larger growth.
To illustrate this Tom Ford has moved his base from Milan to London with offices now in Bond Street which will serve to downgrade Milan for international catwalk fashion shows and Longchamp are opening in Regent Street having paid up to £2M premium it is rumoured for the lease. Limited opened a Victoria Secrets flagship in New Bond Street as well as in Westfield Stratford City.
H&M new luxury, at affordable prices brand, & other stores, is searching for a Regent Street store.
Other movers and shakers were Dr Martins, who are back on the opening trail having taking a new store in Carnaby Street with 18 town requirements for 2013 of 1000 sq ft with 800 sq ft ancillary. Primark continue their rapid expansion now with 242 stores, having opened their second store in Oxford Street, at the Tottenham Court Road end of 141,000 sq ft, now destined to expand by another 40,000 sq ft in anticipation of Crossrail station opening in 2018. Their turnover was £3.5bn with a 13% increase in UK floor space.
Even the Rolling Stones will be opening in Carnaby Street soon in a fashion store.
Pringle moved out of 141 Sloane Street having before been in Bond Street and is looking for a new store in the West End. Symthsons took its Sloane Street shop at £430 Zone A 30 ft Zones.
Bally have resited into a better pitch in New Bond Street but have failed to sell their existing larger store so far nearby.
Paul Smith sales rose 3% with a new flagship planned in Bond Street.
Despite the list of foreign groups wanting London still driving up prices Superdrug are after 1750/4000 sq ft in London close to tube stations. Maplin are keen to expand in London from 1500/ 3000 sq ft.
Any UK retailer without a sharp offer will be eventually substituted by landlords in London with the pressure from international retailers wanting to claim the best locations.
The UK
Fashion sector
Fashion still dominates the retail expansion market in the UK as seen by Debenhams profits being up 4.2% in September and planning to open 17 new stores.
Generally though there are a lot less retailers in the market than there were 20 years ago and the domination in expansion is coming from foreign brands like H&M. The outdoor sector expansion is almost getting to saturation point in some towns though.
The shoe sector is doing well but is now a very polarised market with a good brand identity being important for survival. In London Oliver Sweeney to Jimmy Cho at the luxury end to Kurt Geiger and the designer end are expanding and doing well to Clarks who dominate the mid-market sector.
Fashion generally is holding up with Ted Bakers sales were up 15% and Jo Jo Maman Bebe are after 14 more shops of up to 1500 sq ft.
Value jewellery is continuing to expand with the like of Warren James looking for more shops.
The White Company is after 2550/4000 sq ft stores to add to their 37 in London and across the country and Antropologie are after 3 stores in the South.
Greenwoods with 86 stores want 1600 sq ft. across the UK from Bangor to Swindon and MenKind wanting more pop ups of 1500 sq ft in top 75 towns as do Cotton Traders. Urban Outfitters too are after 6500/10,000 sq ft in London and the south and some northern towns.
Cath Kidston profits rose 19% on the back of opening 333 stores last year to 85 and Anya Hindmarch with 17 outlets in host stores and two stand alones rose 16%. Fred Perry with 20 UK shops showed £34.2m pre-tax to March owned by Japanese’s Hit Union in London. £52.8 M sales were in the UK.
Non-Fashion sector
The value market is expanding the most rapidly outside London Oakham “money here right for you” are expanding in 800 sq ft shops across London suburbs to the unbanked communities.
Poundland, 99p stores and Poundstretcher, B&M are all on a massive UK expansion of 4500/10,000 sq ft units, snapping up every large store in sight with often 2 or 3 competitors per town . US private equity groups are after buying a chain.
The betting sector is continuing to grow with Ladbrokes are after 600 sq ft shops and Betfred with 1350 stores and sales of £3.5bn.
The Beauty sector continues to expand with Marco Akldany hairdressing (7 shops) wanting more 500/1000 sq ft shops in London and Biothecare Estetika (10) want to double their size in London.
Charity shops still are growing with BHF taking larger store electrical and furniture shops. Their latest 6000 sq ft opening will be in North Finchley.
Food Sector
The other leaders in expansion in the UK remain the food sector from Coffee Shops to take always to supermarkets.
Café Nero already with 500 cafes continues to want more in London of 750/1400 sq ft or 500/750 for the express format. Just Falafel, with 23 restaurants, are after one a week in London.
Pret a Manager are taking major sites everywhere backed by huge sales as shoppers get more take away orientated while Greggs, Muffin Break and Costa and Starbucks continue to expand.
McDonalds, Burger King, KFC and Costa Coffee are all after drive thrus throughout the UK.
There is no let-up of the expansion of the Coop, Tesco, Sainsbury’s and Morrisons for in town sites of up to 4000 sq ft, as out of town expansion becomes more and more difficult.
Failures and downsizers
Last year saw JJB Sports, Clinton Cards, Pumkin Patch, Peacocks, Blacks Leisure, Comet, Aquascutum, Past Times, Julian Graves, Allders, Allied Carpets La Senza, Peacocks, Barratts and Game all go down.
It was not all bad though with Game going to Op Capita taking half the stores, Peacocks by Sun Capita and Clintons by American Greetings. JJB and Comet have not found buyers.
Herbal Inn had 7 shops on the market and Blockbuster 10 stores.
Esquires coffee shops went into a pre pack administration at Christmas loosing 10 cafés out of some 30 units but managing to persuade their landlords to keep them it seems in the rest. Thorntons did better despite a profits collapse to £850,000 from £4.3M as sales picked up and are targeting at closing 120 shops.
HMV are reported to be about to breach banking covenants with a drop in sales of 29.2% to October last and a US vulture fund is reported as being after them.
Aurora Fashions with still 1250 stores owned by the administrators of Kaupthing the Icelandic Bank (Coast, Oasis and Warehouse) was in the red despite sales rising 4.2%.
Argos will be closing about 50 of their 740 stores as they try and refocus on the internet.
French Connection still struggles on saddled with 13 loss making stores. Sales fell 9.5%.
Jack Wills and Aubin Willis have 10 shops available but they seem to be doing well as a group still.
Monsoon had some 15 non performing shops for sale throughout the UK.
Jessops having nearly gone under in 2009 when they were saved by their Bankers finally went into administration this week with their 192 stores.
And retailing changes in 2013?
Turnover rents may disappear with growing internet sales as a landlord cannot claw back such sales in practice.
And what happens to franchising where the internet accounts for a large proportion of sales in the High Street?
We see large brand retailers cutting back on allowing franchisers to open more shops so as to not compete against the company’s own internet sales. Refunds from the internet into the same brands High Street shops, which may be owned by a franchisee rather than the franchisor, will cause too many problems for franchised stores.
Franchising will remain strong in such sectors as food to hairdressing.
Internet access will have to trade alongside the High Street shop with all stores having ipads or the equivalent to show customers what can be bought and offer a “click and collect service” to the High Street shop-otherwise High Street shops that don’t have this facility will fail. Prices will have to harmonise between the Internet and High Street otherwise this will not work.
There will be a continued fall in High Street shops in dry cleaning, games, off licences and mid-market fashion without a strong brand presence, along with multi brand stores like Sting on Regent Street which is to a local fashion retailer selling multi brands labels, as success is very much related only now to well promoted brands now in the UK.
Town centres will have to adapt to fight the mega shopping scheme competition as will the too many “cloned town centres” we have in the UK, being copies of an adjoining town centre with all the same retailers. Shopping Centres will have to adapt to the local needs and ethnic mixes.
Outlet shopping will also have to be more focused on up market brands and move away from a “bargain basement” image. Polo Ralph Loren for example, has more outlets than shops and stock now is often this seasons older stock, rather than last years.
Outlet centres, to survive, will have to become destinations in their own right, not just dumping grounds for old stock for mid to low end retailers.
And of some of the retailers we think should be watched Hamleys should prosper under French ownership as they have a unique product and more style than Toys R US where many of the latter’s goods can be bought on the internet. As such we see little future for the latter.
Companies we see a disappointing future for are Jaeger and Aquascutum as revived by the new owners, unless they reinvent themselves and Holland and Barratt as how do they retain their market share against supermarket competition?
Bang & Olufsen probably will not survive against the internet and have just announced anyway 125 shop closures in Europe. We see little future for value jewellery brands like the Signet Group and their High Street brands such as H Samuel as their shops look dated and the product is too expensive for the value market.
Cycles and all products associated with them will continue to boom post the Olympics though by contrast.
Food competition will continue to grow in a small store concept in town lead by all the supermarket brands, as will coffee shops and fast food both in town and in drive thrus, as we all eat out more.
