Regent Street London Christmas 2013
The UK GDP growth rate has doubled and should be about 2.3% this year and should expand by 3% pa to 2016. Employment jumped to 30M.
Retail expenditure should rise by 5.5% to 2018 according to Verdict. The beneficiaries they say will be food, health & beauty, electricals and homewear especially, as the housing market surges ahead. Clothing and footwear will increase by 22%.
Mid-market will be squeezed by budget retailers. The defined brands will be the winners.
Retailers gave major discounts before Christmas this year with footfall down by 3.6% in the first week of December. However spending on the internet has had a large impact on High Street sales with shoppers often looking often for the best deals before buying.
Multi brands except in Department stores are finding it difficult to compete and apart from John Lewis, Selfridges and Harrods which are a more traditional Department stores, rather than simply a large fashion store so we wonder long term if department stores have the same future as they once enjoyed. Certainly retailers that rely mainly on Christmas sales are vulnerable as shoppers look for discounts and will no longer spend before the traditional January sales as they used to.
John Lewis, the bellwether of UK retailing achieved total sales 7.2% up on 2012 sales, with 31.8% coming from their website which was 22.6% up from 2012.
UK Internet online sales now account for 20% of all non-food spending and the trend is growing. Retailers, in order to survive have to have a good internet business and offer a single strong brand.
Asos the online retailer thinks the average clothes retailer with 250 shops will have to downsize by nearly 60% due to the internet. However its link with Primark failed mainly it is thought returns of such low priced merchandise made it unprofitable.
Value seems to be driving non luxury shopping and even food with Primark taking from the more mid-market stores such as M&S.
Aldi was up 31% up on market share & Lidl increased its share too.
Waitrose was up 7% though whereas the larger group sales of the big four were flattening.
Certain brands are performing very well like JD Sports, Next and Super Group.
However the chief executive of Debenhams has said the high street was a “sea of red” in the run-up to Christmas due to heavy discounting after the department store chain issued a major profits warning. Its margins were hit by offering heavy discounts on clothing in December and pre-tax profits for the first half of its financial year are now likely to be around £85m, almost 25pc less than City forecasts of £110m for the six months to the end of February.
And the future in retailing in 20 years?
By 2035 Google see the advent of 3D printing taking over clothing manufacture and a lot more besides. We may rely on the internet to buy a design first, but still need showroom shops (Google even suggested Starbucks for your 3D printer access).
We see a trend of less but better targeted shops.
This for the future generations may see manufacturing returning away from Asia as everything will become automated. Maybe even our food will be from replicators in 50 years so no need for supermarkets then!
London
Luxury markets
Continue to thrive with the Asian market accounting for 50% of luxury world sales now with Karl Lagerfeld the German designer, is looking to open a flagship store in Regent Street.
Mulberry, with 123 stores has reported a profits drop due to a £10.7M shop opening investment but sales were up 4% and international sales by 29%.
Victoria Beckham is to open her first store in Mayfair too while Isabel Marant the French designer with 14 stores opened at 29 Bruton Street.
Globe-Trotter, the exclusive luggage brand favoured by the rich and famous are opening a flagship shop in Albemarle Street to replace their Burlington Arcade store and to supplement their concessions throughout the world.
Major new flagship stores which have opened or are to have been J Crew, Coach and Longchamps in Regent Street and Swatch, Brietling and Victorias Secret in Bond Street.
Mid-market brands continue to expand with Cath Kidson, the homewear and fashion brand adorned with flowers, which started some 20 years ago in Notting Hill, opened their first in Central London, in Piccadilly. Company sales are now £105M and their other recent opening was in Westfield White City.
They now have 61 shops and concessions in the UK and 75 in Europe and Asia. The private equity company is now looking to sell on the business.
Cool Britannia are after more tourist shops in all locations including outside London and in Paris too, having opened many new shops with a recent opening in the Strand.
Antler were seeking a new shop in Covent Garden.
John Lewis is to open in Westfield White City in a 230,000 sq ft branch.
Lululemon, the Canadian brand specialising in yoga and other sports opened in Chelsea and now Covent Garden. The Australian aspirational brand Lorna Jane with 150 stores is after a flagship store.
London key fashion Streets remain Regent Street which continues to be focused on premium retail fashion to the exclusion of most other uses. Bond Street continuously attracts the world’s luxury brands. Oxford Street remains the number one destination for visitors but remains mid-market apart from within Selfridges. Piccadilly remains a major tourist destination and along with the surrounding areas is moving more towards fashion as there is currently is a predominance of cafes.
Brompton Road is gradually becoming more premium fashion from mid-market while Sloane Street has retained its exclusivity and premiums values.
Getting into premier locations can cost very substantial premiums from several hundred thousand to many millions in premiums now. This is a result of so many foreign retailers trying to obtain a flagship shop for their brands in one of the world’s most prosperous and sought after cities.
The UK
Outside London and the South East the pressure for shops is not so intense and reasonable rents and even reverse premiums and good rent frees are still achievable, but reduced from what they were. High Rates still play a major issue on profitability though in Northern Towns where rents have dropped from 2008, but not rateable values.
5 year options to break by retailers are more acceptable now but it depends on the actual deal.
It is not unusual to have on a rent of £60,000 pa to have a contribution of one or two years rent equivalent even in the better towns. The Covenant offered being one of the most important factors in driving any good deal though.
Fashion Sector
Urban Outfitters, with 35 shops in Europe and 163 in the US catering for 18 to 28 age group more at the value end, are after 6 more stores.
Zara remains one of the world’s biggest clothes retailer with 6100 stores, sales were up 10% since November with Europe being 45% of their market.
Joules opened in Petersfield, Worcester and Burnham Market and are looking for more.
Jo Jo Maman Bebe with 56 stores and recent deals in Balham, Guernsey, Cambridge & Dublin continue to expand into 800/1500 sq ft shops more south of Birmingham.
Anthroplolgie opened in Bath and is looking for 3/6000 sq ft in London and from Brighton to Oxford.
Jaegar have 8 store requirements of 1250/2000 sq ft plus stock in the South.
The White Company’s profits soared 83% to £7.6M to March 2013.
Abercrombie & Fitch had a loss for the 3 months to November 2 of $15.6M compared to $84M in 2012 are trying to boost profits by selling larger sizes as their cool image maybe catching up with real customers needs.
Ted Baker are expanding more in China now and had a 30.9% sales increase to August 2012, with pre-tax profits up by 50%.
Fred Perry’s pre-tax profits fell marginally but sale increased by £2M pa.
Sports brands seem to be doing well with Sweaty Betty sales rising by 15% to March 2012.
Phase 8 have refinanced to expand despite the 2012 loss.
Non-Fashion sector
Farrow & Ball paint with 25 shops in the UK are looking for 750 sq ft to 2000 sq ft in wealthier towns in the UK.
Wilko are looking for 9000 sq ft units mainly around the London.
Tony & Guy are still expanding in 750/1250 sq ft shops across the UK and in London as a mainly franchised operation.
Travel agents seem to be experiencing a business improvement with TUI saying travel packages are back in vogue for different holidays. TUI’s were up 21% in pre-tax profits to September 2013.
Food Sector
McDonalds are seeking more drive thrus on main roads and retail parks.
Little Waitrose are targeting the M25 and South East for 2500/3000 sq ft stores with 4/6000 sq ft gross while the Coop, Budgens, Tesco and Sainsburys continue their expansion to small store formats too.
Costa continue a relentless expansion with only limited competition now from Starbucks who seem mainly franchise led now while Muffin Break have added 10 more cafes in 2013.
Café Nero is targeting mainly the London area for 900/2000 sq ft cafes.
L’Orchidee boutique Patisserie in Westfield are now looking for a West End Store.
Holland & Barratt have a major expansion on hand throughout England and Ireland.
Dunkin Donuts (associated with Baskin-Robbins ice Cream) plan to open 200 new restaurants in the UK over 5 years initially around London if they can find franchise partners. Whether the brand will work in the UK maybe questionable though.
Paul, now with 30 UK outlets continues to target the London area.
Problem Retailers
Tie Rack is closing all its 36 stores, a sign of the decline in tie wearing in offices.
Millies Cookies had 13 of their shops on the market.
Blockbuster finally closed their doors to 91 shops for the second time – “the world has moved on” said their administrator.
99p Stores despite looking or 40 more stores of 5/10,000 sq ft nationwide with a 25% leap in sales is now making a loss and wants landlords to reduce its rents having lost £584,000 in in 2012 from £7.3M profit. This reflects the battle for pound store space supremacy with only the fittest surviving now.
The extent of Albemarle & Bond’s pawnbroker warned there were “no signs of recovery” in its markets. Pre-tax profits plunged to £4.9m in the 12 months to 30 June from £21.4m a year earlier and is still up for sale. This is a sign partly of more competition and an improvement in the UK economy too.
Barratts went into Administration again for the second time and who knows what will survive this time around for a brand that has not been able to keep up with the trends and compete with Primark.
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