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January 2010 Update

The Summary

There have been 6 retail administrations since the last issue of SnapShop Monthly, including Adams, D2, Wesley Owen, Natural Kitchen, Ellie Louise and Happit; three of these appear to have been pre-pack administrations, while the others, aside from Adams, have also been rescued. New market entrants include Joe & The Juice, MBT, Kiyuchi and a Dyson pop-up shop.

Birth and Death of Retailers

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In Administration New Retailers

In the news… January’s news has been dominated by Christmas trading reports – a digest of which can be found under the Newsletters section on SnapShop. Consequently, several retailers have chosen to outline their plans for the future. Positively, Claire’s, Domino’s Pizza, Esprit, Ethel Austin, Fire & Stone, Greggs, Mint Velvet, New Look, Papa Johns, Paperchase, Poundland, Swarovski and Waitrose have all announced ambitious expansion plans. Less positively, Arcadia is to close ten BHS stores and the leases transferred to Primark; all Borders stores have now shut their doors; Ghost is to axe its department store concessions; and La Senza owners Lion Capital are thought to be seeking funding for the lingerie chain. Elsewhere, Ben Sherman is to exit womenswear; Boots & Waitrose are trialling a tie up; the Threshers, Bottoms Up, Victoria Wine and The Local chains have been bought by SEP Properties and Debenhams is to step up its store refit and brand makeover programme. In the Statistics section, most measures look positive, no doubt again influenced by Christmas. BRC Internet Sales were up a massive 26.5%, while house prices and BRC Retail Sales also rose. Surprisingly, both SPSL and Experian both recorded falls in pedestrian flow levels, as did consumer confidence, which was down 2 points – the second month of decline.

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Geoff’s View

A bird in the hand is worth two in the bush …. …but are they all of equal value? In shopping centres and retail parks, recruiting particular tenants within an explicit retail mix strategy creates a more robust rent roll than simply taking the highest, or any, bidder. Without a tenant mix policy, the retail composition of the centre or park is determined by the judgements and vagaries of individual retailers. Rent is paid from turnover and the lower its proportion the better. The proportion can be reduced either by agreeing a lower rent or by increasing turnover. Other things being equal, retailers whose customer profile matches the visitor profile will increase turnover more easily than mismatched retailers. Furthermore, several retailers with similar customer profiles outperform a ragbag of differently targeted shops. Historically, retailers in the same trade tended to group together in the same area of town. There are five broad objections to shopping centres and retail parks having an explicit tenant mix strategy: 1. “Retailers know their own business best, so don’t second guess them”. This over-estimates

the resources of retailers and their agents to know the potential of your particular location. In FSP experience, the vast majority of retailers welcome solid evidence of the scale of the business opportunity represented by your centre or retail park

2. “We’ve managed successfully so far without a retail mix strategy”. This omits the role of shoppers in making a retail location successful. FSP can demonstrate that happy shoppers visit more often and spend more per visit so that annually they are worth two or three times more than an unhappy shopper. Creating more happy shoppers increases sales, makes the retailers more profitable and therefore willing to pay more for their space. Establishing the identity of the happy shopper is therefore a fundamental step

3. “It’ll only tell me what I already know.” In Made to Stick, Chip and Dan Heath describe the Curse of Knowledge which prevents experts from being able to see the issue from the perspective of the uninitiated. A tenant mix strategy gives a different emphasis to what is already known and thereby effectively communicates the potential of the location to retailers

4. It’s a sledgehammer to crack a nut. On an established scheme, units come up one at a time, so the expense of developing a retail mix strategy is not justified. While more centres now have multiple vacancies, this may be a valid objection if the task is simply to fill it and flog it. However, FSP has been involved in a number of pre-acquisition due diligence investigations where such a policy has cut no ice with the potential purchaser

5. “A different skill set is required to present the business case to retailers when it flows from an evidence-based retail mix strategy”. It can be difficult for letting agents dealing with many different schemes fully to understand the potential of each one for each target retailer. Much of the responsibility for this lack of understanding lies with the research providers who don’t make the evidence very accessible. Naturally FSP pleads not guilty to this charge but only because it is a high priority to work with the client and letting teams to translate the research into practical actions.

I now look forward to a flood of enquiries for help in developing tenant mix strategies!! With kind regards Geoff Nicholson Managing Director, FSP geoff@fspretail.co.uk

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New Retailers Georgina Goodman has secured a £4m private equity investment from Core Capital to fund expansion

J Crew has targeted the UK for expansion

Joe and the Juice has launched its first UK site on London's Regent Street

Kuyichi is to open up to 10 franchise stores in the UK and Republic of Ireland alongside a

series of company-owned stores as part of a long-term brand building exercise

MBT is to open its first UK outlet store at Land Securities’ Gunwharf Quays in Portsmouth

Store News Bombay Bicycle Club is planning to open a further eight restaurant delivery outlets in London

Boots The Chemist and Waitrose are considering trialling several different store formats simultaneously as

they thrash out details of their forthcoming tie up

Claire's intends to open significantly more stores during 2010 than this year

Debenhams is to rev up store refits following the success of its Cardiff shop and give its brands a makeover as it focuses on profitability as well as sales

Domino's Pizza is planning to expand its chain of 608 pizza outlets in the UK and Ireland to 1,000 by 2017

Ed Hardy is planning to open a second London store after the launch of its first UK store at Westfield London earlier this month

Ethel Austin is planning to open a further 100 fashion stores across the country in 2010

Fire and Stone is planning to expand with at least six new outlets over the next 18 months

GIVe may be expanding internationally just two months after its UK debut

Greggs is to focus on expanding its bakery chain in Scotland, Wales and the South East of England this year where it has a relatively low presence

Haldane Stores has acquired a further eight stores from the Co-operative Group, with the transfer of 245 staff, taking its total chain to 26

Jaeger is engaged in talks over the possible opening of a new store in Paris

Lakeland is to open its first overseas store next year in Dubai

Mint Velvet will open 25 new fashion concessions and stores by spring to add to its 14 House of Fraser concessions and two standalone shops

Monsoon is poised to open five Accessorize stores in the US next year as the retailer tries once more to crack the North American market

New Look plans to double the size of many of its UK stores

Nokia is to close four of its flagship retail stores

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Oliver Sweeney has opened a new-look flagship on Regent Street

Papa John's is planning to open a further 40 pizza delivery outlets in 2010

Paperchase is planning to expand its chain of 60 stationery stores with up to 20 new outlets in 2010, and believes there is long-term potential for 200 stores

Pineapple has opened a flagship clothes store in Covent Garden

Poundland is ramping up its store expansion programme in Northern Ireland on the back of strong sales since first opening there in October

Principles is back, exclusively at Debenhams, with designer Ben de Lisi at the helm

Sainsbury's Supermarkets

is to launch a click-and-collect service in April as it strives to double the size of its non-food business within five years

Shop Direct Group has confirmed it has met possible franchise partners interested in relaunching Woolworths on the high street

Subway is planning to expand its 78 sandwich stores in Yorkshire and the North East to 200 by 2015

Swarovski is to open four stores in Manchester, Aberdeen, Doncaster and Warrington

Tesco plans to open up to 30 stores in the Czech Republic

The Entertainer is to steam ahead with expansion after recording its "strongest trading in the company's history" in 2009

Trespass has hopes to fill the void left by Blacks

Uniqlo plans to expand in Europe in 2010 with cities such as Madrid, Barcelona and Milan, plus a city in Germany all being targeted for store openings

Waitrose is planning to expand its chain of 222 supermarkets with 23 new outlets in 2010

Financial Restructuring Adams Kids has fallen into administration for the third time in three years

Blacks Leisure Group is poised to undergo an equity fundraising of between £15m and £20m

Borders remaining stores have closed as no buyer was found

Bottoms Up plus Threshers, Victoria Wine and The Local have been bought by property investment

and consultancy firm SEP Properties

Clapham House Group has admitted that its Real Greek brand would eventually be sold as it moved to focus exclusively on its expanding Gourmet Burger Kitchen chain

d2 became the first post-Christmas retail casualty after falling into administration in the last week of December, however it was later bought out by its management team

Esprit is set to buy out its Chinese venture partner as it looks to ramp up its presence in that market

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Habitat owner Hilco plans to write off 60% of the furniture retailer’s debts as part of a turnaround plan

Happit has been bought out of administration by a new Yorkshire-based company, Ellie Louise Trading

Harry Ramsden's has been bought by Ranjit Boparan, the owner of Birmingham-based Boparan Ventures – think Buxted Chickens and FishWorks 2

Hobbycraft was put up for sale at the end of last year with a price tag thought to be around £70m. Former Borders UK owner Luke Johnson has confirmed he would consider bidding for the chain

Ideal Shopping Direct has bought plant and garden equipment retailer Lead The Good Life

Jane Norman lenders are to take over the business and restructure its debts of almost £136m

JD Sports Fashion has taken control of the Australian distribution company for rugby brand Canterbury, and bought a majority stake in its New Zealand distributor

JD Wetherspoon is close to completing the acquisition of 12 late-night venues from 3D Entertainment, the Chicago Rock Cafe owner, for about £4.3m

La Senza owner Lion Capital is thought to be seeking funding to save the struggling lingerie chain

Laithwaites will take over Vinopolis in London this month

Mamas & Papas has agreed a new funding package from HSBC which will allow the business to grow its international business

Natural Kitchen has undergone a pre-pack administration through Tenon Recovery

Puccinos has put eight non-trading units up for sale after falling into Administration

Smythson of Bond Street has been sold to Greenwill for £18m

Theo Fennell is exploring options to raise funds through an equity placing

Topps Tiles has taken the decision to withdraw support and funding for its loss-making Dutch subsidiary

Wesley Owen has fallen into administration

Internal Restructuring Ben Sherman is proposing to exit womenswear business and focus on menswear

Bhs

is to shut 10 department stores

DFS is considering a float or third-party investment

Ghost is set to axe its department store concessions and lower its prices

Jessops plc shareholders have voted to voluntarily wind up the company after the Jessops store business was sold to new company Snap Equity in September

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Joules has launched Baby Joule following the success of its children's range

General ASDA has waded into the online personalised greetings card arena in a tie-up with

manufacturer Hallmark

ASOS has launched a new plus-size range

Boxing Day proved to be the busiest online shopping day of the year but Christmas Day itself saw a slowdown against last year in traffic to etailers

HMV and 20th Century Fox Home Entertainment have teamed up with AdMedia to launch Gamerbase, an interactive instore advertising model

House of Fraser has become the latest retailer to launch an iPhone application

Key Staff Changes occurred in the following retailers during the month; Focus, Hugo Boss, Jessops, John Lewis, Midlands Co-Op, Moss Bros, My-Wardrobe.co.uk, N Peal, OKA, Direct Wines, HMV Group, Albemarle & Bond, Asos, Clarks, Co-Op Group and Daks

Local Authorities The government has unveiled plans to give local councils more power to put town centres first ahead of out-of-town developments

Marks & Spencer lost clothing volume and value market share last year while rivals George at Asda, Tesco and Primark all gained

Marks & Spencer is facing legal action following allegations that staff and customers at three of its stores were exposed to asbestos during refurbishments

Matalan suitors are baulking at the £1.5bn price tag put on the value chain

Sainsbury's Supermarkets

has announced that it will dramatically cut its packaging requirements for its Basics tinned tomatoes when it switches from using cans to cartons

Snow The continued snowfall across the UK has resulted in unwanted costs for grocers as they battle to overcome challenges in supply chain

Sports Direct International's

Mike Ashley is understood to be facing an investigation into possible loans secured from Icelandic bank Kaupthing

Tesco is trialling a schoolwear embroidery service as it seeks to give parents whose kids need bespoke uniforms a cheaper alternative to specialist suppliers

Tesco has been left with unusually large quantities of waste after relaxing its stores waste budget over the festive period, in an effort to boost sales and availability

Ugg and Jimmy Choo have teamed up to launch an ‘Ugg & Jimmy Choo’ women’s sheepskin footwear capsule collection

VAT Fears have been expressed that VAT may be imposed on food in next year’s Budget. Politicians are understood to be considering a levy of about 5% on food in a bid to address the country’s financial challenges

VAT Some leading retailers increased their prices on key lines just weeks ahead of announcing a VAT freeze, a report claims

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Property Area Property Partners' Trinity Walk shopping centre has resumed construction

Ikea has bought a retail park in Theale, near Reading

Land Securities is moving closer to starting work on several shopping centre developments, including

The Trinity Quarter Project in Leeds, after the recession delayed progress on the schemes

Threadneedle Property Investments

has bought retail centre in Chester, Cheshire, for £27.6m; Holyhead retail park in Anglesey, Wales, for £8.3m; and Abbey retail park in Daventry, Northamptonshire for £15.3m.

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Retailer Results

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UK Overview ONS Retail Sales

The value of retail sales in December at current prices not seasonally adjusted, increased 2.6% YoY, changing the 3 month moving average to 2.5%, from 2.4% in November. Value of sales through food stores in December increased by 5% YoY, compared with 3% in November. The value of sales through non-food stores was up 0.5% YoY, up from 0.3% last month. As always, Non-Store Retailing & Repair was the best performing sector, with a YoY increase of 4.8%. After a reasonable increase of 3.2% YoY in November, Household Goods stores showed only a marginal increase of 0.9% YoY in December.

Please see the Retail & Economic Statistics page on SnapShop for more historical detail

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Internet Retail Sales

Based on BRC figures, non-food non-retail sales were 26.5% higher in December YoY, up from 16.9% in November.

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NB: ONS have recently adjusted historical figures, but have given data only back to October 2008. BRC started reporting in April 2009.

BRC Retail Sales

Year-on-Year (YoY) total UK retail sales values in December increased 6.0%, while like-for-like (LfL) sales increased 4.1%.

Retail sales in central London in December were 12.0% higher on a like-for-like basis than a year ago, when sales had fallen 0.7%, as financial turmoil hit consumer confidence – especially in the City. Please see the Retail & Economic Statistics page on SnapShop for more historical detail

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Pedestrian Flows

SPSL’s Retail Traffic Index for December increased by 27% MoM against November, and decreased by 5.5% on December 2008. Experian FootFall reported a MoM increase of 18.6% and a YoY decrease of 2.8%

Pedestrian Flows - Year-on-Year Change

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Interest Rates

In January, the Bank of England’s Monetary Policy Committee once again voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.

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Please see the Retail & Economic Statistics page on SnapShop for more historical detail

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Inflation

In the year to December, the consumer prices index (CPI) rose 2.9%, up from 1.9% in November. The more familiar RPI (Retail Prices Index) increased, from 0.3% in November, to 2.4% in December.

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House Prices

According to the Nationwide index, the price of a typical house rose by 0.4% in December MoM. At £162,103, the average price of a typical UK property in December 2009 was 5.9% higher than at the end of 2008.

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NB: YoY figures refer to left hand scale, MoM statistics refer to right hand scale. September YoY was flat. Please see the Retail & Economic Statistics page on SnapShop for more historical detail

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Consumer Confidence

The GfK NOP Consumer Confidence Index fell by 2 points during December to -19. After a dramatic increase in the Index from August to October the Index has now fallen back for two months in a row, but remains much higher than it was a year ago.

GfK NOP Consumer Confidence Index

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Research by GfK NOP on behalf of the European Commission

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Please see the Retail & Economic Statistics page on SnapShop for more historical detail

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Ireland Overview CSO Retail Sales

At time of writing, the most recently published data were for November, when the value of retail sales in current prices, not seasonally adjusted, was 11.5% lower YOY, decreasing the moving YOY 3 month figure to –11.7% from –11.1% in October. The value of food sales in November decreased to -8.9% YOY, and the value of non-food sales decreased to -15.6% from –17.1% the previous month.

Please see the Retail & Economic Statistics page on SnapShop for more historical detail

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Inflation in Ireland

In Ireland, HICP fell to -2.6% in December, while CPI increased, to -5.0%.

Irish Inflation (HICP v CPI)

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Please see the Retail & Economic Statistics page on SnapShop for more historical detail.

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And Finally… Family Values

Traditionally, January is the busiest time of the year for divorce lawyers, and as the economic situation takes its toll, January 2010 is unlikely to be any different.

But never fear! If you’re currently thinking of filing or are in the midst of a tricky separation, don’t worry about trivialities such as who’s going to get custody of the toaster…for Debenhams have launched the perfect solution; the divorce gift list.

The idea, inspired by the increasing trend for people to celebrate rather than commiserate the end of a relationship, gives the newly single the opportunity to ask their friends and family to help out with household items their separation may have left them without!

Unsurprisingly, no trace of the aforementioned service can be found on the Debenhams website!

www.fspretail.co.uk 26/01/10

FSP has gone to its best efforts to ensure this data is correct but the author reserves the right not to be responsible for the accuracy of information provided.

SnapShop Monthly, a benefit of SnapShop Membership, is provided by:

FSP 20 Manor Court Yard Hughenden Avenue

High Wycombe Buckinghamshire

HP13 5RE

Tel: 01494 474740 Email: snapshop@fspretail.co.uk

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