The Retail Note - 14 February 2017
The Retail Note
4 minutes to read
- CPI hit 1.8% in January, up from a rate of 1.6% in December, according to the ONS. However, Shop Price Inflation is still far lower than this, at around 0.1%. Monitoring the differential between headline RPI/CPI figures and Shop Price Inflation (i.e. price movements on the high street, as opposed to other areas of the consumer economy) will be a key factor as the year progresses.
- Two high street operators could soon be under new ownership. Cosmetics giant L’Oréal is considering selling The Body Shop ten years after purchasing the ethical beauty chain for €650m. Contrary to how this was reported in the press, this is not a distress sale. Separately, Jaeger has been in discussions over the possibility of finding strategic partners or a buyer for the business. Jaeger is seeking investment as it continues to implement a turnaround plan, including repositioning the brand, re-launching the website and focusing on pushing full-price sales.
- B&Q is to launch a new, urban, small-store format. The first outlet will open on Holloway Road in North London on 10 March. At just 3,000 sq ft, its offer will be focused on home décor, repair and maintenance, with a suite of supporting services. Another interesting example of an out-of-town stalwart re-entering the high street through an edited and targeted format.
Stephen Springham, Head of Retail Research:
There has not been a single major UK retail casualty since the Referendum vote. Not one. Zip. Quite staggering given the expectation to the contrary in the wake of the Referendum outcome. The media were salivating at the prospect of a retailer bloodbath that simply hasn’t materialised. In this instance, no news is good news. But no news, however staggering, seldom grabs the headlines.
Expectations of massive retailer fall-out on the scale of 2008 were always wide of the mark. Most retailers are now in a far better place structurally, financially and operationally than they were when the financial crisis struck. Totally immune to any economic storm they are not, but they are in a far better position to batten down the hatches as required. Consumer demand has thus far held up, but the real tests are likely to come as this year unfolds.
Not all retailers will emerge unscathed. There will inevitably be some retailer casualties this year, some possibly as soon as the next few weeks, as quarterly rent day approaches in March. But, by and large, these will be few and far between and fairly minor in scale. Never welcome, but unlikely to massively de-stabilize the high street.
In the absence of full-blown retailer administrations to get their teeth into, our media friends have had to feed off the scraps of retailers’ closing stores, as a sign of supposed distress. Waitrose and Clintons have both fallen under the spotlight over the last week, albeit on extremely spurious grounds. Waitrose is closing six stores. The fact that, of these, two are Little Waitrose’s (c-stores being more hit and miss than supermarkets), one is a relocation, one of the stores dates from 1981 and one from 1977 provides a bit more context – as does the fact that the business will also be opening a further eight stores this year to more than counterbalance the closures.
As property advisors to Clintons, the week-end “news” is much closer to home. As parent American Greetings has confirmed, the prospect of mass closures is “false” and there will only be potential individual store closures, timed around lease expiries. Also, the business is actually on the expansion trail. The insinuation of the offending article that as many as 120 stores are about to be culled is simply not true.
No retailer has a perfect store portfolio. Performance will vary massively across the estate. Also, store performance can change significantly over the course of a 10 year lease (even more over an historic 25 year lease). Retailers are constantly reviewing their store portfolios – and if they are not, they definitely should be. Weaker stores will drop off the bottom, to be replaced by newer, better outlets. Retailers need to churn their portfolios and this is evidently what is happening at both Clintons and Waitrose.
In the meantime, the media shouldn’t confuse basic housekeeping as distress. And no news is better than fake news.
Read the latest Retail Monitor - Q4 2016 report here