Politicians ‘Saving the High Street’?
Muddled political thinking on how to “save” the high street, lacklustre rather than dire retail sales figures from the BRC, strong trading updates from Boohoo, Dunelm and Poundland, more mixed showings from Dixons Carphone and Halfords.
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- True to recent form, a particularly downbeat release from the British Retail Consortium (BRC) on August retail sales. Total sales growth flat-lined, while like-for-like sales declined by -0.5%. The official figures from the ONS are likely to be far more positive when they are released on 19 Sep. Note that the BRC figures exclude (amongst others) the UK’s largest grocer and retailer overall (Tesco), the largest online retailer (Amazon) and second largest specialist fashion retailer (Primark) all of whom are out-performing in their respective sectors.
- Good retailers continue to trade well. Online pure-play Boohoo has raised its full-year outlook and now expects sales to grow between 33% and 38%, compared to previous guidance of 25% to 30%. As it celebrates its 40th year of trading, value furnishings operator Dunelm saw total like-for-like sales increase by 10.7% to £1.1 billion, while pre-tax profits increased 23.4% to £125.9m. For the nine months to 30 June, Poundland saw revenue increase by 3% to €1,358 million, driven by strong performance of PEP&CO clothing shop-in-shops which are present in nearly 300 stores.
- Mixed results from other players. Dixons Carphone posted a rise in like-for-like group sales of 2% for the first quarter to 27 July. Its international arm saw a 4% rise in like-for-like sales driven by strong performances from its Nordic regions (+4%) and Greece (+7%). But performance was blighted by the mobile division which saw sales decline by 10% over the period. Halfords reported a drop in its sales for the 20 weeks to 16 Aug. Like-for-like sales declined by 3.2% and retail like-for-like sales were down 3.9%. FY profit forecasts were also downgraded to between £50-£55m, versus £59m previously.
Stephen Springham, Head of Retail Research:
A caveat: the Retail Note is strictly apolitical. All political parties are treated with equal disdain.
The two main political parties (at time of writing, anyway) have announced their respective plans to save the high street in recent weeks. But these plans have flown under the radar somewhat, cruelly overshadowed by far more trivial political matters, in my somewhat biased, “retail-first” view. Both policies differ in approach – the Tories effectively focussing on “top down” investment on whole town centres, Labour on “bottom up” solutions to empty shops.
Boris Johnson’s government has increased the pot of cash available through its Future High Street Fund from £675m to £1bn, the extra £375m coming from the Ministry for Housing, Communities and Local Government. The original shortlist of 50 towns has also been doubled.
Nothing intrinsically wrong in this at all – at least the issue is being recognised, if not fully addressed. As we have stressed on my occasions in our research, historic under-investment is one of the key structural failings that continue to undermine the retail sector, so any cash injection should be welcomed with open arms. Is £1bn nearly enough? Is any cash injection ever enough and even with my “retail-first” blinkers on, it is difficult to argue that other areas of society, such as the NHS, don’t have a far more compelling case for additional funds.
The 50 new towns shortlisted for cash are a real curate’s egg. Many are clearly very challenged (I won’t name and shame), but there are a few surprises too. High Wycombe? When the Eden shopping centre opened a decade or so ago, High Wycombe’s marketing strapline was “the most affluent catchment in the UK”. Maybe the town isn’t blazing a trail, but it isn’t exactly on its knees either. Putney? A great demographic base, but a retail offer that has maybe not kept pace with wider gentrification. Leamington? Again, hardly the embodiment of a retail apocalypse.
Applying crude maths, each centre would theoretically receive £10m. For some, that may make a tangible difference. For others, it wouldn’t even be a drop in the ocean. Either way, it is an improvement on the paltry £100k allocated to each of the 12 Portas Pilot Towns, which would have barely covered the cost of a half-decent consultancy report.
My issue with the initiative is with how this cash is deployed. By pure coincidence, in recent weeks three Local Authority Invitation to Tender documents have come my way for “Retail and Town Centre Use Studies”. For the uninitiated, these projects were all the rage in the 2000s and beyond and are effectively very long, process-driven capacity studies that quantify current and future retail floorspace need.
Having undertaken many of these studies in previous lives, I was never fully convinced that that they were aligned with on-the-ground reality and were actually a poor basis for setting planning parameters. Indeed, you could (and I would) argue that these capacity-based retail studies are actually partially responsible for the levels of over-supply that we undoubtedly now have in retail markets.
It beggars belief that Local Authorities are still spending significant sums of money in commissioning these studies. They are anachronisms . The wording has only been modified in places to suggest “possible reductions in floorspace”. As if a methodology that was flawed in calculating increases in floorspace need would be any better at quantifying over-supply.
By way of actual example, we were recently involved in an investment sale in a coastal town which will remain anonymous. Said town is clearly very challenged, with a higher than average vacancy rate and is blatantly over-supplied. Yet a recent Retail Study suggested there was capacity for up to 100k sq ft of additional space. As big a disconnect as you could get from reality.
As part of his wider mission to win hearts and minds, Jeremy Corbyn has also announced his own measures on how to tackle the ‘retail apocalypse’. Mr Corbyn’s proposals centre on giving councils the power to reopen shops left vacant for more than one year. And that they should then be “given” to start up business and community projects.
Really? That assumes that all the empty shops are council-owned, when the reality is that very few are. Councils would only have the “the power to reopen” the few stores that they own. What is going to happen to the rest? Are the councils going to buy them from existing landlords? Through CPO? At what rate? £10m isn’t going to buy you many shops, even vacant ones. Or is the assumption that landlords are wilfully keeping shops vacant for some ulterior motive? Why would they want a rent-paying tenant? And in the event of councils seizing control of empty shops, are they just going to simply “give” them to start up business and community projects, as opposed to charging rent?
I’m being kind if I say this thinking is muddled. Mr Corbyn’s solution to empty shops is tantamount to telling an unemployed person to get a job. The root causes are far more complex.
The high street on the parliamentary agenda = good. Fresh investment in town centres = good. But each town is different and has its own story to tell. By extension, each requires individual appraisal and local solutions, there can be no notion of “one size fits all”. Scientific quantification of floorspace need no longer applies and there is no point in addressing the issue of empty shops if we don’t understand what made them vacant in the first place.