• Limited media coverage of fairly strong retail sales figures for October from the ONS. Year-on-year retail sales values were up +3.2% and volumes (‘real’ growth, net of inflation) were up +2.7%. Food (+2.9%) out-performed non-food (+0.8%), although there was welcome confirmation that the clothing sector (+3.2%) had avoided the bloodbath of the corresponding month in 2018. No cause to revise our predictions for Christmas/Q4 (values up by between +3.0% and +3.5% and volumes up by between +2.5% and +3.0%) at this stage.
  • Weak performance from Asda. The supermarket giant reported a -0.5% dip in like-for-like sales (exc fuel) for the period from 1 July to 30 September. Predictably, CEO of parent company Walmart Doug McMillon blamed the under-performance on Brexit, which he said continues to “negatively affect customer spending patterns”. Yet figures from the ONS showed that all UK foodstores reported value growth of +2.6% over the same period.
  • Performance at B&M has been hampered by weak sales at its German business (Jawoll). For the 26 weeks to 9 September, the value operator registered a fall of -70.5% in pre-tax profits to £32.2m. Group revenue increased by +12.4% to £1.8 billion (excluding the French business Babou, which it acquired in the second half of the year). The UK fared well, with revenue up +13.8% overall and +3.7% like for like.
  • Opposite direction of travel at New Look. For the half year to 28 September, the fashion operator saw statutory pre-tax losses reduce from £41.9m to £11.2m. Despite the narrowing losses, sales fell -13% to £523.8m, partly as a result of store closures under its CVA. Although this improved profitability, like-for-like sales in UK and Ireland still fell by a worrying -7.4%.
  • Mixed figures from Card Factory. In the year to date (nine months to 31 October), group sales rose 5% and profits were in line with expectations. Like-for-like sales grew +0.9% over the nine months, but declined by -0.4% in the third quarter. The company opened 38 net new stores over the period.

Stephen Springham, Head of Retail Research:

“Consumers shop brands, not channels”. One of the best truisms in retail, but one that generally gets lost in the narrative around online. Online is invariably depicted as an indestructible force, the only area of growth for retail. Those in the digital space will prosper, those outside will fall by the wayside.

Take Mothercare as an example. The consensus amongst most lazy journalists and armchair retail analysts is that the business failed because it was a victim of online competition. This overlooks the fact that the business has been underperforming for over 20 years, a period that predates the very invention of online retailing. The business ultimately failed because its brand and proposition were simply not strong enough.

I covered Mothercare extensively for a Childrenswear report back in 1996. Back then, it was just one of two national specialists in the market (the other being Adams, remember them?) and effectively had the sector to itself. Yet, it was still underperforming. The level of competition has ratcheted up massively since then. Primark was then a little-known business outside of Ireland, a far cry from the dominant force (and major player in the kidswear market) it is today. The Big Four grocers have all since made a huge incursion on the market too – to my knowledge, George at Asda, F&F at Tesco and Tu at Sainsbury’s are now all £1bn+ businesses/brands. And, of course, there is Amazon, much more a player on the babycare and equipment side than kidswear (at the moment).

Mothercare was in the digital space and was a multi-channel player. But the metrics in the lead-up to its demise should be a telling case study for the retail industry as a whole. Stores and online should be mutually-supportive and as seamless as possible. For all its faults, Mothercare went a long way to achieving that. The issue is that if you remove one pillar of the business, the other will ultimately suffer too.

And so it proved. In the last financial year (to March 2019), the business streamlined its store portfolio from 134 to 79 sites post its initial CVA. Unsurprisingly, UK sales took a substantial hit, declining by -11.8%. But most tellingly, online sales also shrunk by -8% over the same period. The message? Stores support online and vice-versa. Mothercare couldn’t simply make cost savings by closing stores and expect the online business to pick up the slack. The sales from closed stores either evaporated into the ether, or more likely, went to a competitor with a stronger brand and overall proposition. The lesson? Consumers shop brands, not channels.

Different circumstances but essentially reinforcing the same mantra, the recent experiences of both M&S and Superdry. The latter has had a dramatic fall from grace over the last couple of years, going from being one of the darlings of the retail sector to a major under-performer. Group founder Julian Dunkerton has returned to the helm of the business through a boardroom coup and is now addressing legacy issues across the company – essentially a devaluation of the brand through over-expansion, lack of focus on the product and too much discounting.

Founders returning to run a retail business they set up can often result in failure – what they come back to often scarcely reflects what they originally created and left behind. But no one understands Superdry better that Julian Dunkerton and it is clear that his main aim - above all else - is to restore the brand. Period. And this is already manifest in trading performance. Although last week’s interim results had some nasty headline numbers in them, there were positive signs too. For example, there was a +3.2% increase in store gross margins, as the business reduced the level of promotional activity (hopefully it will abstain from Black Friday too).

But there are equally telling facts amongst the nasty numbers. Overall group revenue was down -11.3%. But ‘online didn’t out-perform bricks & mortar’ as is so often the easy retail narrative. All areas of the business showed broadly similar levels of decline – stores (-11.7%), e-commerce (-10.5%) and wholesale (-11.2%). The issue lies in Superdry’s brand and product and this is what is being rigorously addressed, not its areas of operation. I say it again, consumers shop brands, not channels.

M&S’ recent interim results didn’t make positive reading, the food business aside. Total sales were down 7.8% and clothing and home sales were down 5.5% like-for-like. Arguably, the most disappointing figure in the whole release (one that was largely over-looked and even seen as a positive by some) was that M&S.com achieved meagre growth of just +0.2%. A relatively immature business in a high growth channel should be achieving a far superior rate of growth than that.

Again, the uninformed in the media referenced online players as the reason for M&S’ travails in general merchandise. Yet M&S is in that space too, it is a genuinely multi-channel retailer. If it had a better online platform (admittedly, it is far from perfect), would more people buy more M&S product? No, not unless the product were better and more akin to their needs and aspirations. If they wanted to buy the product they would, through whatever channel. The merchandise, though improving, is still not what it needs to be and M&S’ brand in non-food has not yet recovered to former heights.

And what do consumers shop? I won’t labour the point further.