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Retail has always been a highly dynamic industry, intensely competitive and fighting for a share of the wider consumer spending pot. This is an industry used to dealing with a constant diet of change. However, the change we are seeing today is far more profound than anything the past has thrown up. We are now seeing by far the most challenging period in retail history. A reshaping of the industry’s structure and economics is unfolding, and most of the real change is yet to happen.

Richardtalksretail is focused on analysing this change, anticipating the implications, and mapping how the key players across the various sectors are dealing with it. The regular Blogs in this public section of the site are a taster of the much more detailed analysis and forecasts in the premium section, reserved for subscribers.

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What you get

Next up …

With the first trading statement now out, many are rushing to revise their view of the retail temperature. My advice is … don’t bother.

What we have learned (aka been reminded):

  • Next is one of our strongest retail brands – it is therefore NOT a bellwether
  • It’s statement is always the most detailed, thorough, and with an insightful narrative
  • The company had a better Q4 than the Black Friday and Tesco decisions suggested (makes both even more surprising and perplexing)
  • Store performance is weakening progressively and …
  • … online continues to grow

What we have not learned (yet):

  • As online grows, returns become a higher % of total sales so …
  • … what impact will they have once netted out …
  • … the headline sales increase will certainly net lower
  • What did Next learn from Black Friday – will it join the promotion lemmings this year
  • In a market as tight as this, a big player doing modestly better means many others must have done worse

Next has been a very unusual retailer for many years. While most of its peers struggle with cash flow, Next generates much more than it deems sensible to reinvest in its ongoing business. Share buybacks have been a company staple for years. However, when a company announces slightly better than expected numbers, and that it intends to spend £300m buying more of its own shares, a positive market reaction is guaranteed.

Very few others will be able to report figures like these. A year ago, Next’s trading statement resulted in a 10% fall in its share price – the comparatives were undemanding. These numbers are certainly better than expected but should be treated with caution, and certainly not taken as an indicator of what lies ahead.

** We advise retailers on strategy and track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk

 

 

 

Xmas Trading Statements – fact and fiction

Tomorrow, Next will kick off the trading statement reporting season and over the coming weeks, history will be repeated. A stream of often upbeat  statements will gradually emerge, and they will be mostly misinterpreted. These statements at headline level are about as indicative of where we really are as the Premier League table is after two games at the start of the season.

Christmas trading statements are unaudited and produced internally. I’m not suggesting that they are simply made up – God forbid!! However, there is latitude to adopt a flexible approach with definitions and timeframes. And there is massive pressure to deliver what a company’s stakeholders want to see. Goalposts are regularly picked up and plonked down in a different spot. Definitions and timeframes can be adjusted to suit. And of course every company uses totally different criteria. Beyond this, the obsession with year-on-year comparisons has encouraged most people to look at the headline percentage figures, and ignore the absolute numbers on which they are based.

It is already clear that Christmas trading was poor because the wider economy is weak. Wages are flat and inflation is squeezing spending. Economic weakness coupled with political uncertainty are bound to encourage consumer caution.

Retail is entering the New Year on the back foot. Against the background of very thin consumer confidence, last year saw 64% of non-food retail on sale over the 12 months. This literally and emotionally devalues the attractiveness of product offers. Given that over 50% of UK retail sales is about wants rather needs, it is easy to see why the industry is so vulnerable.

Bear all this in mind when you read these Trading Statements. Don’t be fooled by the packaging and focus on the underlying contents!

** We advise retailers on strategy and analytics. We also track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk

New Year retail message

Happy New Year to everyone!! Here are some words and phrases we will be hearing much more of in retailing during 2018:

  • Losers
  • Profits warning
  • CVA
  • Administration
  • Retail casualties
  • Onerous leases
  • Staff cuts
  • Consolidation
  • M&A
  • Restructuring
  • Promotions
  • Debt
  • Credit insurance
  • Cost reduction

Here are some words and phrases I think we need to hear much more of:

  • Winners
  • Revenue growth
  • Profit growth
  • Market share growth
  • Customers
  • Staff
  • Investing in service
  • Range editing
  • Space editing
  • Brand integrity
  • Price integrity
  • Bank support

Role models are invaluable. There are plenty of retail winners out there and lessons can be learned from many, by many. No one is going to be a winner in this market because they are good at managing costs. That has to be a given. Being great at selling is the non-negotiable skill in this market. And being good at selling has to begin and end with the customer: this last word is the most important in the two lists above. Investing in truly understanding your core customer is critical. And having enough belief in your brand and its relationship with those core customers to not chase after peripheral business. This is what I believe is essential for retail success next year.

** We advise retailers and the financial community, and track promotions by sector and company – for details contact admin@richardtalksretail.co.uk

Promotional Intelligence

2017 Week 51

Non-food retailers on promotion this week 70%
Equivalent for same week last year: 71%
  • With a few days left of pre-Christmas trading, 70% of on-food retailers are currently on sale
  • This is virtually the same as last year – the major difference being this year’s far greater cost pressures which very few are managing to pass on to their customers

  • Fashion is the major driver of this week’s index hike. Last week 56% of fashion was on sale. This week it’s 74%
  • Th premium sector across non-foods has jumped on the bandwagon – last week’s 38% have hit 50% this week

  • Post Christmas we will see in the index move through the 80s and into the January Sales
  • With 64% of retailers on sale throughout 2017, the impact of the traditional “January Sale” has been materially diluted

** We advise retailers and the financial community, and track promotions by sector and company – for details contact admin@richardtalksretail.co.uk

Testing the Xmas trading temperature

My impression is that Christmas trading is as cold as the weather. Over many years I have learned that trading over the months leading up to December are a strong guide, and this year has been weak.

My sense is that footfall has been relatively weak. And that footfall is never shared equally, or even proportionately. Visiting stores today. John Lewis is reasonably busy. If its footfall is 100, M&S stands at around 75. I estimate Debenhams at c35 and House of Fraser at c20. I spend lots of time walking stores throughout the year and in a variety of locations. I would say these relationships are not too different from the rest of the year, except M&S’s footfall is materially higher now – a slightly better Christmas might be on the cards for them.

Meanwhile, today we learn that inflation is up to 3.1%. This tells us something about what the retail results season might look like as 2018 unfolds, and it wont be good. Over this period the pound has devalued by c15%. The fact that retail has only managed to increase prices by some 20% of this figure underlines just how pressured the industry is right now. Some of the cost will have been shoved back up the supply chain to suppliers but this has product quality implications. How many retailers can risk reducing the quality of what they sell?

We have already seen signs of industry stress in recent weeks with some administrations, some credit insurance worries and stories about cash flow concerns. However weak Christmas trading is, this will still be the cash flow peak for most retailers. These stress levels can only increase in Q1 2018.

** We advise retailers on strategy and analytics. We also track promotional activity across the UK’s key retailers. Get in touch for details admin@richardtalksretail.co.uk

 

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