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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.

If you want to know more, please get in touch.

What you get

Christmas unwrapping …

As the trading statement season chugs along, it’s all panning out in a reasonably predictable way. The stronger players have done well. Today, Ted Baker released numbers most others can’t even dream about. Meanwhile, Debenhams’ early profits warning has been greeted with alarm in some quarters, in spite of its recent relatively disappointing trading performance pointing downwards. The same story applies to Mothercare, again warning on profits. Then there is a middle group delivering OK results – Next, Morrisons, Sainsbury’s among them.

Many try to read patterns into these numbers that are not really there. Tech: online is stronger so exposure to online must be key? Yes, but that’s missing the point. The key is the brand – the offering, its relevance and how effectively it’s executed. When one looks at the star performers so far they all have big ticks in these key boxes.Along with Ted,  Aldi and Lidl have posted fantastic figures, underlining how they continue to eat market share. The fact that this is largely driven by new store openings also misses the point: market share growth comes at the expense of the competition so it’s a double competitive advantage.

Unlike the growth markets of the past, this one is getting ever tighter so the strong prosper at the expense of the weak. This will dominate the rest of the reporting season. Generally, those retailers who have been trading strongly in the preceding year will do so over Christmas. And the reverse is equally true. Most figures that appear to confound this will usually be explained by changes in reporting periods and/or weak/demanding comparatives.

There is still much more to come. M&S, Tesco, JLP and ABF (Primark) are among those who will attract the most attention. My advice would be to resist reading too much into any. Tesco is looking stronger and will be respectable. Marks will not be quite as bad as some think, but the underlying trading performance will remain lacklustre. JLP will show signs of having to run faster to stand still, as per most preceding months. And Primark will demonstrate that you can still retail successfully without a transactional website, if you tick those boxes I mentioned earlier.

** Our GOLDEN QUARTER REPORT analysing Q4 2017 vs Q4 2016  covering 200+ leading retailers is now available. For details contact admin@richardtalksretail.co.uk

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

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