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Our views on Christmas Trading and no mention of Like For Like Sales

As specialists in disposing of surplus stores, Legacy Retail maintains a close eye on the latest trends in the sales and profitability of retailers with physical stores, versus those of the online and ‘click and collect’ businesses.

The recently announced results for the Christmas and January trading period, threw up a lot of interesting points which support our view that in excess of 25% of retail space on the High Street is still surplus to requirements.

There seemed to be three main themes:

1. Non- delivery of goods and the cost of doing so

The Christmas season was bedevilled with the failure of the retail industry to fulfil its online commitments.  We witnessed M&S again experiencing difficulties with fulfilling home delivery. It amazes me that relative new comers such as AO (formally Appliances Online) get it right but one of our oldest and largest retailers is still struggling years down the road to deliver its products on time. Furthermore City Link collapsed, resulting in disappointment and redundancies, because of their inability to charge an economic price. According to industry sources this inability to be able to price correctly is creating massive inefficiency as the delivery companies have no option but to operate on the lowest cost base.  So what is the solution? Click and Collect. This is fast becoming the  more efficient option and smarter retailers are realising that they should use collection hubs and third party outlets. They don’t need shops.

2. Black Friday will be forever more

Are retailers now in the uncomfortable position where the consumer expects the Winter Sales to run from Black Friday (the day after Thanksgiving) right through to Christmas? The consequences, and the margins, don’t bear thinking about.

3. Grocers

We have had more tales of woe from the Grocers, in particular the Big Four.  Our concern does not lie with how they are losing market share to the discounters. The solutions to that should be easy – reduce prices and deliver value. Our interest lies in the move from hypermarkets to convenience stores and what to do with the excess space in the remaining big sheds.  Bringing in other categories (some competing) to fill surplus space in the big sheds does not change the economics. Just because there is another coffee outlet does not mean we will drink more coffee. However it does mean that there will be more pressure on the High Street as yet again trade is drawn away to the retail parks. Some of the hypermarkets are so big (particularly the Tesco Extras) that if they got it right, they could create mini retail parks in themselves and have a convenience store in the middle. They already have the parking and access.

Lastly, Austin Reed’s CVA and Bank’s administration…

The CVA looks a bit desperate, if the press is to be believed.  Austin Reed are planning to only close 31 loss making stores and asking landlords for a 20% rent reduction on another 35 but for one year only.  This out of a total estate 232 stores.  These actions do not seem to tally with the Directors’ comments that the business had been hit by “a rapidly changing retail environment”.  We ask whether they are doing enough to future proof the business.

Moving on to the collapse of Bank.  Richard Hymans, retail expert, comment that “the apparel market in the UK is the toughest in the world” misses the point. We met with JD Sports, Bank’s parent, over a year ago, regarding analysis we had carried out on Bank, indicating that their target customers were one of the highest users of digital alternatives, i.e. they had too many stores for their market.  Unfortunately we think we were right.

Playing around with retail space is not the answer, reducing the footprint combined with a sensible approach to right sizing for the new (i.e. digital) environment is.

We hope Austin Reed get it right.


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About the author

Barry Knight

Barry Knight

A retail veteran blogging about the latest retail trends.

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