Author: Jacqueline Button

Clinton Cards was founded in 1968 by Don Lewin and named after his young son Clinton. It has gone from strength (77 shops in 1988) to strength (771 shops now) but last week crashed into administration, the latest high street victim of hard and changing times and the biggest since Woolworths in 2008.

What happened was simple: Clintons were in debt to the tune of £35m to RBS and Barclays. Those banks sold the debt to Clintons’ biggest supplier, American Greetings, and they called in the loan. Clintons couldn’t pay so administrators were appointed.

American Greetings’ motives are unclear: wouldn’t it be better to be main supplier and creditor to a trading entity than a business in administration? Will it acquire the business itself? The exotically named chief executive Zev Weiss has confirmed this is a possibility although there are said to be others interested in acquiring all or part of the business: WH Smith, rival Card Factory and investment firms OpCapita and GA Europe.

This level of interest recognises the strength of the brand and the importance of the card market. But Clintons hasn’t been doing well. In a sector which saw a 3% rise in sales last year, Clintons suffered a 3.5% drop. So what are they doing wrong? Cards are expensive (sometimes as much as £5 for a piece of card for goodness sake!), postage is ruinously expensive and online providers like Moonpig.com have taken a section of the market away from the high street. But this affects all card retailers and Clinton’s competitors, such as Card Factory, Paperchase and Scribbler are doing well with the latter reporting 15% year on year growth.

Paperchase occupies the top end of the market. Its cards aren’t cheap but they’re good quality and are only a part of the shop’s offer. There is an ever changing array of colourful stationery and quirky gift items well displayed in stylish units in carefully chosen locations. Scribbler has diversified into gifts but also specialised into cards which are at the rude end of humorous. They are popular, though, and when compared to Clintons fairly bland offer you can see why.

Card Factory is at the other end of the market – cheap, cheerful and, frankly, a bit cheesy but when it’s the thought that counts (which is surely the case with cards more than anything else) why, in these straightened times, send an expensive card when a cheap one will do?

Clintons meanwhile sits in the middle of the road and perhaps has tried too hard to please all of the people all of the time. Where once there were birthday cards and Christmas cards now there are cards for Easter, other religious festival and more dubiously cards to celebrate divorces, weight loss and your cat’s cousin’s step-mother’s wedding anniversary. Whilst it has a small range of acceptable but unadventurous cards for £1 its more unusual ranges (like the Deco range) are expensive and little of its offering stands out in a crowded market.

As well as product failures Clintons made bad business decisions: the acquisition of Birthdays in 2004 which simply increased its exposure to the struggling high street market, the fact that most of its units are in prime positions meaning a rent bill of an unbelievable £80m a year (in particular contrast to Card Factory which occupies more secondary, cheaper locations) and the apparent family feud which led the eponymous Clinton to be usurped from his position by Darcy Wilson-Rymer (another exotically named individual who is, for the avoidance of doubt, a man).

So what will happen now? Inevitably there are fears for the 8,000 employees and inevitably there will be store closures, particularly if a competitor like Card Factory or WH Smith buys the chain but, despite the shortcomings of some of its products there is a place for Clintons in high streets which already have too many empty shops. Let us hope that it will survive in some form and in some locations. And there is a broader fear – the spate of retailers getting into difficulties which have included HMV, Game and Thorntons shows no sign on abating. You can’t help wondering – who will be next?

Jacqueline Button is a Solicitor in the Real Estate Department and also SA Law’s Retail sector expert. To read previous blogs by Jacqueline, click here.

For further information about our Real Estate or Retail services, or to discuss a particular matter or situation in more detail, contact Jacqueline Button at our St Albans office by email at jacqueline.button@salaw.com or on 01727 798000.

© SA LAW 2012
Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them. You are recommended to obtain specific advice in respect of individual cases.

Author: Jacqueline Button

2011 was an inclement year for retailers. Most found trading hard and some were swept away by the storm – including Jane Norman, Habitat and, most recently, Barratts. Retailers expected Christmas to be tough but in fact it was dazzling (to use the BRC’s term). December like-for-likes grew by 2.2% with particular improvements in food, clothing and footwear. Closer analysis suggests that the figure isn’t quite as good as it first appears – remember the snowy weather of last December and the fact that Christmas Eve in 2011 fell on a Saturday – effectively giving retailers another day of Christmas trading. However with stores such as Sainsburys reporting a “record-breaking” Christmas it was certainly a season to be jolly for some.

So with Christmas now behind us what is the outlook for 2012?

Sunny Spells

As mentioned above Sainsburys had a happy Christmas and look to be going from strength to strength. All its figures are up – total sales for the third quarter by 4.5%, on-line grocery trading by 20% and convenience sales by almost 25%. This is very impressive and with a busy year for Diamond Jubilee street parties and Olympic themed barbeques coming up there is no doubt that Sainsburys will be basking in profitability in 2012.

Like Sainsburys, Debenhams had a good Christmas with like-for-likes up by 6.5%. After years in the shadow of John Lewis and House of Fraser they have got the department store formula right and are set fair for 2012.

So diversity is an indication of success (Sainsburys having extended its non food offer) but it’s not essential. Greggs opened 98 new stores in 2011 and plan to open 90 more in 2012. It sold 7.5 million mince pies and 75,000 “giant” ginger bread men in the Christmas period and its cheap but tempting (and unhealthy) offering will continue to appeal to cost-conscious consumers in 2012.

Other retailers likely to enjoy a balmy year include perennial favourites Waitrose and John Lewis and newer but popular smaller retailers such as Cath Kidston and The White Company.

Scattered Showers

Despite the success of Sainsburys and Debenhams , Marks and Spencer, usually capable of weathering any storm, reported a mixed Christmas with sales of general merchandise (particularly home goods) down on the previous year. This isn’t a surprise – beds and sofas aren’t going to be at the top of the list of economically challenged shoppers while a treat from M&S’s food department might be. They will have the same problem in 2012 unless they can offer better value on home goods as they have done quite successfully on clothing.

A surprising victim of the adverse conditions is Tesco whose like-for-likes are down by 1.3% and whose CEO is predicting a year of minimal profit . In addition they have just announced the “temporary” closure of 12 Fresh & Easy stores in the US. Perhaps the message is that diversification is good in a tough climate whilst global expansion might not be.

Also likely to suffer variable weather is Argos who are currently looking at closing stores but who, as a value retailer, should dodge the showers and have a reasonable year.

Mainly Cloudy

I have blogged about the ongoing troubles of HMV and Game before. They have both had a difficult 2011 and there is no sign of a better outlook for them in 2012. Game’s like-for-likes plunged by 15% over Christmas and HMV’s by 8.2%. The trend is simply moving away from buying music, games and technology on the high street when they are so easily available on line. By this time next year one or both retailers may no longer (sadly) be trading.

They’re a different type of retailer but Early Learning Centre suffered store closures over 2011 and its hard to see them reversing this trend in 2012. Their products are available elsewhere so the business is by no means finished yet but its hard to see this year as anything but miserable for them.

Also struggling are Thorntons who were buffeted by gales in 2011 and must expect a gloomy 2012.

Stormy Weather

So who is really going to suffer from the vagaries of the British retail climate? Barratts have (as mentioned above) just gone into administration, La Senza is closing 81 stores and looking for a buyer and Hawkins Bazaar is in administration and looking for a buyer for its remaining 25 stores. Past Times is also on the brink of being drowned in the flood. Its an eclectic mix but there are similarities – large chains, small stores no diversification and products which aren’t what cash-strapped customers want to buy. Whilst administration isn’t always the end of the road for a business some or all of these names won’t be around in a year’s time and, unfortunately, there will be others (whose problems aren’t yet apparent) who will join them.

Overall its hard to see that 2012 will be anything other than tough for the majority and disastrous for a few. The bright spots of the Jubilee, the Olympics, Paralympics and European Cup will help some but not all and for most success (or otherwise) will be as unpredictable as the weather.

Jacqueline Button is a Solicitor in the Real Estate Department and also SA Law’s Retail sector expert. To read previous blogs by Jacqueline, click here.

For further information about our Real Estate or Retail services, or to discuss a particular matter or situation in more detail, contact Jacqueline Button at our St Albans office by email at jacqueline.button@salaw.com or on 01727 798000.

© SA LAW 2012
Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them. You are recommended to obtain specific advice in respect of individual cases.

Author: Jacqueline Button

Last month I wrote about the Government’s appointment of Mary Portas, the Retail Tsarina, to carry out a review aimed at “halting the decline of the High Street” with particular emphasis on clone towns and vacancy rates. Now the Labour Party have launched a 4 point plan to “put the heart back into Britain’s High Streets”.  The announcement on their website is, unsurprisingly, full of criticism of the “Tory-led Government” and its “VAT hike” but it’s worth looking beyond the party political posturing at their ideas.

Labour begin by stating that 14.6% of retail premises in the UK are currently empty with vacancy rates rising. This is at odds with Colliers International who say that 13.3% of units are empty and vacancy rates are falling. Either way, this is too large a figure and Labour are right to give some thought to the issue.

A 4 point plan sounds brief enough to make an impact but long enough to provide some substantive, practical ideas but in fact, although Labour reel off lots of facts and figures, they give little depth to the plan and no information as to how it would work in practise.

VAT

The first part of the plan is a temporary VAT cut back to the old rate of 17.5%. Labour do not say how temporary this is to be but presumably they are talking about months rather than weeks or years. Last year the British Retail Consortium predicted the VAT increase to 20% would cost 163,000 jobs over 4 years and reduce consumer spending by £3.6 billion over the same period. Apparently the cut, as well as saving jobs and increasing spending, will put £450 back into each family’s pocket. Labour don’t explain how this amount is calculated or point out that in order to make a dent in the £3.6 billion everyone would have to spend their £450 on the High Street and not on the internet or a well-deserved holiday away from economy-induced stress.

The obvious problem with this suggestion is, in a time of tax rises and spending cuts, where is the 2.5% saving to be made? The plan doesn’t deal with that.

DIVERSITY

Jack Dromey MP, the Shadow Local Government Minister, said, “One of the things I hear from my constituents is how the character of the local High Street has changed”. His constituency is in Birmingham but presumably he isn’t referring to the changes brought about by the arrival of Selfridges and the rejuvenation of the Bull Ring which even the most reactionary shopper would see as positive.

Labour say they want to introduce a retail diversity planning clause, putting communities in charge of the future of their local High Streets. They don’t say in which legislation this clause is to go or expand on the rhetoric. Assuming that they mean that every High Street shouldn’t be occupied with the same big brands, this isn’t dissimilar to the coalition’s (that’s the Tory-led coalition, by the way) and Ms Portas’s opposition to Clone Towns.

So how would this diversity clause work? In a shopping centre or a street where there is only one landlord like Marylebone High Street the landlord can (to an extent) control the tenant mix. In most High Streets there are multiple landlords each keen only to let his premises on the best terms. The only way to control the tenant mix would therefore be through planning law operated by local authorities.

In planning terms, retail is currently classified as A1 use. Therefore if a retailer wants to use an office (B1) or a warehouse (B8) for retail use they have to apply to the local authority to change the use of those premises which the authority will either grant or refuse. But if a big retailer wants to use premises previously used by a small retailer no consent is needed. Similarly there is no way under planning law to stop a whole row of pound shops opening up or to prevent one retailer opening multiple units in one street.

Labour’s diversity clause is beginning to look like a whole statute and even when the parliamentary draftsmen’s work is finished the local authorities’ in interpreting the law and processing the applications it generates will have only just begun. Each community will need a street full of stationers to supply the amount of red tape needed to prevent the retailer with the best bargaining position (as opposed to the best fit in the street) moving in.

COMPETITION

Labour’s third prong is to create a “competition test” which would (somehow) lead to “greater choice and lower prices for shoppers” and ensure a “level playing field between small and large shops”.

Again, with no explanation of how this idea will be translated into reality or even what it really means we can only speculate. Labour’s planning statute will have to define a “small shop” and a “large shop” (will this be based on square footage, turnover, profit, number of outlets, number of employees or number of noughts in the chief exec’s salary?) and somehow ensure that a certain percentage of units in a town will be reserved for independent retailers.

The reality of this, of course, is that landlords will be faced with empty shops if the “big shop” quota for their town has been used up or forced to reduce rents to accommodate an independent who cannot pay the market rent. So whilst this may lead to greater choice for shoppers it won’t necessarily lead to lower prices and may lead to financial difficulties for landlords. Hardly a way of injecting new life into the economy.

INNOVATION

Labour’s fourth idea, to enable councils to pursue innovative uses for empty shops such as cultural, community or learning services is their best although it is hardly innovative in itself and is little different than landlords granting leases to charity shops on the basis that at least the rates are covered even if no rent changes hands. However, at least Labour have grasped the concept that an occupied (even if non-trading) unit is better than an empty one and this is certainly an idea which could help some towns where shop vacancies are high and other usable space is in short supply.

The biggest flaw in Labour’s plan is what they don’t cover: town centre car parking charges have, like VAT, been “hiked” whilst most out of town shopping centres provide free parking. Business rates are high and in some places crippling (rates in St Albans are higher per square foot than Oxford Street). Instead of nebulous ideas about diversity and competition these are solid, easy to grasp issues which Labour could have addressed but chose not to.

Since Ms Portas’s appointment the (Tory-led) Government has been quiet on the issues of the High Street, consumed as it has been with other problems. Unfortunately Labour chose a launch date for its plan of 25th July when the news was dominated by the potentially disastrous political games in the US and the tragedy in Norway so their ideas (whilst flawed) have not been as widely publicised as they might have been. The problems of the High Street aren’t as immediate as the phone-hacking scandal or as far-reaching as the US debt crisis but they need addressing quickly and thoroughly. So far, neither the Government nor the Labour Party have been quick or thorough enough.

Author: Jacqueline Button

Its been a busy couple of weeks for an international corporation which owns a British institution. And that isn’t News International and the now defunct News of the World. Marks & Spencer has 600 stores in the UK and over 300 further stores worldwide. It employs 75,000 people in the UK and 21million people visit its UK shops every week.  The brand is now 125 years old (there is a museum in Leeds celebrating its history) and it would be hard to argue that it’s not going strong.

Last week M&S held its AGM. Questions from shareholders included topics such as socks and bread (apparently M&S bread doesn’t compare well with other brands but the bakers are working on improving it). These are subjects close to the shareholder’s hearts and also to the retailer’s customers’: a well-dressed, well-heeled army of discerning shoppers who appreciate quality in either socks or seeded batch. They like value but not value retailers and are older than the average high street shopper.

Unlike John Lewis which is concerned it is too “beige” the directors of M&S are alive to the fact that the brand could be becoming too colourful for its core customer. Its Classic collection is enduring and popular and the ranges aimed at younger customers such as Portfolio and Indigo are hardly competing with Top Shop and River Island. The biggest indicator, however, that not only are M&S’s customers older but that the board listens to them is that the TV Ads featuring the “M&S girls” are to be axed because they are not appealing to the core shoppers. So no more shots of Myleene Klass and Lisa Snowden in bikinis or Dannii Minogue and VV Brown in skimpy dresses. The agelessly glamorous Twiggy will be retained but only for billboards and in-store promotions. This is a cunning move: please the customers and save a fortune in advertising costs in one well timed decision.

Even before this masterstroke M&S stood out as a success story in the retail graveyard which 2011 has become. Its most recent results are a rise in like-for-like sales of 1.7% in the 13 weeks to 2 July. Whilst this growth is driven by food the retailer did gain a share in the clothing market, a trend which is likely to continue given the difficulties of other retailers in the sector (although fans of the latest clothing casualty Jane Norman are unlikely to flock to M&S in large numbers).

M&S’s real strength, and the sector which will see it through the bad times, double dip or not, is food. The brand is aspirational, synonymous with quality and with little competition in the mass market. Only Waitrose comes close but in competing as a true supermarket cannot narrow its focus on the top end of the market as effectively as M&S. For the M&S customer food is good and cooking is easy (made so by the Cook range and the Bistro products amongst others). This comes at a price but M&S customers are prepared to pay it. Any relaxation of that price, such as the Dine In for £10 offer, leads to scenes reminiscent of a zoo feeding frenzy as excited customers try to grab the best bargain.

From its variety of cafes to its no quibbles returns policy M&S is doing almost everything right. There are sectors where it could do better (its jewellery, for example, its overpriced compared to Accesorize) or which it could do away with (a lot of other retailers, not least John Lewis, has a wider, better selection of electricals) but its core offering of food and clothes is hard to beat. The shareholders may complain about the quality of the bread but they know their investment is a wise one and, what’s more, that the directors listen to them. They are (or should be) happy shoppers.

Author: Jacqueline Button

Its been a bad week for some retailers. Comet are the latest multiple to announce planned store closures (22 are to be sold), New Look have announced bad results and don’t get me started on the subject of HMV and their refinancing which indirectly makes us, their tax-paying customers, part owners of the struggling brand.

But elsewhere, in a land of ice, frost and frozen food things are looking up. This week Iceland announced a record year with pre-tax profits of £155.5m up 14.8% from last year which in itself was a good one. During the last financial year the retailer opened 21 new stores and plans another 15. These are impressive figures. Iceland is doing well under the management of founder Malcolm Walker who, along with his team, owns 23% of the business.

Not all mums go to Iceland and I’m afraid that I’m one of the heathens who goes to Sainsburys instead. A visit to an Iceland store however does a lot to make even the snobbiest shopper think twice about taking their 4X4 to Waitrose. The stores aren’t the most ascetically pleasing on the high street but the offering is broad and the food is cheap. No, its not made by Heston Blumenthal or advertised by the suave and classy Rupert Penry-Jones but when most of the products cost £5 or less you don’t expect it to be. In fact, the face of Iceland is now reality “star” Stacey Solomon, a big step up in wholesomeness (not to mention singing ability) from the disgraced former “star” Kerry Katona.

Iceland’s website follows suit: its not going to win design prizes in cyberspace but its clear, colourful and helpful. There is a section for “busy mums” and information on healthy food and home delivery.

So has Iceland had it easy during this never-ending period which feels as dark as the days of an Icelandic winter? They’re a value retailer (but so are New Look) and they sell food (but mainly food – no diverse offering like Asda, Tesco and Sainsburys to spread the risk). Yes, they’ve had it easier than some but their profits and their expansion and the fact that they are being eyed-up for a takeover by both Asda and Morrisons speak for themselves.

But, as with all retailers, Iceland could do better. Walker says “we know we’re doing the right things as our existing customers are spending more money with us”. They need to do even more right things to attract new customers. My suggestions: instore cafes (always popular with busy mums), premium brands and don’t sell to Asda, Morrisons or anyone else. Iceland is a successful retailer. Its not glamorous or luxurious but it does what it does really well and with a few improvements it might divert some of those 4X4s away from Waitrose.

Author: Jacqueline Button

As everyone (save, presumably, our increasing population of the functionally illiterate) knows Mary Portas, former Queen of Shops and current Secret Shopper, has been appointed by the government to carry out a review aimed at “halting the decline of the High Street”. There was a time, in another millennium, when people were appointed to this sort of role due to nepotism, cronyism, corruption or even because they had the right experience to carry out the task. Now, for this big, important role we get a TV personality.

Vacancy Filled

However, a high-profile, energetic, opinionated person is just what is needed for this Herculean job. The government (David Cameron, personally, no less) wants Ms Portas to look into the problems of empty shops and “clone towns” with a view of identifying what “government, local authorities and businesses can do to promote the development of more prosperous and diverse High Streets”.

Ms Portas began her new job with something of an own goal when it was discovered that she had a relationship with Westfield who are hardly champions of independent retailers. We have to look past that, however, and see what she can deliver. The problems with our high streets are big and getting bigger as more and more retailers (HMV, JJB, Thorntons to name but three) start closing stores. In some towns, particularly in Northern England, vacancy rates are alarmingly high and it is a self-perpetuating problem: once a few shops are empty other retailers either choose to move or are forced to close due to lack of passing trade.

Clone Wars

Clone towns are a different issue and appear a less serious one. Presumably even Ms Portas and the government agree that is better to have a high street full of big brands rather than half empty with a couple of struggling independents. But creating retail diversity is like any other kind of positive discrimination – rife with issues. The only way it is going to work is to get all the players to work together.

The first are the big brands themselves. Ms Portas has long been running a campaign to get the likes of Tesco to work alongside rather than against their local counterparts but appealing to the better nature of big business isn’t going to produce more than superficial results. Big retailers have shareholders to think of and their core customers to please. They may make a token gesture to help out locally but they aren’t going to do anything which would threaten their dominance. That’s not business. Or human nature.

There is a role for local councils on the planning front and also on parking charges. Car owners prefer to shop out of town where parking is free rather than on the high street where they have to pay to park. Haringey Council has just increased the cost of parking on Green Lanes from £2.80 per hour to a staggering £6. And this is hardly a wealthy area.

And what can landlords and the property industry do? Long leases, upwards only rent reviews and quarterly rental payments don’t suit small, new businesses. Monthly payments are now more common but rents are set by the market and many small retailers simply can’t afford prime spots. But a government interferes in the market at its peril. It cannot be fair to allow a smaller retailer to pay a lower rent per square foot than its multiple neighbour. This isn’t fair on landlords either, and many landlords are pension funds so lower rents mean smaller pensions.

Having said that, a landlord can obviously pick and choose its tenants if it can afford to do so. Marylebone High Street is often cited as an example of diversity (although in reality it is dominated by chain stores) but it is an unusual example of a street with only one landlord who can treat the street much like a shopping centre and create its own mix of tenants.

Buying Power

Most importantly, it is the consumer who has to be convinced by Ms Portas’s review. 21st century customers are busy juggling jobs and families and often they want to shop as quickly and conveniently as possible. This means buying as many goods as possible from the same shop or a series of shops in the same place, preferably with easy parking, at a time which suits them. It means buying things from familiar brands or on the internet.

But its not all about the multiples. Consumers have the power in retailing and they tend to exercise it intelligently – they know a good shop when they see it whether it’s a big brand or an independent. Lots of independents do well but ultimately any shop, big or small, will close if it doesn’t sell what people want to buy.

Ms Portas’s review shouldn’t lead to a restriction of consumer choice by making trading harder for any class of retailer, even the big ones. She may be the retail tsarina, but on the high street the customer is king.
Contact us

For further information about our Real Estate services or to discuss a particular matter or situation in more detail, contact Jacqueline Button at our St Albans office by email at jacqueline.button@salaw.com or on 01727 798000.

© SA LAW 2011
Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them. You are recommended to obtain specific advice in respect of individual cases.

Author: Jacqueline Button

Last week I blogged about the latest horror stories from the high street. This week, however, there’s more of a chick lit feel on the retail front with up beat and feel good stories in the wake of the Royal Wedding.

Will and Kate’s nuptials gave a boost to the sales figures of more than just haute couture designers and milliners. Every self respecting street was decked with bunting and union jacks for its party; sales of barbeques went up, so did paper plates, so (more mundanely) did bin bags. Waitrose reported a 23% increase in sales as against the Easter period last year – and only part of that was due to Heston Blumenthal’s infamous royal trifle. Apparently most customers made their own and the sale of trifle sponges went up by a staggering 370%.

Across the board retail sales rose by 1.1% month on month in April. It was the warmest April on record which triggered near panic buying of flip flops and skimpy shorts – sometimes by people who would be better off buying something less skimpy. DIY sales rose (although not by enough to save Focus) as did sales of gardening products and outdoor toys.

Back to haute couture and luxury brand Burberry is linking its plans for success to another event of international importance which takes place in London – the Olympics. Last week I blogged that JJB (who are in a somewhat different market) were pinning their hopes of a revival on souvenir sportswear and now Burberry are doubling their store space in London in time for the opening ceremony. The company will increase the size of its Knightsbridge store, has taken over a whole block of Regent Street and is apparently looking for space on the Kings Road. The brand has just reported an increase in full year pre-tax profits from £215m to around £290m. Seriously impressive for a retailer which doesn’t sell trifle sponges.

The final good news is that Marks and Spencer, that bastion of the high street has announced a 12% rise in its profits to £710m (obviously it does sell trifle sponges which must have contributed in no small part to that figure). M and S is looking to re-open in Paris and transform its online presence.

So what does all this good news mean? Is it the start of a trend? Is a blip? Is it a sign that the good times are on their way back? Unfortunately, the answer to the last question is almost certainly no. Other than Royal wedding invitees and Burberry’s core customer base, people are finding that disposable income is in short supply. In April certain circumstances collided and overcame consumers’ caution. That may not happen again for a while – maybe (and this is a depressing prospect) not until the Olympics.

Author: David Linklater

As you may have heard in the newspapers recently, there has been much speculation about the possible takeover of Iceland by Morrisons.  The 40-year-old Iceland chain has been put up for auction by the Resolution Committee of Landsbanki, the failed Icelandic bank that took ownership as a creditor of Icelandic retail group Baugur.
It is suggested that this would give Morrisons the much needed boost to rival their nearest competitors by increasing the company’s market share by about 2% to 14%, bringing it nearer to its closest rival, Sainsbury’s, which has a 16% share of the sector.
Iceland has roughly 800 stores, mainly focused on high streets which will mean Morrisons get a long awaited foothold on the high street market and be a more dominant force in the South East.
There is also speculation that rival supermarket chains Sainsbury and Asda are interested in buying the majority stake in the frozen food retailer. Another name linked with the takeover is Iceland chief executive Malcolm Walker who already owns 26% and made an offer on the remaining shares of £1bn last year.
The sale process begins in September when all eyes will be watching to see what happens to the iconic brand and whether it retains its position in the market as a leading provider of discounted frozen foods or whether the new owner will try to re-brand.

Author: Jacqueline Button

War and Peace

In March I blogged about the troubles of HMV – a traditional high street retailer hounded to the point of profit warnings and the threat of store closures by competition from the voracious etailing sector.

One of the ideas mooted for the survival of the brand was the combining of some outlets with those of Waterstones, its sister company. Now that is looking unlikely as HMV has been looking for buyers for Waterstones and may have found one in the form of an interesting partnership. Tim Waterstone set up the eponymous chain in 1982 using a £6,000 redundancy payment he received from WH Smith. Now in his 70s he has made 5 previous attempts to buy back the company. This time, he might well succeed because his partner is Russian zillionaire, Alexander Mamut. The news of their bid of £43m led to a 12.5% rise in HMV’s share price even though HMV had allegedly hoped to achieve a price of £75m.

If the bid is successful expect to see an increase in the works of Dostoyevsky and Nabokov on the shelves.

Wenlock and Mandeville

Another favourite blogging subject at SA Law is JJB, the struggling sports retailer which undertook a second CVA earlier this year, conducted a fundraising and moved to AIM which means, claims its broker Panmure Gordon that it now “has the finances and strategy to restore the brand”. One would hope so after spending that kind of money on rescue measures.

Apparently, JJB is looking forward to 2012 for a resurgence in sales brought about by the Olympics and England’s likely qualification for Euro 2012. They are hoping these two events will generate sales of more than £200 per square foot – that’s an awful lot of Olympic merchandise and Wayne Rooney replica shirts and an awful lot of reliance on Olympic fever taking hold (a reasonable assumption) and the England football team not crashing out of another tournament early doors (no comment).

DIY SOS

Last week saw another retailer fall from grace – Focus DIY has gone into administration following a default on their banking facilities. The good news is that the 180 stores are still trading and Kingfisher (B&Q’s owners) have agreed to buy 31 of them. In addition, the owner of Range homewear stores is also interested in the chain. Interestingly Focus blames not the weather (unlike JJB, HMV and Thorntons) but a weak housing market a low consumer confidence for its difficulties – surely a weak housing market means homeowners are resigned to staying put and want to spend money doing up their houses but perhaps they are all going to Wickes and Homebase.

Finally, it looks like there is more trouble ahead. According to Ernst and Young’s Item Club consumer spending is expected to rise by only 2% a year in the 10 years to 2020. The gap between high inflation and subdued wage growth will continue to widen and disposable income will continue to decline. This is a depressing forecast, both for shopaholics like myself and for retailers, particularly those sensitive to discretionary spending. You might think that this is every retailer except the supermarkets although the same report says technology retailers should do all right. In other words people would rather have an Apple than an apple.

Author: Jacqueline Button

In the shops in April there were milk chocolate eggs, dark chocolate eggs, white chocolate eggs, big eggs, small eggs and enormous eggs, cute bunnies, stylish bunnies and scary bunnies, and the odd chocolate bear or duck.

If you’re a chocolate retailer you expect your best trading period to be Easter time. Thorntons, perhaps the High Street’s best known chocolatier is celebrating its centenary this year. But if it had 99 years of strong Easter trading it wasn’t to have a hundredth. The company has just issued its second profits warning of the year with like for like sales down by 12.6% on the last quarter.

It is now estimating annual profits of £3m to £4.5m. That’s a lot of chocolate but not as must as it sold last year when it made a profit of £6.1m.

And what does Thorntons blame for its poor sales of eggs and bunnies? The weather. That would be the same meteorological force on which it (amongst others) blamed its poor Christmas trading. But whereas December sales were affected by the ice and snow Thorntons reckons that the hot April weather put customers off buying chocolate.

Is this the real reason? Or the only reason? Yes, chocolate melts in hot weather but surely the combined feel-good factors of sunshine, days off work and that wedding everyone’s talking about would be more likely to make consumers splash out on chocolate goodies than less. Besides, you can keep it in the fridge.

It seems more likely that it’s a combination of factors which have hit Thorntons’ profits this Easter. One is increased competition – Thorntons isn’t the only chocolate shop on the High Street and its not just chocolatiers who sell Easter eggs. Hotel Chocolat is a dark and sophisticated presence in the market and, in London, there is even more luxurious competition from the likes of Maison du Chocolat and Godiva. All the supermarkets were selling Easter products and it’s much easier for busy parents to stock up with eggs whilst they do the weekly shop than to take time out of a busy day to queue up at Thorntons, not to mention the wider range of products and the host of three for two and bogof offers which the supermarkets were promoting.

Another factor is an increased awareness of health issues – chocolate is not, unfortunately, good for you. And finally, in households where the R word still resonates purse-strings are tight and chocolate is not (and I personally struggle with this concept) an essential purchase.

So what will the results of Thorntons’ melting profits be? One is that they’re selling ice cream in more stores which can only be a good thing, but flippancy aside the main outcome will be the closure of some of Thorntons’ 600 stores. 9 have closed this year already and the company has said that with a lot of leases coming up for renewal it will review its portfolio with a view to more stores closing. I have already blogged about the trials, tribulations and proposed store closures of other retailers such as HMV and JD Sports and it is depressing to add Thorntons to that list, especially as it celebrates its centenary. In some towns there will be another empty shop on the High Street and chocoholics will have to get their fix elsewhere.