Monthly Archives: September 2009

Global Retail
posted by Retail News From the Guardian

Marks & Spencer sees difficult 2010

Marks & Spencer boss, Stuart Rose, who has earned £7.8 million in salary and bonuses last year. Photograph: Rui Vieira/PA.

Photograph: Rui Vieira/PA.

There’s a mixed bag of retail results this morning, with ASOS soaring ahead, Marks & Spencer struggling along, and Blacks Leisure shutting stores and cutting staff.

M&S first. Sir Stuart Rose said today that M&S is riding the downturn well. It’s true that a 0.5% decline in like-for-like sales in UK is better than some analysts feared, but the company is still lagging behind rivals. Marks’ food division grew its sales by 1.7% in the last 13 weeks – that’s pedestrian compared with Waitrose’s weekly gains of around 11%.

Rose said that M&S also plans to hire 20,000 temporary workers this Christmas, and warned that next year will be difficult:

‘We are pleased to report continuing improvement in our performance. This demonstrates that the actions we are taking are working.

Whilst there is more visibility in the marketplace and consumers appear more confident, we continue to be cautious about the outlook. We expect 2010 to be a tough year and we will continue to run the business accordingly.”

ASOS, meanwhile, grew its sales by an impressive 47% in the last six months. Its web site – which mainly offers affordable versions of celebrity fashions – now has 1.2 million active customers.

The news is gloomier from Blacks, though, which said it is shutting 87 underperforming stores and looking to cut 20% of its head office staff.

In other news…..First Group has said trading is in line with expectations despite the recession, and also reported cutting 4,000 jobs.

And Man Group has estimated it will make a profit of £280m for the last six months, a sharp fall on the previous year’s £622m.

Global Retail
posted by Retail News From the Guardian

Jessops saves 2,000 jobs with HSBC deal

Jessops expects to post a loss for the year

Jessops has struck a deal with HSBC which will save 2,000 jobs. Photograph: David Sillitoe

The Jessops camera chain has handed control of the business to its bank in a take-it-or-leave-it deal it said would save the business and 2,000 high street jobs.

The 72-year-old chain, the largest photographic retailer in the UK, has agreed to a debt-for-equity swap with HSBC. Shareholders, whose investment in Jessops was worth 155p a share just five years ago, will get just 1p for every 10 shares they own.

Chairman David Adams, who was brought in two years ago to try and save the ailing business, said the deal was “a good result”. The alternative, he said, was immediate insolvency and shutdown.

Jessops is one of a number of firms that have been forced to relinquish their equity to lenders to slash their debts and stay in business. Earlier this year retirement home specialist McCarthy & Stone and housebuilder Crest Nicholson were forced into such swaps. Fashion group Mosaic, which runs the Oasis chain, did a similar deal with its lender Kaupthing and hardware retailer Robert Dyas agreed a swap this month with Lloyds Banking Group and Allied Irish.

The Four Seasons nursing home business and betting group Gala Coral are also known to be considering a swap deal to cut their debts.

Adams said Jessops’ dire financial situation was not the result of the recession but of over-ambitious debt-fuelled growth plans which left the retailer owing HSBC some £60m. The retailer, he said, had pursued a “growth at any cost” business plan that was unrealistic.

Jessops is one of a number of companies held up as an example of the poor outcome of private equity ownership. The private equity arm of ABN Amro floated Jessops in October 2004 for 155p a share and sold its remaining stake in 2006 for 120p.

The following year the wheels came off: Jessops was hit by fierce competition for point-and-shoot compact cameras and increasing use of camera phones. Sales collapsed, the group issued multiple profit warnings and the directors were replaced. One hundred stores were closed, 500 jobs axed and old stock sold off at a loss.

Adams said the swap deal showed “we have demonstrated to the bank that Jessops has a valid place in the market and a valid business plan and that there is good chance of getting a return”.

Under the debt-for-equity swap Jessops will be sold to a new company 47% owned by HSBC and 33% by the retailer’s pension fund, which is in deficit. The remaining 20% stake will pass to an employee benefit trust that will eventually be allocated to the retailer’s management as a long-term incentive. Two key beneficiaries are likely to be Jessops’ new chief executive, Trevor Moore, who joined the business two weeks ago, and David Adams, who is staying on as chairman.

HSBC is providing a £54m loan to the new company to acquire Jessops and will immediately write off £34m – leaving the retailer with a debt of £20m. Shareholders will receive just £100,000. There are just over 100m shares in issue.

The UK Listing Authority, which monitors quoted companies, has granted a waiver to usual rules that would require a circular outlining the deal and a shareholder vote – to allow the refinancing to go ahead immediately. The retailer had said it did not have time to comply with the usual procedures.

Global Retail
posted by Retail News From the Guardian

Jessops hands over control to HSBC in rescue deal

Nikon D3 camera

Sales of conventional cameras at Jessops were hit by the popularity of camera phones. Photograph: Dan Chung

The Jessops camera chain has handed control of the business to its bank in a take-it-or-leave-it deal it said would save the business and 2,000 high street jobs.

The 72-year-old chain, the largest photographic retailer in the UK, has agreed to a debt-for-equity swap with HSBC. Shareholders, whose investment in Jessops was worth 155p a share just five years ago, will get just 1p for every 10 shares they own.

Chairman David Adams, who was brought in two years ago to try and save the ailing business, said the deal was “a good result”. The alternative, he said, was immediate insolvency and shutdown.

Jessops is one of a number of firms that have been forced to relinquish their equity to lenders to slash their debts and stay in business. Earlier this year retirement home specialist McCarthy & Stone and housebuilder Crest Nicholson were forced into such swaps. Fashion group Mosaic, which runs the Oasis chain, did a similar deal with its lender Kaupthing and hardware retailer Robert Dyas agreed a swap this month with Lloyds Banking Group and Allied Irish.

The Four Seasons nursing home business and betting group Gala Coral are also known to be considering a swap deal to cut their debts.

Adams said Jessops’ dire financial situation was not the result of the recession but of over-ambitious debt-fuelled growth plans which left the retailer owing HSBC some £60m. The retailer, he said, had pursued a “growth at any cost” business plan that was unrealistic.

Jessops is one of a number of companies held up as an example of the poor outcome of private equity ownership. The private equity arm of ABN Amro floated Jessops in October 2004 for 155p a share and sold its remaining stake in 2006 for 120p.

The following year the wheels came off: Jessops was hit by fierce competition for point-and-shoot compact cameras and increasing use of camera phones. Sales collapsed, the group issued multiple profit warnings and the directors were replaced. One hundred stores were closed, 500 jobs axed and old stock sold off at a loss.

Adams said the swap deal showed “we have demonstrated to the bank that Jessops has a valid place in the market and a valid business plan and that there is good chance of getting a return”.

Under the debt-for-equity swap Jessops will be sold to a new company 47% owned by HSBC and 33% by the retailer’s pension fund, which is in deficit. The remaining 20% stake will pass to an employee benefit trust that will eventually be allocated to the retailer’s management as a long-term incentive. Two key beneficiaries are likely to be Jessops’ new chief executive, Trevor Moore, who joined the business two weeks ago, and David Adams, who is staying on as chairman.

HSBC is providing a £54m loan to the new company to acquire Jessops and will immediately write off £34m – leaving the retailer with a debt of £20m. Shareholders will receive just £100,000. There are just over 100m shares in issue.

The UK Listing Authority, which monitors quoted companies, has granted a waiver to usual rules that would require a circular outlining the deal and a shareholder vote – to allow the refinancing to go ahead immediately. The retailer had said it did not have time to comply with the usual procedures.

Global Retail
posted by Retail News From the Guardian

Retail sector enjoys unexpected sales growth in September

Bluewater shopping centre

Bluewater shopping mall in Kent. Photograph: Corbis

Retail sales rose unexpectedly this month, in a sign that the sector has stabilised following the sharp fall in demand throughout most of this year.

The Confederation of British Industry (CBI) reported this morning that a small majority of retailers enjoyed higher sales in September than a year ago.

“After such a difficult summer, it is encouraging to see signs that conditions in the retail sector are stabilising,” said Andy Clarke, chairman of the CBI Distributive Trades Panel. Clarke, who is also chief operating officer of Asda, added that consumers should be able to look forward to seeing more new products on the shelves after “months of heavy destocking”.

But Clarke also warned that: “With unemployment rising, wage growth low, and consumers building up their savings, spending is likely to remain subdued for some time.”

According to today’s CBI distributive trades survey, 39% of retailers said sales volumes rose in September compared with a year ago, while 36% said they fell. The resulting balance of +3 was significantly better than the -14 which the City was braced for.

The figures show that grocers are enjoying particularly solid trading, with a net balance of +80 reporting higher sales in September. But durable household goodsmakers, chemists and booksellers all reported a net fall in volumes.

With interest rates at a record low of 0.5%, lower mortgage costs means that consumers should have more disposable income. But separate data from the Bank of England this morning showed that a lack of credit availability helped to push remortgaging and unsecured borrowing down last month.

Howard Archer, economist at Global Insight, said the CBI data indicated that the UK economy returned to growth in the current quarter. But he was also cautious over the strength of the recovery.

“Low mortgage payments, reduced utility bills and easing inflation are boosting the purchasing power of a good many people, thereby giving them scope to step up their discretionary spending. Even so, the suspicion remains that the upside for consumer spending will be limited for some time to come as consumers overall still face serious obstacles. These notably include sharply higher and rising unemployment, low earnings growth and heightened debt levels,” Archer said.

The distributive trades survey has only reported a net rise in sales volumes in one other month, April, since the start of 2009. Today’s survey also showed that a net balance of +3 retailers expect them to rise in October.