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UK Retail Briefing - December 2007

ANALYST COMMENT
 TOUGH TIMES AHEAD
Consumers under pressure
DSG
The Internet
Confidence still strong
THE MONTH IN UK RETAILING
 CO-OPS (RETAIL)
Co-op in £80m pharmacy acquisition
 GROCERS
Grocers fined for dairy price fixing
Somerfield unveils expansion plans
Supermarkets judged in animal welfare league
Tesco
…boss unveils global sales target
…as it considers Czech Plus business
…then posts strong Q3 figures
…as it launches IT support service
 OFF-LICENCES
Threshers and Oddbins
…merger rumours emerge
…before they deny reports
 CLOTHING RETAILING
Alexon issues profit warning
Arcadia criticised for not joining ethical trade group
Matalan FY profits up 8.5%
Moss Bros
…issues profit warning
…as Baugur considers bid
…while Laura Ashley builds stake
Peacocks plans international expansion
TK Maxx to launch homewares chain
 FOOTWEAR RETAILING
JJB acquires Original Shoe Company
 MIXED GOODS RETAILING
Woolworths under pressure to renegotiate debt
 MULTI-SECTOR RETAILING
Alliance Boots posts £504 million H1 profit
HMV
…sees losses narrow
…and continues rolling out Fopp stores
Laura Ashley reports 10.8% fall in LFLs
M&S not ruling out return to continental Europe
 DEPARTMENT STORES
Debenhams
…renegotiates debt
…as MRG takes 7% stake
…as Landmark-owner considers joint bid
 DIY RETAILING
Kingfisher
…sees weaker UK demand hurt profits
…and offloads B&Q Taiwan joint venture
Topps Tiles reports drop in FY profit
Travis Perkins updates trading
 CARPET RETAILING
Carpetright sales affected by UK slowdown
 FURNITURE RETAILING
MFI to spend £125m on overhaul
ScS issues profit warning
 HOME SHOPPING
Asos H1 profit soars
Findel posts strong H1 profit
 HEALTH AND BEAUTY RETAILING
Co-op in £80m pharmacy acquisition
 SPORTS AND LEISURE GOODS RETAILING
JD Group improves LFLs, warns on tougher trading
JJB
…LFLs up 1.6%
…as it acquires Original Shoe Company
Sports Direct
…sees Ashley plan to increase stake
…as Sports Direct posts weak H1
 JEWELLERS
Signet warns on FY profit
Theo Fennel boss seeks international expansion
 TOYS AND GAMES RETAILING
Game
…provisionally cleared for Gamestation takeover
…as strong performance continues
EXECUTIVE APPOINTMENTS
Baugur targets Shepherdson
Bhs chairman to step down
Blacklock to leave Waterstone’s
Cheesewright leaves Asda for Wal-Mart Canada
Hobbs appoints new creative director
Hudson quits M&S
Morrisons appoints new executives
New CEO for The Body Shop
New Look chairman retires
Primark on the hunt for new buying director
Spindler appointed to Debenhams’ board
Theo Fennell appoints new chief executive
TK Maxx appoints new MD
Waitrose appoints new spirit buyer
PRODUCT DEVELOPMENT – FRUIT AND VEGETABLES
 ASDA
 ICELAND
 MARKS & SPENCER
 MORRISONS
 SAINSBURY’S
 SOMERFIELD
 TESCO
 WAITROSE
ADVERTISING NEWS
 NEW CAMPAIGNS
HMV launches biggest-ever Christmas campaign
Sainsbury’s directs customers to festive site
 ACCOUNT GAINS/LOSSES
Miles Calcraft Briginshaw Duffy retains Waitrose advertising account
BLM gets D&A brief
RETAIL ADVERTISING REVIEW
 ADVERTISING EXPENDITURE
Figure 1: Total advertising expenditure by all advertisers (£m), Oct 2003-Oct 2007
Figure 2: Total advertising expenditure by all retail advertisers (£m), Oct 2003-Oct 2007
 USE OF MEDIA
Figure 3: Use of media by retail and all advertisers (%), Oct 2003-Oct 2007
Figure 4: Use of media by retail and all advertisers (£m), Oct 2003-Oct 2007
 TOP 25 RETAIL ADVERTISERS
Figure 5: Top 25 retailers by adspend (£), Sep 2007-Oct 2007
Food
Furniture
DIY
Variety Retailers
Optical
Other
Nielsen Media Research/definitions
RETAIL SALES AND INFLATION
 RETAIL SALES
Office for National Statistics
Figure 6: Retail sales trends: Nov 2006-Nov 2007
Figure 7: Non seasonally adjusted % value change on previous year, Nov 2006-Nov 2007
Figure 8: Seasonally adjusted % volume change on previous year, Nov 2006-Nov 2007
Significant features of the latest ONS statistics
Confederation of British Industry
British Retail Consortium
 RETAIL PRICE INFLATION TRENDS
Figure 9: Annual percentage change in retail price index for selected product groups: Nov 2006-Nov 2007
Figure 10: Annual percentage change in retail price index for selected product groups: Nov 2006-Nov 2007
Retail Prices Index
Consumer Prices Index
British Retail Consortium: Shop Price Index
SECTOR ANALYSIS – ELECTRICALS
 SALES TRENDS
Figure 11: Electrical specialist retailers, sales trends, 1998-2007 Q3
Figure 12: Electrical retailers as % of all retail sales: 1997-2007
 RETAIL PRICE INFLATION
Figure 13: Indices of retail prices for product categories, 2000-07 (Jan 1987=100)
 CONSUMER EXPENDITURE
Figure 14: Consumer expenditure on selected product categories (£m), 1998-2007 Q2
 ELECTRICAL RETAILERS: LATEST TRENDS
Figure 15: Outlet numbers operated, by leading electrical retailers, 2003-06
SECTOR NEWS REVIEW: ELECTRICAL RETAILING
 JULY
DSGi
...mulls franchises in UK
…as Dixons expands offer
 AUGUST
DSGi
…moves into Turkey
…and joins Setanta-sellers
 SEPTEMBER
Kesa sees profits fall in H1
DSG reports sales growth in first quarter
 OCTOBER
Carphone Warehouse increases connections in Q2
DSG increases LFLs in H1, Italy still problematic
 NOVEMBER
Carphone Warehouse reports strong profits in H1
Kesa sales growth slows in Q3
 DECEMBER
Kesa on the verge of BUT sale
DSGi
…reports first-half results
…as new DSG boss will boost online presence
SECTOR ADVERTISING REVIEW – ELECTRICALS
 ADVERTISING EXPENDITURE
Figure 16: Total advertising expenditure by electrical retailers, Oct 2003-Oct 2007
 USE OF MEDIA
Figure 17: Use of media by electrical retailers and all retailers (%), Oct 2006 and Oct 2007
Figure 18: Use of media by electrical retailers and all retailers (£m), Oct 2006 and Oct 2007
 TOP TEN ELECTRICAL RETAIL ADVERTISERS
Figure 19: Top ten electrical retailers by adspend, Oct 2006 and Oct 2007
 RETAILER FOCUS
Comet
Figure 20: Comet, media use by adspend and as share of total, Oct 2006-Oct 2007
Figure 21: Comet, top brands by adspend, Oct 2007
PC World
Figure 22: PC World, media use by adspend and as share of total, Oct 2006-Oct 2007
Figure 23: PC World, top brands by adspend, Oct 2007
Currys
Figure 24: Currys, media use by adspend and as share of total, Oct 2006-Oct 2007
Figure 25: Currys, top brands by adspend, Oct 2007
Empire Direct
Although Sony’s retail arm was the fourth-highest advertising electrical retailer in October 2007, an accurate breakdown of the company’s media use and top brands by adspend are not available. As a result, here we will examine the fifth-highest advertiser, Empire Direct.
Figure 26: Empire Direct, media use by adspend and as share of total, Oct 2006-Oct 2007
Figure 27: Empire direct, top brands by adspend, Oct 2007
Nielsen Media Research/definitions
REPORT FOCUS: CONVENIENCE RETAILING
Convenience store retailing
Figure 28: Convenience store sales as a percentage of all food store sales, 2002-07
Independents flee to join symbols
Huge investments and growing expertise
Who is using convenience stores?
Tesco Express, Spar and Co-op dominate the sector
Four main shopper types
Mixed views on multiples in the sector
Retail sales through convenience stores
Figure 29: Retail sales through convenience stores, at current and constant prices, 2002-12
Smaller households and busy lifestyles will continue to spur on growth
Convenience stores retail sales to account for a fifth of all food retailing sales by 2008
 CONSUMERS: WHO, WHERE AND WHY
Trends in convenience store use
Figure 30: Frequency of purchase from convenience stores, 1999-2007
Frequency of purchase
Six in ten adults use regularly
Potential to drive up visit frequency
Figure 31: Frequency of purchase from convenience stores, August 2007
Frequent users (42%)
Weekly users (20%)
The less frequent and non-users
Convenience stores bought from
Tesco Express tops the charts
Figure 32: Convenience stores used in the last 12 months, August 2007
Tesco Express shoppers
Figure 33: Convenience stores used in the last 12 months, by gender, age and socio-economic group,  August 2007
Sainsbury’s Local
Co-op Welcome
M&S Simply Food
C-store shopping by main grocery store used
Figure 34: Convenience stores used in the last 12 months, by store used for main grocery shopping, August 2007
 PROFILES OF LEADING CONVENIENCE STORE RETAILERS
 SPAR UK LTD
Background
Strategic evaluation
Financial performance
Figure 35: Spar UK, turnover, 2003-07
Store portfolio
Figure 36: Spar UK, store numbers, 2003-07
Figure 37: Spar stores, by region, 2007
Retail offering
Operational issues
Advertising and marketing
e-commerce and home shopping
 MUSGRAVE
Background
Strategic evaluation
Financial performance
Figure 38: Musgrave Plc, financial performance, 2002-06
Store portfolio
Budgens
Londis
Figure 39: Musgrave, retail outlet data, 2002-06
Retail offering
Budgens
Londis
Operational issues
Advertising and marketing
e-commerce and home shopping
 COSTCUTTER
Background
Strategic evaluation
Financial performance
Figure 40: Costcutter, store turnover and store numbers, 2002-06
Store portfolio
Retail offering
Operational issues
Advertising and marketing
e-commerce and home shopping
 INDUSTRY INSIGHTS
Challenges of fresh products
Lagging behind in fair trade and organic
Competition triggering more investment
Creating the right package
How the independents fare
 THE FUTURE
A trend towards local shopping
Greater focus on local services
Lifestage factors
Consolidation in the sector will continue
Symbol groups are poised for further growth
Franchising likely to grow
All the basics must be right
Differentiate to progress
Brand building
Price and margin management
Forecourt sector will continue to forge ahead
Outlook

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