UK Retail Briefing - June 2008

ANALYST COMMENT
 LET’S LOOK FURTHER OUT
Developing consumers
Food retailing
Fashion retailing
The Internet
Ageing population
What does it mean?
In five years time
The consumer of 2013
Cautious optimism
THE MONTH IN UK RETAILING
 GROCERS
Asda's 2p sausage offer prompts Morrisons' price-slashing spree
Morrisons
…considers acquiring Co-op’s Somerfield stores
…reports Q1 sales up 8.6%, LFLs up 7%
Sainsbury's CEO calls for better government anti-obesity regulations
Tesco's group sales rise 13.7% in Q1
 CLOTHING RETAILING
New Alexon chief to start in June
Ann Summers takes it down a notch
Burberry posts 23% FY profit rise
Fat Face signs for eight new stores
French Connection 's Q1 LFLs "broadly flat"
Laura Ashley posts 7.6% drop in 17-week LFLs
MK One:
…goes into administration
…bought by Brafman
Moss Bros:
…has £40m offer withdrawn by Baugur
…subject of stake increase by Laura Ashley
…in talks with Berwin&Berwin
Primark prepares to take on Europe
Ted Baker reports 8.4% rise in sales
TJX opens 5 HomeSense stores in UK
 FOOTWEAR RETAILING
Stylo reports £7.8m FY pre-tax loss
JJB Sports buys Qube Footwear for £1
 MIXED GOODS RETAILING
Mothercare posts strong FY sales and profit growth
Woolworths to grab slice of Indian toy market
 MULTI-SECTOR RETAILING
Boots
…opts to re-invest options
…HQ moves from UK to Switzerland
…FY profits up 20.1%
…to receive investment from Pessina and KKR
M&S
…FY profits reach £1bn
…chief: Government "in denial" about downturn
…lowers target for Rose to secure bonus
…to open Olympian store in East London
 DEPARTMENT STORES
Debenhams to expand in Russia and India
House of Fraser implements data synchronisation service
 DIY RETAILING
Kingfisher reports LFL drop but profit rise in Q1
Focus to downsize 40 outlets in turnaround plan
Topps Tiles sees H1 profits decline 16%
 CARPET RETAILING
Bill Gates invests in Carpetright
 FURNITURE RETAILING
Land of Leather asks KPMG to renegotiate banking facilities
ScS Upholstery's credit insurer withdraws supplier coverage
 BOOK AND STATIONERY RETAILING
WH Smith posts 2% drop in Q1 LFLs
 SPORTS AND LEISURE GOODS RETAILING
OFT scolds Sports Direct over purported store closures
JJB posts 5.3% drop in Q1 LFLs
JD Sports posts LFL rise
 JEWELLERS
Signet posts 24% fall in Q1 profits
 MISCELLANEOUS SPECIALIST RETAILING
Halfords reports 8% rise in FY profit
EXECUTIVE APPOINTMENTS
New Alexon chief to start in June
New DSGi COO to join only part-time
Focus finance director resigns
FrostFrench MD and design head resign
Habitat CEO resigns
Hugo Boss names new chief
Moss Bros close to appointing new chairman
Net-a-Porter appoints new CEO
Otto UK's CEO steps down following strategic review
Sainsbury's Tu poaches George at Asda's buying director
PRODUCT DEVELOPMENT – DESSERTS
 ASDA
Product description
Product description
 ICELAND
Product description
Product description
 MARKS & SPENCER
Product description
Product description
 MORRISONS
Product description
 SAINSBURY’S
Product description
 TESCO
Product description
 WAITROSE
Product description
ADVERTISING NEWS
 NEW CAMPAIGNS
Ann Summers to launch viral push
Asda launches viral push for recycling campaign
Boots to sponsor NatMag's beauty event
Sainsbury's promotes seasonal food
Spar to launch its biggest ad campaign
Waitrose to roll out "perfect picnic" campaign
 ACCOUNT GAINS/LOSSES
Redwood wins Homebase's in-store magazine
House of Fraser puts review on hold
Peacocks appoints Equator to raise brand profile
Thorntons seeks new agency for £3.3m account
RETAIL ADVERTISING REVIEW
 ADVERTISING EXPENDITURE
Figure 1: Total advertising expenditure by all advertisers (£m), Mar 2004-Mar 2008
Figure 2: Total advertising expenditure by all retail advertisers (£m), Mar 2004-Mar 2008
Use of media
Figure 3: Use of media by retail and all advertisers (£m), Mar 2007-Mar 2008
Figure 4: Use of media by retail and all advertisers (%), Mar 2007-Mar 2008
 TOP 25 RETAIL ADVERTISERS
Figure 5: Top 25 retailers by adspend (£), Feb 2008-Mar 2008
Food
Furniture
DIY
Optical retailers
Other
Nielsen Media Research/Definitions
RETAIL SALES AND INFLATION
 RETAIL SALES
Office for National Statistics
Figure 6: Retail sales trends, Apr 2007-Apr 2008
Figure 7: Non seasonally adjusted % value change on previous year, Apr 2007-Apr 2008
Figure 8: Seasonally adjusted % volume change on previous year, Apr 2007-Apr 2008
Significant features of April’s 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, Apr 2007-Apr 2008
Figure 10: Annual percentage change in retail price index for selected product groups, Apr 2007-Apr 2008
Retail Prices Index
Consumer Prices Index
British Retail Consortium: Shop Price Index
SECTOR ANALYSIS – ELECTRICALS
 SALES TRENDS
Figure 11: Electrical specialist retailers, sales trends, 1998-2008 Q1
Figure 12: Electrical retailers as % of all retail sales, 1999-2008
 RETAIL PRICE INFLATION
Figure 13: Indices of retail prices for product categories, 2000-08
 CONSUMER EXPENDITURE
Figure 14: Consumer expenditure on selected product categories (£m), 1998-2007
Electrical retailers: latest trends
Figure 15: UK: Leading electical retailers, 2007
SECTOR NEWS REVIEW: ELECTRICAL RETAILING
 JANUARY
Carphone Warehouse LFLs up 1.0% in Q3
DSGi
…issues profit warning
…then ditches analogue TVs
Jessops LFLs inch ahead
Kesa LFLs up 1.7% over Christmas
 FEBRUARY
DSGi
…to conduct strategic review
…as UK offices raided in Intel inquiry
Kesa sells BUT for £410m
 MARCH
Fnac to arrive in the UK?
 APRIL
Kesa predicts tough trading after FY results
DSGi issues second profit warning
 MAY
DSGi could close 200 outlets, cuts dividend
 JUNE
DSGi to close stores in strategic move
SECTOR ADVERTISING REVIEW – ELECTRICALS
 ADVERTISING EXPENDITURE
Figure 16: Total advertising expenditure by electrical retailers, Mar 2004-Mar 2008
 USE OF MEDIA
Figure 17: Use of media by electrical retailers and all retailers (£), Mar 2007-Mar 2008
Figure 18: Use of media by electrical retailer and all retailers (%), Mar 2007-Mar 2008
 TOP 10 ELECTRICAL RETAIL ADVERTISERS
Figure 19: Top ten electrical retailers by adspend, Mar 2007 and Mar 2008
 RETAILER FOCUS
PC World
Figure 20: PC World, media use by adspend and as share of total, Mar 2007-Mar 2008
Figure 21: PC World, top brands by adspend, Mar 2008
Currys
Figure 22: Currys, media use by adspend and as share of total, Mar 2007-Mar 2008
Figure 23: Currys, top brands by adspend, Mar 2008
Comet
Figure 24: Comet, media use by adspend and as share of total, Mar 2007-Mar 2008
Figure 25: Comet, top brands by adspend, Mar 2008
Richer
Figure 26: Richer, media use by adspend and as share of total, Mar 2007-Mar 2008
Figure 27: Richer, top brands by adspend, Mar 2008
Nielsen Media Research/Definitions
REPORT FOCUS: SPORTS GOODS RETAILING
Market worth £5.6 billion
Where consumers shop
What they think and do
Tough times for Sports Direct
Profits drop at JJB Sports and Blacks Leisure
Fashionable John David Group
Market prospects good after consumer slowdown
 CONSUMERS: WHERE, HOW MUCH, WHAT THEY THINK
Trends in sports goods retailing
Internet gains ground
JJB Sports maintains a huge lead
Figure 28: Outlets used for buying clothing, footwear or equipment for sports or outdoor activities in the last 12 months, March 2008
Demographic findings
JJB has a wide age spread
JD Sports is JJB's biggest high street rival
Figure 29: Outlets used for buying clothing, footwear or equipment for sports or outdoor activities in the last 12 months, by most popular other outlets used, March 2008
Figure 30: Outlets used for buying clothing, footwear or equipment for sports or outdoor activities in the last 12 months, by next most popular other outlets used, March 2008
JJB in strong position
JD suffers from disloyalty
Clothing stores need differentiation
How much?
Men under 45 are the big spenders
Figure 31: Spending on sports clothing, footwear or equipment in the past 12 months, March 2008
Internet capitalising on high spenders
Figure 32: Outlets used for buying clothing, footwear or equipment for sports or outdoor activities in the last 12 months, by spending on sports clothing, footwear or equipment in the past 12 months, March 2008
 WHAT THEY THINK?
Key points
Attitudes towards shopping
Figure 33: Attitudes towards shopping for sports clothing, footwear and equipment, March 2008
 PROFILES OF LEADING RETAILERS
JJB Sports
Strategic evaluation
Shopper research profile
Background
Financial performance
Figure 34: JJB Sports, financial performance, 2003-08
Store portfolio
Figure 35: JJB Sports, store numbers and retail space, 2003-08
Retail offering
Operational issues
Advertising and marketing
E-commerce and home shopping
John David Group
Strategic evaluation
Background
Shopper research profile
Financial performance
Figure 36: John David Group, financial performance, 2003-08
Store portfolio
Figure 37: John David Group, store numbers and retail space, 2002-08
Retail offering
Operational issues
Advertising and marketing
E-commerce and home shopping
Sports Direct International
Strategic evaluation
Background
Shopper research profile
Financial performance
Figure 38: Sports Direct International, financial performance, 2003-08
Store portfolio
Figure 39: Sports World International, store numbers and retail space, 2003-08
Retail offering
Operational issues
Advertising and Marketing
E-commerce and home shopping
 INDUSTRY INSIGHTS
The state of the market and current trading
What do you expect for the rest of 2008 and 2009?
Top performing brands
The Internet: increasingly powerful in sports goods
 THE FUTURE
The sports clothing market
Figure 40: UK consumer expenditure on sports clothing, at current and constant 2003 prices, excluding VAT
Sports footwear
Figure 41: UK consumer expenditure on sports footwear, at current and constant 2003 prices, excluding VAT
Squeeze on spending
Ageing population
Technological Innovation
Participation in sport and healthy living
Sports and fashion