Retail is detail - December 2023

So I'm back again with a bite-size update on what was going on in December.

As always please continue to share your feedback.

Frasers Group finalised a bargain purchase of Matchesfashion from Apax Partners, amounting to approximately ￡52 million.

This acquisition results in substantial losses for the private equity firm, reportedly investing around ￡600 million in the business since taking over from the founders six years ago, as reported by Sky News. As part of the deal, roughly ￡20 million of the fashion company's debt will be refinanced.

Amid Frasers' successful "elevation strategy," driving robust trading performance, the Matchesfashion acquisition is expected to significantly boost its position, according to Sky News. Despite CEO Nick Beighton's improvements since joining the company in 2022, Matchesfashion has still felt the effects of the global luxury goods revenue slowdown, posting an adjusted LBITDA loss of ￡33.5 million for the year ending January 31, 2023.

While luxury retailers experienced soaring valuations and sales during the pandemic three years earlier, Beighton aims to collaborate closely with the Frasers team to devise a strategy that leverages the business's strengths and rapidly integrates synergies with Frasers.

CEO Michael Murray of Frasers expressed confidence in enhancing the group's luxury portfolio, emphasizing their commitment to providing consumers access to top-tier brands. He anticipates leveraging their industry-leading ecosystem to capitalise on synergies and drive profitable growth for Matches.

Beighton also noted the benefits of being part of Frasers, foreseeing increased scale, superior retail expertise, and enhanced financial stability, aiming to better serve brand partners and customers alike.

Uniqlo's head in the UK is dedicated to lowering prices as inflation becomes less of a burden, aiming to draw in more shoppers during the brand's expansion in the region.

They've already implemented price reductions on select products, slashing the cost of cashmere sweaters from ￡129 to ￡109 over the past year. Additionally, many jumpers and hoodies have seen price drops from ￡39.90 to ￡34.90.

Alessandro Dudech, Uniqlo's chief, shared with The Telegraph the brand's intention to translate the decreasing material costs into reduced prices for premium items. "We're committed to passing on these price reductions," he affirmed. "As the costs of materials like cashmere and merino decrease, we want to reflect those savings back to our customers."

These price adjustments coincide with Uniqlo's accelerated growth in the UK, with Dudech noting a significant surge in their customer base.

Despite operating only 17 stores in the UK after a 16-year presence, the Japanese retailer is gearing up for further expansion. Their upcoming flagship store on Oxford Street near Tottenham Court tube is on the horizon, and plans are underway for a store on Edinburgh’s Princes Street.

Selfridges has reached out to its parent company, Central Group, seeking financial assistance to fulfil impending debt obligations, prompted by co-owner Signa's recent insolvency filing.

Signa, established by Austrian billionaire René Benko, has declared insolvency for two pivotal divisions, including Signa Prime Selection. This entity shares ownership of properties like the Selfridges department store in London and Berlin's KaDeWe.

The insolvency of Signa, which collaborated with Thai conglomerate Central Group in a ￡4bn acquisition of Selfridges last year, has exerted financial strain on the renowned department store.

Cambridge Properties, Selfridges' holding company overseeing the store's property portfolio, has officially started discussions with the Thai corporation to secure funds essential for meeting impending debt repayments.

Specifically, loans extended to Manchester Exchange Square Invest Limited set for repayment in February, and another loan to London Oxford Street Invest Limited, originally scheduled for repayment in August 2024, may potentially be extended for a year contingent on sustained backing from the group's primary controlling entities.

Retailers to pay for recycling tech Starting in 2026, new regulations from the UK's Department for Environment, Food and Rural Affairs (Defra) will shift the responsibility of e-waste recycling costs onto retailers, marking a significant change.

As per the newly unveiled consultation by the government department, both UK producers and retailers will shoulder the expenses for gathering household and in-store electronic waste.

The proposed measures outline obligations for major retail entities to establish complimentary "collection drop points for electrical items in-store," eliminating the necessity for consumers to make a new purchase to facilitate this service.

Defra elaborated that online merchants and brick-and-mortar retailers would be mandated to retrieve any defective or unwanted large electrical appliances while delivering replacements starting in 2026.

WHSmith's recent logo update in a mini-rebrand trial has caused some bewilderment among customers nationwide.

As part of this rebranding effort, the high street retailer has opted to rename several branches to 'WHS', shedding the surname of its founder, Henry Walton Smith, from its branding.

The new logo, featuring the three-letter abbreviation in white font against a blue backdrop, has debuted in ten of its stores across the UK, including locations in York and Preston.

John Lewis Partnership is set to revamp its turnaround strategy, with CEO Nish Kankiwala assuring employees that the employee-owned business will prioritize its retail operations.

Addressing the staff, the chief executive emphasized a unified retail approach for the Partnership, encompassing Waitrose, John Lewis, financial services, and property divisions.

"Our primary aim is to excel as a top-tier retailer that consistently delights our customers... That's our strategy, and that's where our relentless focus will be, every day, across all our endeavours," Kankiwala conveyed, as reported in The Financial Times, referencing the Partnership's internal publication.

A more comprehensive plan will be unveiled to John Lewis partners in the forthcoming months, expected to be presented in January or February.

Zalando has introduced an exclusive shopping service tailored for coveted limited-edition items.

Interested customers eyeing these fast-selling special edition products can now request access via the Zalando app. If granted an invite, they can secure a specific time slot for their purchase.

Zalando's Plus members hold a higher probability of receiving invitations and will have a portion of the available stock reserved for each product release.

The inaugural product introduced through this service was the FENTY x PUMA Avanti trainers, accessible to customers across most Zalando markets. Invitations for this launch were dispatched to customers on December 19th. Pascal Hahn, Zalando's VP of transactions, expressed, "Our invite-only experience is a true win-win-win for our customers, our partners, and us. Customers now enjoy a more thrilling and hassle-free shopping experience for their favourite sought-after items."

"Harnessing this approach, partners can narrate a compelling story around their product and grant customers the luxury of time, eliminating the rush to checkout. For us at Zalando, it means curating the most captivating assortment, showcasing brands in the most optimal manner."

This exclusive invite-only service aligns with the German fashion giant's commitment to enhancing the shopping journey. It complements the earlier launch of Zalando Stories, a digital magazine featuring captivating narratives, influencer content, and helpful tips.

Farfetch, a key player in luxury fashion retail, may still be considering selling its subsidiary, Browns, following its recent deal with South Korean company Coupang.

Farfetch acquired Browns from the Burstein family in 2015, signaling a pivotal step towards merging digital and physical retail. Leveraging the 53-year-old department store, Farfetch introduced futuristic concepts like connected mirrors and app-based features in 2021. Based in London, Browns is renowned for introducing brands like Missoni, Ala?a, and Calvin Klein to the UK market. It reportedly generated over $34.5 million in e-commerce revenue in 2022, supplemented by modest in-store sales.

Although Farfetch, which went public in 2018, transitioned to a private entity led by CEO José Neves, it will become a Coupang subsidiary from April 30. Failure to comply with the deal terms could result in repaying Coupang's $500 million loan at an annual 12.5% interest rate, yet the agreement doesn't mention Browns' fate.

A potential sale of Browns could enhance Farfetch's liquidity amidst mounting debts, with a market value of $258.4 million as of December. Frasers Group, led by Mike Ashley, known for Sports Direct and House of Fraser, emerges as a potential buyer. Amidst its expansion in the UK fashion retail sector since 2021, acquiring Browns aligns with its luxury fashion segment goals. However, Frasers Group recently acquired Matches, a luxury multi-brand retailer, which had been operating at a loss of $43 million in 2023 before the purchase.