Sunday Retail News Roundup

Bullring owner on inside track to buy New Street, Ailing Debenhams easier for bosses to bag bonuses, Ashley leaves consigliere spinning, Experian and new European rulebook on cybersecurity, John Lewis invests half a billion pounds online, 'Vodafonepest' phone giant heads to top complaints league for fourth time, Mobiles ring up ￡281 Christmas sales, Britain online shopping capital of Europe, ProSkin gets boost tattoo removals, Dixons Carphone to launch 'home gadgets' emergency service, Burberry to wrap up Piccadilly Circus 3D scarf campaign, Odey bets against Argos owner.

Sunday Times.

The owner of Birmingham’s Bullring is close to a ￡340m deal to buy the shopping centre above the city’s rejuvenated New Street station. Hammerson, the FTSE 100 property giant that also owns retail hubs such as Silverburn in Glasgow and The Oracle in Reading, is on course to seal the purchase of Grand Central by Christmas. In September, thousands flocked to the opening of the centre, which is anchored by John Lewis. Grand Central was built as part of a ￡750m renovation of the station, formerly a 1960s eyesore, by Network Rail and the city’s council. The replacement and Grand Central were seen as symbols of the West Midlands’ recovery since the financial crisis. When they opened, John Lewis managing director Andy Street, who grew up in Birmingham, said there would one day “be a Harvard business case [study] about the revival and change in the economy here." Hammerson fought off competition from British Land, owner of Drake Circus in Plymouth, and Grosvenor, developer of Liverpool One, to secure Grand Central. Its swoop will be seen as an attempt to consolidate its grip on the city’s retail pitch. The Bullring, which was redeveloped in 2003, has 160 stores including Apple and Selfridges. Grand Central, which took five years to build, gives it a further 66 shops. Hammerson’s move comes as the biggest property companies scramble to control a shrinking list of prime shopping centres. The rise of internet shopping means the most sought-after retailers are interested only in taking space at dominant malls. Last year, Land Securities won a fierce bidding battle for a stake in Bluewater, Essex, in a deal that also gave it the right to manage the site. Intu, previously known as Capital Shopping Centres, bought the Trafford Centre from northwest billionaire John Whittaker for ￡1.6bn five years ago. Two years ago it also snapped up Midsummer Place in Milton Keynes.

Debenhams has watered down the targets its bosses need to hit to receive multimillion-pound paydays, saying the lower hurdles reflect “ongoing challenges in the UK retail sector”. The struggling department store chain, whose chief executive resigned in October after a wave of shareholder unrest, has softened the performance criteria for its long-term bonus scheme. The move is likely to prove controversial given investor pressure over poor trading and a flat share price this year. The performance share plan (PSP) is designed to tie in key managers, allowing them to earn multiples of their base salary each year. The awards are in shares that vest after three years, if targets are met. In recent years, 75% of the payout has been based on growth in earnings per share and 25% on return on capital employed — a measure of a company’s profitability. For this year’s bonuses, Debenhams has lowered the earnings-per-share growth hurdles, halving the minimum threshold to 3%. Also, it has almost entirely replaced return on capital employed — which has plunged in the past five years — with four other targets linked to margins, online and international growth and in-store sales. Outgoing boss Michael Sharp, who will depart next year, could earn up to ￡922,500 in deferred shares this year and ￡307,500 next year under the new arrangements. Debenhams said the changes were made “following shareholder consultation” and were approved at last year’s annual meeting. The company added: “These PSP targets were, and remain, both challenging and consistent with our strategy.”

Mike Ashley didn’t have the greatest of times last week. The billionaire Newcastle United owner saw his Sports Direct retail empire branded a “scar on British business” following an exposé of “gulag” working conditions at its Shirebrook warehouse. An undercover investigation described staff being searched, harangued over the PA system and sacked if they clocked up six “strikes” for such offences as spending too long in the toilet or using a mobile phone. He then suffered a double-digit plunge in Sports Direct’s share price as its profits fell short of the City’s expectations and the company booked a painful writedown on its Austrian business. Ashley, 51, appears to have dealt with the pressure in time-honoured fashion — by shooting the messenger. After months of dire headlines, he is said to be close to ditching his PR adviser, Powerscourt.

Some companies will go to extraordinary lengths for the oxygen of publicity. Last week, credit-checking agency Experian used the pretext of a new European rulebook on cybersecurity to send out a piercing analysis. British businesses “are a long way from ready to deal with the current data breach landscape, let alone the high-octane environment we are likely to see emerge over the next two years,” it warned. “The time to prepare is now.” Strangely, there was no mention of the recent data breach at the American division of a certain British outfit — Experian. In October, hackers gained access to the personal data of 15m T-Mobile customers held on its servers. Experian now faces class action lawsuits from disgruntled American phone users. A bit of preparation might have helped.

Mail on Sunday.

John Lewis is investing ￡500million in its online shopping service as it aims for internet sales to overtake those in shops within just four years.The department store chain has embarked on an investment programme to be completed by the end of 2018 which will add hundreds of recruits to its IT department as online demand for products continues to soar. Internet sales at John Lewis rose 13.6 per cent in the week to December 5 compared with the same period last year. Managing director Andy Street expects internet sales to overtake store sales in 2019 – a year ahead of his original forecast. Total sales at John Lewis last year were ￡4.1billion. Street said of the change in forecasts: ‘This has not blown our assumptions out of the water – but it has moved them forward. It’s very reassuring because it endorses everything we are doing.’ The investment plan, the bulk of which will be executed in the next three years, will include the completion of state-of-the-art warehousing and investment into information technology that will improve systems, forward planning, analysis of shoppers and their buying habits and provide what Street called a ‘seamless journey’ for customers.

Despite rising half-year profits announced by Vodafone last month, customers unhappy with the company’s lacklustre effort at problem-solving have shunted the network to the top of the complaints charts. The firm has languished there since October last year – as shown in data compiled by communications regulator Ofcom. Figures published this week will show whether or not the company has earned itself the dishonour for a fourth successive quarter. But regardless of where the network ranks among its peers this time around, Ofcom is investigating Vodafone’s ability to resolve grievances given the high volume of complaints. This scrutiny falls under a wider ‘monitoring and enforcement programme’, which saw rival EE fined ￡1million in July for complaints handling failures.

More people browse internet on smartphones for gifts. Smartphone users are predicted to use their devices to spend an average of ￡281 each on presents this festive season. The increase of 15 per cent on last year highlights a growing reliance on smartphones when making gift decisions. A survey of 2,795 smartphone owners by mobile marketing firm Weve, owned by O2, showed a marked drop in the numbers browsing in store for gift ideas. Sixty-five per cent of smartphone owners were doing this – a 22 per cent fall compared with last year. Tom Pearman, commercial director at Weve, said: ‘It’s a significant drop. We’ve seen a real growth in the quality of retailers’ apps over the past 12 months and that seems to be what is driving this.’ The research found that 92 per cent of smartphone owners said they used the devices ‘to help plan Christmas’ and 60 per cent said they used mobile internet for ‘gift inspiration’. But he stressed that many customers still rely on stores with almost half saying they researched prices on their phones and then purchased in shops – particularly when buying fashion items. He added: ‘There is a critical need for retailers to present a similar experience across their stores and online and make sure the two join up.’

More than four out of five British adults have bought items from the internet, compared to just over half of adults across the European Union as a whole. Shoppers in Denmark, Luxembourg and Germany were the next most likely to buy online, while those in Bulgaria, Cyprus and Italy were the least likely. Figures from the EU statistics agency Eurostat showed Britons were the biggest internet buyers of clothes, with three quarters of online shoppers in this country having bought them in the last year. British shoppers were also the most likely to buy household goods and toys, while Danish shoppers were most likely to buy holidays and event tickets. Older people in Britain were the most likely to have shopped online and the UK was one of just six EU countries where more than half of internet users aged 65 to 74 had bought goods online. Among EU internet users who made no online purchases this year, three quarters said it was because they preferred to shop in person, while one in four were concerned about payment security and privacy. Most e-buyers in the EU seemed satisfied with their online purchases and seven out of ten encountered no problems buying online. The most popular items bought over internet were clothes and sports goods, which were ordered by 60 per cent of e-buyers, followed by travel and holiday accommodation, and household goods and toys.

Skincare clinic chain ProSkin, founded by serial investor Dominic Perks in 2012, has treated 6,000 customers for tattoo removal in the past 12 months. They include those booked in by their partners and ‘erase to replace’ customers who have run out of space for more adornments. Perks, who counts Sipsmith gin and laundry booking app Laundrapp among his business interests, raised ￡2.5million from angel investors and aims ‘to make celeb treatments accessible to the British public’. Celebrities who have had tattoos removed include designer Victoria Beckham and actress Megan Fox. Perks said: ‘I’m an entrepreneur and I saw an opportunity. I saw that the haircare salon market was more consolidated and there were brands, but there weren’t really brands in beauty services.’ Tattoo removal is the fastest-growing part of the business, but the firm also offers treatments such as acne therapy and hair removal. Perks added that the firm might consider its own range of high performance cosmetics. He recently teamed up with investor Rupert Hambro to form start-up incubator Hambro Perks.

Dixons Carphone is preparing to launch what it describes as an “emergency service for the connected world” as it seeks new sources of growth in the face of pressure from online rivals such as Amazon. The retailer will soon unveil new subscription services for customers to help them maintain gadgets and home appliances, sources said. Dixons Carphone is developing software and infrastructure to deliver what it hopes will provide proof that the strategy behind the ￡3.8bn merger of Dixons and Carphone Warehouse last year will create new opportunities for its bricks-and-mortar operation. Customers will be offered remote monitoring of their home network for faults and the ability to get help via an app from specialists, including engineer call-outs. Executives believe that the growing array of internet-connected devices in homes and their increasing importance in daily life means there is scope for a digital version of the RAC. It is understood, however, that they expect to face competition from British Gas, which could combine its boiler- servicing plans with its increasing moves into home automation via the Hive internet-connected thermostat. The launch will be a test of Dixons Carphone’s claims that there is a major role in the market for an independent high-street retailer at a time when more shoppers are buying appliances online and mobile operators are increasingly seeking to sell directly to consumers to protect their profit margins. The merged company’s shares have performed strongly as it has benefited from cost savings and the collapse of Phones 4U but growth is now expected to to be harder to deliver. Its interim report this week is expected to show like-for-like sales up by just 0.8pc, although the consensus of analysts predicts profit before tax will increase by 42pc to ￡111m, as restructuring boosts the bottom line. Citi said Dixons Carphone “faces tougher comparisons given the Phones 4U collapse and iPhone6 launch last year but [we] still expect some benefit from ongoing strength in domestic appliances.”

Telegraph.

Burberry is taking over the world famous Piccadilly Circus curved screen with an interactive campaign that uses the same technology featured in the 3D film Kung Fu Panda. The British fashion business has partnered with DreamWorks Animation to create an advert that uses the movie studio’s NOVA technology to allow passersby to design their own personalised Burberry scarf. Christopher Bailey, chief executive of Burberry, said: "The huge screens in Piccadilly Circus give us a great canvas to launch the technology in a space that will show the possibilities of what this technology can do in an entertaining and engaging way. "Giving users the ability to control their movement in various ways makes the experience much more personal when viewed on a screen whether at home or on a digital billboard." "We partner closely with many social media platforms around the world such as Twitter, Facebook, Line and most recently Snapchat because they allow us to develop a much more intimate relationship with our customers. "The campaigns we create are not developed with a purely commercial imperative, our aim is to identify platforms where we can create interesting content that we believe audiences will enjoy so that our relationship with them can extend beyond the purely transactional." Visitors to the London landmark will be able to use their mobile phones to design their own heritage Burberry scarves with their initials, which will then be beamed onto the giant screen. They will then be able to buy their personalised scarf online or from Burberry’s flagship store on Regent Street. “Burberry is a world leader in luxury, and, leveraging NOVA’s technology, we’re thrilled to help them demonstrate a new and innovative product experience that enables consumers to both personalize and visualize the iconic Burberry scarf", said Jeffrey Katzenberg, chief executive of DreamWorks Animation. It is the latest move by the luxury fashion house to appeal to technology savvy shoppers. It has also developed a photo booth with Google that allows shoppers to star alongside Elton John and Rosie Huntington Whiteley in its Christmas adverts. The luxury group has also launched its own music Youtube site, Burberry Acoustic, featuring up and coming British singers including James Bay and Mercury music prize winner Benjamin Clementine, performing acoustic sets. The group also has its own Snapchat and Instagram accounts and was the first brand to livestream its show on Japanese messaging platform Line.

Crispin Odey has taken a short position against Home Retail Group in his belief that the "working class" Argos brand cannot compete with online. One of the City’s most high- profile hedge-fund managers has taken a sizable bet against the owner of Argos and Homebase in the belief that the “working-class brand” cannot thrive in an internet age. Crispin Odey, the founder of Odey Asset Management, has taken a short position over 1.9pc of Home Retail Group, equivalent to 15.4m shares. Mr Odey’s fund took the position at the start of this month following Argos’s discount frenzy in the weekend before Black Friday. Argos’s website collapsed under the strain, prompting customer complaints. The setback was an embarrassment for the company, which is trying to reinvent itself as a digital business for the 21st century. “They are having a hard and torrid time of it,” Mr Odey said. “I think they will have a bad Christmas. They are really being destroyed by the internet, which is allowing people to shop outside that area. “I don’t think their move to online is working – it really is a working-class brand,” he added. Two-thirds of households shop at Argos at least once a year, but the retailer has tried to move away from catalogues and to compete with Amazon instead, by launching same-day deliveries. The shares have been propped up in recent weeks by vague bid rumours about private-equity interest in the company’s DIY arm, Homebase. However, sources say that any bidder would be “foolish” to approach before the crucial Christmas trading period was over. “It remains to be seen if they can find a bidder who is interested enough and pays a good price,” Mr Odey said. One of the largest shareholders said he was waiting to see whether trading picked up just before Christmas before forming a view of the company’s future.