Sunday Retail News Roundup

Sunday November 8th 2015

China belt-tightening squeezes Burberry, Private equity in ￡100m carve-up Gaucho chain, Marc is 56 but still believes in Santa Claus, William Hill left at the starting gate, Bolland reveals plans to stay on as M&S recovers and signals doesn't want a pay rise next year, Pimlico Plumbers founder warns might be forced to recruit staff from abroad, The 'punk' pretender brewing trouble and cash the bizarre rise of BrewDog boss, Former Camelot boss Dianne Thompson wins jackpot with ￡1m bonus, Fenwick family bags a ￡4.8m dividend payout despite falling sales and profits, At last, Marks & Spencer wakes up to profit margins, Sainsbury's takes a profit hit from grocery price war, Fast-shrinking Matalan profits prompt S&P warning over debt, Greggs' boss says global growth is 'impossible'.

Sunday Times.

Burberry is braced for a drop in half-year profits this week as the slowdown in Chinese luxury spending puts pressure on its chief executive. On Thursday the British maker of trenchcoats and check scarves is expected to say that interim pre-tax profits fell by 4% to ￡146m. The decline comes after a disappointing trading statement last month, when Burberry announced that like-for-like sales had slipped by 4% in the quarter to September. It blamed the weak update on cooling demand in Hong Kong and China. Having expected a modest increase, the City sold Burberry’s shares aggressively. They closed at ￡13.75 on Friday — still below their ￡14.25 level before the alert.

The ￡100m battle for upmarket Argentine steak house Gaucho is starting to sizzle. City sources say that private equity firms BC Partners — owner of C?te Restaurants — and Equistone, the buyout firm formerly owned by Barclays, are leading the queue of potential buyers. Caledonia Investments, which last month paid ￡241m for Gala Bingo, had been in the running, but dropped out in recent weeks. Canaccord Genuity is handling the sale. Gaucho is the latest in a series of restaurants to go up for auction. The sale of Yo! Sushi to Mayfair Equity Partners, another buyout firm, is expected to be concluded before the end of the year. Ed’s Easy Diner, a chain of 1950s-style American burger restaurants, was put up for sale last month for about ￡100m. BC Partners bought C?te for ￡250m in the summer.

The battle for Christmas sales is already under way — and M&S’s Marc Bolland is among the big players who cannot afford to lose it. Since the second week of October, Vicki Day has been making thousands of pounds of commission on festive orders from Marks & Spencer. The fashion and food blog she writes has been promoting products such as chocolate yule logs and turkey breast parcels stuffed with pork, caramelised orange and figs. Every time a customer clicks through to the M&S website and buys something, she takes a cut. “From the moment their Christmas site was launched we put the articles up and it’s been going like a little train,” said Day. “The average basket size is about ￡275. We’ve literally had a month of Christmas already and it’ll get crazier as we go into December and people top up”. She and M&S may have got off to an early start, but this weekend marks the real beginning of the annual sales battle on Britain’s high streets — and iPads.
Mail on Sunday.

Britain's biggest bookmaker is on a losing streak to rival Jose Mourinho’s. Since their peak so far this year in May, shares in William Hill have tumbled 22%, closing on Friday at 331.7p. A nasty, although not unexpected, profit warning last month didn’t help, but bigger questions have started to surface. Like Chelsea, William Hill has suffered from a lack of action in the transfer market. Its rivals — Ladbrokes, Coral, Paddy Power, Betfair — spent big in the summer, agreeing multibillion-pound mergers. William Hill has been left without a star striker. It’s not for lack of trying. Earlier this year, James Henderson — the bookie’s answer to the Special One — tried to buy online rival 888 for ￡700m but couldn’t clinch the deal. That failure may come back to haunt him.

Mail on Sunday.

Marks & Spencer chief Marc Bolland has given the first public confirmation that he plans to remain at the helm of the business for the foreseeable future – and will refuse any pay rise. Bolland intends to ask the board to freeze his pay in the next financial year, confounding speculation that he might be replaced. His hard line on pay, which will be renegotiated in January and take him well into 2017, suggests Bolland believes there is still some way to go on the turnaround plan. But it is also a signal that he expects to be around for some time to come.

Charlie Mullins, the millionaire founder and owner of Pimlico Plumbers, says he might be forced to recruit staff from abroad due to a lack of skilled British workers. The company, which is the UK’s largest independent plumbing company, revealed sales of ￡5.5million in the first quarter of the current financial year, up 17 per cent on the previous year, and says it is on track for a record ￡30million annual turnover. However Mullins, 62, said that ‘sinister clouds’ were building up for the company in terms of recruitment. He said he was prepared to recruit from as far away as Australia if necessary.

Shameless publicity stunts work – just look at Scottish brewery BrewDog. After a mere eight years in business, it sells more than 30million bottles and cans of beer a year and has been named Britain’s fastest growing food and drinks company three years in a row. Co-founder James Watt seems to have gone out of his way to court controversy – throwing stuffed cats out of a helicopter over the City of London; promoting the ‘strongest beer in the world’; and only last week launching the self-proclaimed ‘world’s first transgender beer’.

Dame Dianne Thompson, who quit as boss of the National Lottery operator Camelot last year, has been handed a ￡1million bonus in a scheme that could keep paying out for years into her retirement. Thompson’s pay was already controversial since it was hidden away from Camelot’s main accounts in a separate company called Camelot Business Solutions, where she was initially classed as the highest paid director without being named. In this company’s latest accounts, for the year to the end of March, Thompson is named as group chief executive and received a total of ￡1.6million for six months’ work until she left at the end of October last year. This compares with ￡2.1million for a full year’s employment previously.

The Fenwick family have landed a ￡4.8million dividend from their upmarket department store chain despite a year of falling sales and profits. The 133-year-old stores business increased the payout to shareholders from last year’s ￡4.5million, despite a small dip in sales and a slump of 13 per cent in profits. Sales at the 11-strong chain dropped by almost 2 per cent to ￡358million and profits fell from ￡31million to ￡26.8million in the year to January 2015.

It looks at last as if the future of Marks & Spencer is becoming clearer. Sales are falling and profits are rising. If that sounds like mixed news, then consider how much better it is that way round than sales rising and profits falling. The fact that clothing sales at M&S stores are still lacklustre and that sales through shops are falling quite fast is not good news. But M&S is finally driving up its profit margins – and that is far more important. Discussing the state of M&S is practically a national sport in Britain and has been for years. Is it as good as it used to be? Has it lost its style? Is it attracting new young customers? But what may be critical is that M&S truly adjusts to the new shape of shopping in Britain and finds a place for itself in the new retail environment – and crucially a profitable place.

Telegraph.

Sainsbury's is expected to post a 24pc slide in pre-tax profits as it counts the cost of its price war. The cost of taking a leading role in the supermarket price war has exerted a heavy toll on Sainsbury’s, with the grocer taking a big hit to profits in the first half of the year. Although the grocer is the only one of the “Big Four” market leaders to have experienced a rise in sales, the cost of aggressive competition has put the group’s margins under pressure and cut profits by nearly a quarter. Analysts are forecasting underlying pre-tax profits of around ￡284m the first six months, a 24pc fall on the previous period.

The ratings agency Standard and Poor’s has raised concerns about Matalan’s excessive debt pile after the discount retailer posted a dramatic fall in profits. S&P said that it was lowering its long-term credit-rating on Matalan after the chain’s announcement that earnings had plunged 90pc in the second quarter as a result of serious operational problems at its warehouse in Knowsley, Liverpool.

Greggs plans to have 2,000 shops across the UK. Demand for the bakery's trademark sausage rolls and pasties is limited to the UK. With 1,667 branches dotted across the country, Greggs serves Stotties in Newcastle, Tottenham slices in North London, and Scotch pies in Glasgow. Having outstripped Starbucks long ago as the dominant high street force, it seems to be on an unstoppable ascent under the guidance of food veteran Whiteside, who replaced anti-pasty tax crusader Ken McMeikan as Greggs’ chief executive two years ago.