Friday 16th September 2016
In case you missed them, a round-up of interesting retail related stories from the last week or so.
Before the referendum in June – and, indeed, immediately after it – analysts warned that an exit of the United Kingdom from the EU would create significate uncertainty in the country that would negatively impact shoppers’ spending habits. However, recent ONS and BRC figures reveal a show of defiance from shoppers, who have turned expectations on their head and continued to vote with their wallets in the wake of the referendum result. Read the full blog for more detailed analysis.
Last week saw Aldi’s new CSR adverts, called ‘Everyday Amazing’, hit the TV screen. The adverts explain that the market share nabbing German supermarket sells a lot of free range British chickens, that the RSPCA approves of its salmon, it sells British steak and has been voted by suppliers as the fairest supermarket to do business with – which, by the way, must be a reference to the Groceries Code Adjudicator’s 2016 survey rather than any actual vote. The advert reminded me of an article we wrote in November (http://www.gordonsllp.com/2015/11/csr-the-new-usp/) about the Big 4 trying to differentiate themselves using CSR. Of course, the Big 4 have also been keen to stress the ‘quality’ of their produce. But Aldi and Lidl are doing a good job of ‘cutting them off at the pass’. You will probably remember Lidl’s excellent gastro pub adverts which, for me, did a great job of convincing consumers that Lidl sell quality produce. Now Aldi is tackling CSR. So what is left for the Big 4? The key point of difference still has to be greater choice – even if SKU numbers are reducing.
David Potts increasingly looks like an excellent appointment. Profits are up 13.5% for the six months to 31 July, the first increase in half year profits in four years, debts are down and ahead of target, cost savings are also ahead of target. Shares have risen 40% this year. Yes, 40%! Bear in mind when you re-read that percentage that David Potts bought £1m worth of shares when he was appointed, £500k’s worth almost exactly one year ago and £360k worth in April 2016. David Potts has made some brave decisions since he has been appointed, such as parting with M-Local, which subsequently went into administration, renegotiating the grocer’s agreement with Ocado and agreeing to supply new entrant Amazon. Those moves have not only improved Morrisons as a business but they have also increased the value of David Potts’ shareholding.
John Lewis this week revealed a 14.7% drop in profits, despite a half year increase in LFL sales of 3.1%. Operating profits for John Lewis stores fell 31.2% to £32.4m and were down 28.9% to £96.3m for Waitrose. Hot on the heels of that news was the announcement that Waitrose has axed plans to open around half of its planned 14 new stores. The store closest to us here in central Leeds will also close, with all staff who wish to be retained transferring either to other Waitrose stores or the city’s forthcoming new flagship John Lewis store. JLP Chairman Sir Charlie Mayfield blamed “tough market conditions” for the results. You don’t say. After many years of solid growth these results show that no retailer is immune to challenging economic times.
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