Friday 10/01/20

  1. In RETAIL NEWS, JC Penney and Kohl’s announce weaker sales, India’s Reliance takes on Amazon, Ikea buys a shopping centre (!), John Lewis has a shocker, Selfridges thrives on vegan hampers, M&S suffers, Tesco’s Christmas is a bit meh and Mitchells & Butlers does it again
  2. In INDUSTRY NEWS, we look at how African swine fever is reshaping the meat industry and how CBD feet-dragging might help smaller players
  3. In INDIVIDUAL COMPANY NEWS, British Airways’ Willie Walsh announces his retirement
  4. In OTHER NEWS, I bring you some great gritter names



So US department stores underwhelm, India’s Reliance takes on Amazon, Ikea buys a shopping centre, John Lewis has a nightmare, Selfridges benefits from vegan hampers, M&S and Tesco are a bit meh and All Bar One owners toasts record sales growth …

JC Penney, Kohl’s post lower holiday sales (Wall Street Journal, Suzanne Kapner) shows that a solid US economy and consumer spending just aren’t feeding through to these department store chains as they reported weaker sales during the critical months of November and December. JC Penney, Kohl’s and Victoria’s Secret parent L Brands were all in the same boat as they lost out to the likes of Amazon, TJ Maxx and Target. This was announced just a day after Macy’s and Bed Bath & Beyond unveiled underwhelming performances. * SO WHAT? * This doesn’t really inspire confidence for the immediate future of US department stores and reflects the pressure that many retailers are still under. Having said that, it’s not all bad as Walmart, Target and Costco all did pretty well.

Reliance takes on Amazon and Walmart in India with JioMart (Financial Times, Benjamin Parkin) is a really interesting article that highlights India’s mighty Reliance conglomerate wading into online shopping to take on the likes of Amazon and Walmart-owned local rival Flipkart. Small local shops (known as kiranas) have been suffering from the proliferation of online operators but Reliance looking to change all that. It is experimenting with its new platform JioMart where customers buy their goods which are then delivered from their nearby shops. These shopkeepers then use a handheld Jio terminal to input what goods they have in stock and order new stock from Reliance’s wholesalers. Reliance will try to entice customers by giving early adopters chunky discounts and offering free delivery and returns while the local shopkeepers will benefit from more customers and access to cheaper wholesale goods. The conglomerate will also look to use the data they field from this to offer other digital services. * SO WHAT? * Online grocery delivery is a huge growth area in India’s $60bn e-commerce market and, shortly after Reliance started to sign up customers, Amazon announced a tie-up with local retail group Future to offer grocery shopping and delivery within two hours in major cities. Reliance, though, has an advantage over Amazon and Flipkart (which, as I said, is Indian BUT is majority-0wned by Walmart) because new legislation came in last year restricting foreign-owned companies selling their own inventory to shoppers – but because Reliance is local, it won’t face such restrictions. This will be a very interesting area to watch develop IMO.

Meanwhile, in the UK, Ikea buys UK shopping centre in plan to open more ‘mini’ stores (The Guardian, Sarah Butler) highlights Ikea’s £170m purchase of a shopping centre in West London (the King’s Mall in Hammersmith) which opened in 1980 and contains 40 shops. This is Ikea’s first shopping centre in the UK but it will probably hoover up more as it looks to take advantage of being in a buyers’ market. The company announced that it had beefed up its property team in the UK back in October to take advantage of current market conditions with a view to getting smaller stores in central locations, in a departure from its traditional big box out-of-town format. The new Hammersmith store will stock over 2,000 home furnishing accessories and, yes, their meatballs will also be available 👍. * SO WHAT? * I really do like Ikea’s thinking. They have used their massive resources to experiment with formats and try new initiatives in order to manoeuvre themselves

into a position to take on the future whilst actually listening to what their customers want. They are one of the few players with the resources (and willingness!) to play in retail real estate arena and will no doubt have the pick of the properties available given the number of landlords trying to reduce their exposure to retail property. I still think that they could be major buyers of department stores given their size in central locations. Are they just waiting in the wings for when Debenhams collapses?? BTW, just to be clear, this is PURELY speculation on my part.

And now back to some gloom for UK retail. John Lewis boss in bombshell exit as sales nosedive (Daily Telegraph, Laura Onita and Simon Foy) heralds shocking news for the retailer as it announced a profit warning, the departure of top exec Paula Nickolds and the potential cancellation of its staff bonus – the first time in 67 years. Christmas was poor and annual profits were “significantly lower” than the previous year. John Lewis left reeling by shock exit of ‘golden girl’ (The Times, Ashley Armstrong) highlights the City’s surprise at Nickolds’ departure as she was highly rated by colleagues and commentators but the fact is there is now a management vacuum at the top of the company at a tricky time in the market. Waitrose boss Rob Collins got chopped in the reshuffle and John Lewis boss Nickolds will leave next month along with chairman Sir Charlie Mayfield. The new incoming chairman, Dame Sharon White, is highly regarded but has zero retail experience. * SO WHAT? * I would be willing to bet money that the newbie will jettison the partnership status and make it a publicly listed company within the next year or two – or just sell it. The fact that the new chairman has no retail experience would suggest that the company is looking for a new direction and being a partnership restricts the avenues available to finance a radical overhaul. The company will obviously deny this, but the pressure to do something drastic will only increase as it continues to fail to capitalise from the weakness of rivals in department stores and supermarkets. Yes, staff will say that it will change the identity of the company, but if the senior bods are offered the chance to sell their shares and run when retail generally looks like it’s going to go down the toilet – I think they’ll take it and think about their consciences later.

Elsewhere, Vegan hampers helped Selfridges’ sales grow by 5pc (Daily Telegraph, Hannah Uttley) shows that the department store saw sales increased by 5%, boosted by the popularity of vegan sweets and chocolates whose sales were up by 96% versus the previous year, beauty products, toys and menswear. The department store has been investing in experiences for customers and it appears to have paid off! Fortum & Mason also announced a 15% hike in sales in the five weeks to December 29th as it benefited from sales of its hand-carved smoked salmon, champagne and non-alcoholic sparkling tea. * SO WHAT? * It just goes to show that it’s still possible to do well as a department store – and it seems to me that investing in customer experience is absolutely key.

In a quick scoot around some of the other retailer highlights, Glut of food and skinny jeans squeezes M&S (Daily Telegraph, Laura Onita) shows a shaky performance in clothing and home sales and stronger food sales over the festive period, but there was overstocking in some areas hitting profit margins and its share price fell by 10% on the news. Tesco boasts ‘busiest day ever’ but festive revenues still fall flat (Daily Telegraph, Laura Onita) sounded reasonably good news for the supermarket, which benefited from the performance of its wholesaler Booker and Pubs group raises glass to record sales growth (The Times, Dominic Walsh) showed that strong demand for pub meals and drinks helped power a strong performance at Mitchells & Butlers (owner of brands including All Bar One), confirming the trend of people spending on “experiences” over “things”.



We look at how African swine fever is reshaping the whole industry and how CBD hurdles could give smaller operators an opportunity…

How swine fever is reshaping the global meat trade (Financial Times, Emiko Terazono, Andres Schipani and Jamie Smyth) takes a look at how African swine fever in China has drastially reshaped the meat market globally in the 18 months since it was first acknowledged. So far it has reduced the number of pigs in China by about 40% (around 100 million 😱), which led to pork prices shooting up to record highs and prices of beef and chicken going higher as consumers ate them instead. The situation has become so bad that meat imports to China have not only not been affected by the trade shenanigans going on between the US and China, they have actually increased. The country’s meat imports were up by 63% in the first 11 months of 2019 versus the previous year and suppliers have struggled to keep up with demand. Brazilian, European and Australian producers have been diverting a lot of their product to China meaning that other markets such as Japan, Indonesia, Canada and the Philippines have lost out. Swine fever has now spread to Vietnam, the

Philippines, South Korea and Mongolia with recent outbreaks in Serbia and Slovakia. In the UK, pork producer prices have risen by 12% but suppliers and retailers haven’t yet passed this on to customers. * SO WHAT? * The effects of African swine fever have been shocking but it looks like we are not in the clear yet so expect higher prices for longer for all animal proteins. Good news for the likes of Beyond Meat and Impossible foods if they can take advantage, no?

Adding CBD to food, drink was a hot trend, until FDA chimed in (Wall Street Journal, Annie Gasparro) shows that major food and beverage companies are slowing down work on products containing CBD after the FDA, the US regulator, told consumers in November that there wasn’t enough scientific evidence to prove its stated benefits. PepsiCo, Starbucks, Kellogg, Monster Beverage and Red Bull have been among those looking at putting CBD in their products, but it all appears to have been sidelined as FDA approval could take months or years. * SO WHAT? * This is a major spanner in the works but could prove useful to smaller companies who could take advantage of making products containing CBD as sales of such products continue to rise even without FDA approval. Industry publication (so of course, it’s not biased 😜) Hemp Industry Daily forecasts that hemp-derived CBD product sales were over $1bn in 2019 and could rise to $10billion by 2024.



British Airways’ boss decides to retire…

Willie Walsh to stand down as boss of British Airways owner (The Guardian, Julia Kollewe and Gwyn Topham) signals the end of an era as Willie Walsh, chief exec of

British Airways and Iberia owner International Airlines Group (IAG) will be stepping down in March to be succeeded by Luis Gallego, the Iberian chief exec. Walsh had indicated he would step down within two years at the end of last October, so I guess the pull of the golf course was just too much to resist.



And finally, in other news…

I thought I’d leave you today with Snowel Gallagher and Gritter Thunberg among names chosen for new fleet of salt spreaders (Sky News, Tania Snuggs Gotta love this!

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