In UK HIGH STREET NEWS TODAY, John Lewis gets drastic, Costa looks lacklustre and the latest research suggests huge closures of bank branches.
In OTHER NEWS, I bring you a cure for sunburn and an amazing gesture that will warm your heart. For more details, read on…
So John Lewis is feeling the heat, Costa cools and bank branches could be an endangered species…
John Lewis looks to play to its strengths (Financial Times, Jonathan Eley) signals the venerable UK retailer’s acknowledgment of its current situation versus the competition and changing consumer behaviour and its willingness to take drastic action as it said that it will accelerate the “It’s your business 2028” strategy announced three years ago. The group warned that profits before exceptional items will be almost zero for the first half of the year and that it will fall short of 2017 by year end. Basically, it wants to differentiate itself
from the competition by emphasising its strengths – so it will concentrate more on service at its department stores and quality at its supermarkets. More specifically, in Profit close to zero, John Lewis chief warns (The Times, Deirdre Hipwell) we see that the company will pretty much stop any new store openings (barring exceptional circumstances) and will plough money into existing outlets, products and services. It will reduce some store sizes and utilise its freehold property space more effectively by looking into other uses for it. As Chairman Charlie Mayfield put it, “For us the relentless pursuit of greater scale is not the right course. Our plans put differentiation, innovation and partner-led service at the heart of our offer. The measures we have outlined today are an important next step in our strategy that will ensure we emerge stronger from this period of profound change”. * SO WHAT? * I would strongly agree with the chairman on this one. I think it is more realistic for his company to stick to what it does best and not sacrifice what makes it different to be everything to everybody, because in doing so it will blend into being like everyone else. Once that happens, consumers view you differently and they start to take more notice of price. And once they start doing that, you lose business to the discounters and the likes of Amazon – and then you will ultimately disappear. IMHO, given what’s happening in retail land these days, it is more important than ever for retailers to
find their why and cherish their identity because that is one big reason why consumers will continue to set foot over the threshold of their stores. They need to focus their efforts on what Amazon and the discounters CAN’T (or will find very difficult to) provide – quality of experience being a big one, for instance – and build on that. I think there’s still space to co-exist with competitors, but retailers really need to listen to their customers and not get lazy. John Lewis is often seen as an important bellwether of the high street as it has been around for a long time and is a retailer that sells both food and non-food, so can give a broad picture of how consumers are feeling – especially the more affluent ones. It sounds like they have grasped the gravity of the current situation and are taking steps in the right direction.
The high street gloom continues in Vending machines prove profitable, but Costa feels pressure on the high street (The Guardian, Issy James) as parent company Whitbread blamed falling sales at Costa on lower footfall on the high street. Currently, it has 3,800 coffee shops (2,400 of which are in the UK) and over 8,000 highly profitable coffee vending machines. * SO WHAT? * Whitbread announced in April that it would be splitting the company into two separate businesses: Costa and the
Premier Inn hotel and restaurant chains (which would include brands like Brewers Fayre and Beefeater). The intention is for Costa to float on the stock market as a stand- alone by 2020. Again, I think this is a good idea as it will make each business more transparent. I’m not so sure about the coffee business overall, though, as it feels to me like we are reaching “peak coffee”. My worry for Costa is that consumers tire of big brands such as Costa and Starbucks and go to independents or small chains such as Joe & The Juice and Taylor St. Baristas etc. for a more interesting and less bland experience (it’s not just retailers that need to enhance the experience for their customers!). And if the vending machines are doing well, I would have thought that there isn’t much to stop its competitors from doing the same thing – and if they do, margins will shrink.
2,400 bank branches at risk (Daily Telegraph, Iain Withers) cites a report published by DJB Research on behalf of the mighty Nottingham Building Society which concludes that Britain’s top five banks could cut up to 2,400 branches (which would result in the loss of 12,000 jobs) in addition to the swathes they’ve already cut as it asserts that banks could give “effective nationwide customer coverage” with only 600 branches apiece. * SO WHAT? * More carnage in store for the banks. I imagine the unions will have something to say about this report! Mind you, it is more evidence of changing consumer behaviour. It’s all very well moaning about bank closures but if we don’t use them it’s bound to happen!
INDIVIDUAL COMPANY NEWS
In individual company news, the Disney/Fox deal takes another step forward, Twitter gets more responsible and UK office space specialist IWG announces a profit warning…
In US approves Disney’s purchase of Fox’s entertainment assets (Wall Street Journal, Erich Schwartzel and Keach Hagey) we see that the US Justice Department gave its seal of approval for Walt Disney’s proposed $71bn acquisition of 21st Century Fox assets, as long as it sells off Fox’s regional sports networks, effectively helping Disney nose ahead in its battle with Comcast for control of Rupert Murdoch’s media empire. It would have 90 days following the completion of the Fox deal to sell off the sports networks. Comcast is currently tapping up potential partners that could help it scrape more cash together for another bid. * SO WHAT? * Comcast isn’t just going to let this go, so I expect to see continued fireworks. It just goes to show how important content is getting in a world that is long on networks. Building those networks takes time and a lot of money, but the best network in the work is nothing without content to pipe through just as great content won’t reach its potential without effective distribution channels.
Twitter users to submit email addresses in battle with bots (Daily Telegraph, Hannah Boland) shows that Twitter is making at least some
effort to address long- standing criticism that it does b*gger all to stop trolling and spamming by saying that an update to be rolled out by the end of this year will require NEW USERS to confirm either e- mail addresses of phone numbers when signing up to “make it harder to register spam account”. Twitter founder Jack Dorsey said earlier this year that “We have witnessed abuse, harassment, troll armies, manipulation through bots and human coordination, misinformation campaigns, and increasingly divisive echo chambers…we aren’t proud of how people have taken advantage of our service, or our inability to address it fast enough”. * SO WHAT? * It sounds to me like Twitter is just p!ssing in the wind. The company needs to review its EXISTING user base to weed out the undesirables who remain anonymous, spreading their venom to often vulnerable targets. Maybe I’m just being cynical, but it seems that the roll-out of crowd-pleasing updates is occurring at the exact moment that subscriber growth is dropping off. When things were going gangbusters for them, the company didn’t give a sh!t! Let’s hope that Twitter continues to make moves in the right direction regarding sorting out its moral compass. If it makes meaningful advances in that arena, maybe subscriber number growth will start to accelerate again.
WG issues profit warning following buying spree (Financial Times, Aime Williams) heralds the second profit warning in just over eight months for the world’s biggest serviced office group as the UK-listed company spent money on more leases to increase its office floorspace footprint. IWG runs offices in roughly 3,000 locations in 100 countries but is facing increasing competition from newcomers such as WeWork who compete with it in co-working spaces. * SO WHAT? * IWG, best known for its Regis brand, is obviously talking a good game but it sounds like the company is going to have to come up with something good soon otherwise the company’s credibility will be shot to pieces. Thus far it’s used profit warning explanation clichés such as Brexit and global disruption as well as the current “we invested a bit more than we had intended so bear with us”-kind of deal. IWG will have to do something sharpish otherwise the vultures will start circling and pick off its portfolio.
…And finally, in other news…
It is quite hot at the moment, isn’t it! So just in case you get caught out, I thought you might be interested in this: Mum reveals miracle cure for getting rid of sunburn in just 30 minutes – and it
involves shaving cream (The Mirror, Amber Hick https://tinyurl.com/ycxpgs8q) This sounds a bit messy and I haven’t tried it – but next time I get sunburn I think I’ll give it a go!
AND FINALLY, I thought I’d end with a really positive story that will restore your faith in human nature: Cleaner overcome with emotion after students raise money to send him on holiday (Metro, Jane Wharton https://tinyurl.com/y83vjucc). How great is this??
As always, thank you for reading the WIFI!