Retail FreeView - Healthy vines support Majestic Wine

June 28, 2012

Verdict Retail FreeView
A synopsis of retail news and opinion About us
Verdict is a retail information
Retailers are producing contrasting performances across different sectors and geographies this specialist within the Informa Group.
week. Majestic has reason to toast its performance, while Ocado’s gloom over the Jubilee and its With almost 30 years' experience,
uncertainty about the Olympics produced a big drop in share price. Meanwhile in the value fashion Verdict publishes unrivalled
space we have H&M growing sales and opening more stores in Greece, while New Look is shuffling independent analysis. We provide a
complete picture of the UK and
debt and closing stores in the UK. For every winner there is a loser; this is now the climate for retail.
increasingly the international retail
Maureen Hinton, Verdict Practice Leader
arena, helping retailers,
manufacturers, service suppliers,
analysts, and consultants to fully
exploit opportunities within the
“Carpetright looks to be emerging from a period of turbulence in
industry.
the UK with quarterly LFLs returning to growth for the first time for
two years, albeit against weak comparatives. While investors will Latest analysis
be disappointed that profits were at the lower end of its estimates,
John Lewis | Verdict Company Briefing
that it is producing a profit, given Allied Carpets was sold in a pre-
pack administration for the third time in three years and United Global Department Store Retailing |
Carpets is reviewing its store portfolio, is a credible performance.” Verdict Channel Report
Matthew Walton, Verdict Analyst, in Retail Week, June 26
Footwear Retailing in the UK | Verdict
Market Report
“While Debenhams remains rightly cautious for the rest of the year,
particularly in relation to the impact of the Olympics, having seen Sears | Verdict Company Briefing
a positive uplift from recent UK celebratory events we expect Waitrose Food & Grocery | Customer
Debenhams’ strong offer to resonate well with shoppers visiting Insight
London, particularly as it makes headway with refurbishing its
UK Consumer Satisfaction Index 2012
Oxford Street flagship.”
Honor Westnedge, Verdict Analyst, in Retail Week, June 28

Web: www.verdict.co.uk | Tel: +44 (0)20 7551 9664 | Email: enquiries@verdict.co.uk

June 28, 2012

Verdict View
Healthy vines support Majestic Wine

By Andrew Stevens, Retail Analyst

Majestic has posted another year of solid growth as it scale and buying power of a larger retailer with the Majestic opened its 181st store in late May, moving it
continues to dominate specialist wine sales. In a personal service and product knowledge of a local one store closer to its ambitious target of 330 stores in
market that has been increasingly difficult for independent wine merchant, enabling it to defy the the UK. While the company has said that it is confident
specialists, Majestic has managed to use its strengths in current pressures that are forcing wine specialists out of in its abilities to reach this goal it is highly likely to be a
customer engagement alongside a knowledgeable the market. long-term objective rather than a priority for the
workforce to secure loyal customers. While its goal of business, especially when its focus remains on
330 UK stores seems ambitious, Majestic is working on Service has long been one of Majestic's stronger customer service. Wine is a product that retails well
improving its online proposition. points. It employs most of its staff through its online, as has been proven by many competitors and
management training scheme and gives them the wine subscription services. While Majestic's store-based
Majestic Wine has again managed to produce healthy opportunity to work towards widely recognized services such as free tastings and its instore events will
growth this year, with total sales increasing by 8.9% qualifications from the Wine and Spirits Education Trust. mean that a strong and potentially larger store
and UK retail like-for-like sales increasing by 2.6% during Not only does this equip staff with professional levels of portfolio will remain core to the Majestic proposition, a
the 53 weeks to April 2, 2012. Majestic has published product knowledge, it encourages them to engage multichannel focus will allow the retailer to challenge
several key performance indicators to support this better with customers; this level of service is difficult to its competitors on multiple fronts.
growth, including an 11.1% increase in customer achieve within supermarkets, which are largely unable
numbers (to 568,000), a 1.6% increase in the average to provide specialist wine advice. The future looks bright for Majestic. It recently reduced
transaction value (to £128), and an 8.3% growth in its minimum online order from 12 to six bottles, mirroring
transaction numbers (to 2.2 million). All of this seems Engaging closely with its customers is a priority for the a successful move made for instore purchases in 2009.
impressive, especially when we take into account the retailer. During the 53 weeks to April 2, 2012, 37,000 If Majestic can replicate the estimated 12.9% increase
aggressive pricing strategy of Majestic's grocery customers attended events hosted in stores across the in customer numbers and 14.6% rise in transactions –
competitors. Majestic portfolio. These events are free to attend and with only a 4.0% decline in the average transaction
enable Majestic to showcase both its range and the value – reported following the reduction in the
Wine retail, and alcohol retail in general, has been product knowledge of its staff. Majestic also recently minimum instore purchase, it is likely to be toasting yet
difficult throughout the downturn. While sales of launched its first multimedia advertising campaign in another successful year. Moreover, online contribution
alcoholic drinks are estimated by Verdict research to London, the initial results of which are reportedly to overall sales has been stable at 10.0% for two years
have grown by 34.0% between 2002 and 2012, over encouraging. By enabling its customers to engage with now; a move to make online purchases more
the same period sales via off-licenses and tobacconists its stores, products, and people via instore tastings and accessible is sure to increase the channel's share of
declined by 36.6%, indicating just how tough it is to events, Majestic is able to build a solid relationship that revenues, as well as introducing new customers to the
operate against those retailers with scale. However, is unparalleled in supermarkets. retailer.
Majestic has a unique proposition that combines the


June 28, 2012

News Review
Following a property review in August 2011, New Look plans to close
Clothing & Accessories
approximately 60 stores over the coming years – of which seven closed in
By Kate Ormrod
2011/12. However, whether or not this will help to stem the flow remains to
be seen. The dominance of Primark in the value clothing sector in the UK is
H&M keeps faith in the Greek market unlikely to stop in the short term, despite New Look’s efforts to promote its
Despite the current financial turmoil taking place in Greece and the value for money credentials. Furthermore, New Look has a far larger store
uncertainty surrounding its future in the eurozone, Swedish fast fashion estate than its competitor – the company has 600 stores in the UK,
retailer H&M has stated that it still sees potential for growth, highlighted by compared to Primark’s 156 – and should look to address the issue of store
the recent opening of its 24th store in the country. Although the company closures sooner rather than later in order to minimize costs.
has stressed that it is prepared for the worst, it has reason to be optimistic, as
it recently posted a 22.0% sales increase in the country in Q2, ending May
31, 2012. Furthermore, it is not alone in having faith in the Greek market, as Food & Grocery
only last week electricals retailer Dixons pledged to stay in the country. By Cliona Lynch
However, the fact remains that expanding in Greece at this current time is a
particularly high-risk strategy. Unemployment in Greece hit a record high Ocado share price falls, despite 12% sales growth
earlier in June of 21.9%, resulting in low consumer confidence and even Online grocer Ocado has posted a sales growth of 12% for the 24 weeks to
lower disposable incomes; thus, regardless of whether the country stays in May 13, 2012 to reach £332.3m ($518.3m), along with operating profit of
the eurozone or reverts to the drachma, discretionary spending in Greece £14.9m ($23.2m) and a pre-tax profit of £200,000 ($311,960). However,
will be severely restricted for the foreseeable future. despite this growth, the company’s share price fell by more than 20% in the
24 hours following the announcement, due to a gloomy prediction from the
New Look announces debt reshuffle following poor results company’s CEO, Tim Steiner, in which he stated that the company had not
Struggling UK fast fashion retailer New Look has announced its full-year benefitted from the Queen’s Diamond Jubilee in the same way that bricks
results for 2012, posting a decline in like-for-like sales of 5.7%, a fall in total and mortar grocers had, and he could not predict the effects that the
sales of 2.0%, and a pre-tax loss of £54.5m ($85m). At the same time, the Olympics could have on its service. Furthermore, the company faces a
company also revealed that it has amended its existing borrowing of £1.1bn mounting threat from Waitrose, which is increasingly encroaching on
($1.7bn), extending the start date for repayments from 2013 to 2015, Ocado’s market share, due the similarity of their offerings – Ocado sells
providing the company with, according to CEO Alistair McGeorge, Waitrose-branded goods – and the regions in which they operate. In light of
“breathing space to invest.” this increasing competition and the uncertainty surrounding the company’s
H2 trading period, Ocado’s record of having never made a full-year pre-tax
profit looks set to continue.


June 28, 2012

News Review
Tesco to tailor its online offering Home & DIY
UK grocery giant Tesco has announced plans to personalize its online By Matthew Walton
shopping experience by using data collected via its Clubcard loyalty
scheme; for example, promoting its Finest range to higher spending
customers. The initiative follows a successful trial run that saw sales of IKEA requests permission to enter India
mattresses – the item used for the test – increase by 10%. The scheme has IKEA has asked the Indian government for permission to invest €1.5bn
attracted some negative attention, as it has been perceived in some ($1.9bn) in 25 new stores in the country over the coming years. The plan to
quarters as creating “a class divide” among Tesco customers; however, increase the group’s worldwide portfolio from its current 298 stores is likely to
such segmentation makes a great deal of sense for the retailer, and does come up against complications. Despite the recent relaxation in the rules
not represent Tesco simply attempting to split its customer base into rich and regarding foreign investment in the country, no global retailers have moved
poor. The company is looking to re-engage with consumers following the fall forward with expansion into the Indian market. In addition to regulatory
in sales it recorded over the second half of fiscal 2011/12 and the first uncertainty surrounding 100% foreign ownership, IKEA will have to overcome
quarter of fiscal 2012/13, and the disappointing performance of its Big Price the government directive that 30% of inventory must be sourced from small-
Drop campaign, and it should be able to rebuild relationships at both ends scale local industries, which is made particularly difficult given the poor
of the financial spectrum by promoting its value proposition to price- transport infrastructure in place. While no timescale has been laid out, if the
conscious consumers and the quality of its produce to higher spenders. application is successful, IKEA will not only have the opportunity to grow into
a retail sector estimated by Verdict research to be worth £552.5bn
($886.9bn) in 2011, but will also act as a test case for other multinational
Electricals & Entertainment retailers looking to invest in India.
By Matthew Rubin

Carpetright’s profits dive
eBay snatches Sainsbury’s digital boss UK underlying operating profit at Carpetright has taken a nosedive from
Tanya Lawler has been poached by eBay to take up a newly created £17.8m ($27.7m) to £2.8m ($4.3m) in the year to April 28, 2012. Life-for-like
position of vice president of UK trading. Lawler, who will take up the position sales were down 0.2% for the year, which would have been worse but for a
later in 2012, has held her current position of director for digital and cross strong second half performance, where sales rose by 1.9%. Total group
channel at Sainsbury’s for five years, and has previously worked at Argos turnover fell by 3.1%; however, net debt was drastically reduced from
and Capgemini. The appointment will put her in charge of developing £46.6m ($72.5m) to £19.1m ($29.7m). The overriding performance was in line
eBay’s customer strategy and driving growth in the retail sector, including with expectations, as trading conditions continue to force retailers into
building on current partnerships such as Superdry and House of Fraser. heavy discounting to attract shoppers. The retailer has also acknowledged
eBay’s vice president of marketplaces UK and the rest of Europe, Claire the shift in its customer base using the Internet to make purchases by
Gilmartin, believes the UK is one of its fastest-growing European markets, shutting 49 stores, with more expected to close in the coming year.
reflecting the importance to the pureplay retailer of selecting someone with
vast knowledge of the UK retailing industry.


June 28, 2012

News Review
By continuing to stay profitable, Carpetright is managing the challenging
conditions admirably, and not ignoring the need to downsize. With demand
likely to pick up in the coming years, it is well placed to rebuild lost margins
and increase profitability. Stay in touch
Contact us to see how we can help
John Lewis to push for click and collect Tel: +44 (0)20 7551 9664
The managing director of John Lewis, Andy Street, has announced that the Email: enquiries@verdict.co.uk
department store is in talks with various unnamed parties to arrange local
click and collect services. Online John Lewis shoppers can already arrange Share your views with our analysts and the Verdict community through our
to collect their goods from their local Waitrose; however, the new goal is to social media channels.
create a tie-up with a retail chain that has wide coverage across the UK. LinkedIn
The new strategy is part of Street’s belief that UK retailers will need no more Twitter
than 70 outlets to reach every customer in the country, instead targeting
sales via shops, online, mobile phones, and through click and collect. Any Sign up to our emails for news from the UK and across the globe.
potential click and collect tie-up for John Lewis would not only be great Verdict FreeView
news for its middle-class shopping base, but with less need to build further
department stores, costs can also be controlled during less stable trading
conditions.


Retail FreeView - Healthy vines support Majestic Wine

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Retail FreeView - Healthy vines support Majestic Wine