Articles From the Team
Britain’s broken retail sector. Is the news as bad as it appears, particularly for those of us working in the Northwest?
News headlines in 2018 have been full of doom and gloom stories about problems, challenges and struggles within the UK retail sector. Well known retail brands are going into administration, undertaking voluntary CVAs, closing stores, downsizing, making redundancies and losing market share.
We’ve seen Jamie’s Italian, Toys R Us, Conviviality Retail (Bargain Booze), Maplin, Jaeger, Agent Provocateur, Feather & Black and a number of other companies go into administration, and we’ve seen House of Fraser, New Look, Byron, Prezzo, Mothercare, Homebase, Debenhams, Carpetright, Poundstretcher and others look to reduce store and staff numbers in order to survive. In addition, other companies have opted to merge or acquire to survive, in the hope of gaining economies of scale. Two notable examples include Tesco’s acquisition of Booker and the planned merger of Sainsbury’s and Asda.
The Northwest of England has its fair share of retail companies and some of the negative headlines are applicable to the region’s retailers; most notably in 2018, is the collapse of Crewe based Conviviality Retail. Luckily for Conviviality’s staff, customers and clients, its Bargain Booze business was saved by grocery wholesaler Bestway and its Matthew Clark business was picked up by Irish drinks giant C&C (the makers of Magners and Bulmers cider).
Yet, whilst the Northwest has seen problems in its retail sector, upon closer inspection, some retailers are doing well; although the companies listed below is not an exhaustive list, I thought a positive news story about some of the region’s success stories was a useful addition to the current narrative surrounding the retail sector.
So, which Northwest companies have made it on the list? JD Sports – the Bury based Sports & Leisure retailer posted record results with like-for-like in-store sales up 3%, and online sales up 30 per cent. It has heavily invested in online and international expansion, and has recently acquired the US shoe store Finish Line for c. £400m. In 2016 it bought Go Outdoors and fully acquired Tessuti.
Boohoo – the Manchester based online fast-fashion retailer saw revenue almost double to £580m – up from last year’s £295m. The company increased its active customers by 22% and went on the acquisition trail acquiring PrettyLittleThing, which itself has seen a 128% growth in customer numbers.
The Hut Group – the Manchester based health, beauty, fitness and lifestyle company is Europe’s largest retailer of beauty products and one of the Northwest’s most acquisitive companies. In 2016/17 it created c. 1,200 new UK jobs, sales were up 50% to £501m, EBITDA was up 67% and 52% of sales were derived from the Group’s own brands.
EG Group (Euro Garages) – the Blackburn based roadside and convenience store retailer is rapidly expanding and hugely acquisitive. It recently made a $2.2bn acquisition in the US, acquired sites in Germany, Italy and elsewhere, and is a leading franchisee for brands such as Starbucks, Subway, Greggs, KFC and Burger King.
B&M – the Blackpool based retailer has a market cap of £3.81bn and is one of the UK’s leading variety retailers. In 2016/17 group revenues were up 19.4% and gross profit was up 20.3%. The company opened many new stores and acquired and opened sites in Germany.
Iceland Foods – the Deeside based frozen food retailer was voted the UK’s best online supermarket by Which? – two years running. In recent years, it’s undergone somewhat of a renaissance and in 2017 total sales were £2.97bn – up 4.4% on the previous year. It has 902 stores and 22,208 employees.
Not all retailers in trouble
In a climate where 19% of fashion retailers are displaying signs of financial distress, it’s great to see Manchester’s ‘fast fashion’ retailers Boohoo and PrettyLittleThing growing and expanding. As a 2016 article in The Guardian observed, the Manchester-based online companies [are] threatening to take over fashion retailing with inexpensive, brash clothes that are more likely to have been inspired by a reality TV star’s clubbing outfit than the catwalk. These companies are hugely innovative, maximise usage of social media and trends, speak to their customers in a direct and edgy manner, and focus on low cost, own-brand products that appeal directly to their target audience and also provide the best margins.
The Hut Group, JD Sports, Iceland and other retailers have embraced e-commerce and online retail, and they sell a significant volume of own brand products to customers. They are not afraid to invest in their business, they innovate and they listen to what their customers want.
Looking to move in-house?
BCL Legal works closely with clients in every industry sector across the Northwest, and we are pleased to count The Hut Group, JD Sports, Boohoo / PrettyLittleThing, EG Group, Pets at Home and many other retailers as clients.
Lawyers looking to move in-house shouldn’t be put off by the recent headlines about the retail sector. However, we strongly recommend that you undertake the necessary due diligence before applying. Some of our retail clients have fantastic roles for legal talent and the fast paced, down-to-earth and non-bureaucratic nature of these retailers makes them thoroughly exciting and rewarding places to work.
If you’re a commercial contracts, IP/IT, e-commerce, data protection, corporate, real estate or commercial litigation solicitor, then options exist for you to move in-house at some of the Northwest’s most exciting and dynamic companies. If you’re interested in exploring potential opportunities, don’t hesitate to get in touch.
There are many articles documenting why the retail sector is feeling the pinch and so I couldn’t write this blog without mentioning some of the explanations I have read in my research.
In no particular order:
Retailers haven’t kept up with changing shopping habits • Most notably a move towards online shopping /e-commerce (almost a quarter of non-food retail sales are now purchased online) • People are tending to do smaller more regular shops rather than one big shop in a single location. Convenience stores, the location and the range or products is key – see EG Group’s success • People are looking to have a better shopping experience, in more intimate stores with a more discrete range of products. Smaller format stores are key
Customers have different priorities • There has been a shift in how people eat, drink, relax, entertain etc. – takeaway and delivery services, entertainment and new technology items are using up disposable income that may have been spent in shops/traditional retailers • People have more time pressures and so have less time to shop. Convenience and home shopping, and e-commerce are fast replacing physical retail
Financial Pressures • Inflation, additional pension burdens and the increase in the National Living Wage is increasing costs, particularly for traditional retailers with lots of stores • A squeeze in disposable income due to higher rents, energy prices, oil prices etc. means consumers are spending less on discretionary purchases • Record levels of consumer debt and the prospect of higher borrowing costs • Business rates - due to rise again in April - are a burden • Increased competition is squeezing margins whilst property prices and costs increase • Transportation costs are increasing
Interestingly, despite the doom and gloom and store closures, the vacuum on the high-street is being filled with new entrants. These include the likes of Dyson, Google, Microsoft, Samsung and Tesla who have all begun to open shops to sell (and provide information) their products direct to the public. Also, the boom in e-cigarettes has meant that almost every town centre has at least one vaping shop.