Who are the last men standing on the High Street?
A number of clear winners are emerging from the wreckage of the high-street downturn. James Thompson identifies some of the leading lights
Tuesday 30 December 2008
Next year is shaping up to be a watershed year for UK retail. In the last month alone, a number of large high-street chains, including Woolworths, Zavvi, The Officers Club and Whittard of Chelsea, have collapsed into administration.
The fact that more will fold over the next few weeks and months means that at the end of 2009 the UK high-street will be missing some well-known chains. While the ongoing consumer downturn and rising retail administrations brings misery for many store groups, for others it represents a unique opportunity to prosper from the demise of their rivals. For instance, in the entertainment market the prospects for HMV look positively rosy following the collapse of Woolworths and Zavvi. Here we take a look at 10 retail sectors to forecast who is likely to be sitting pretty next year and why. There will be lots of retail losers in 2009, but there will also be handful of winners.
Who? The John Lewis Partnership-owned department store with 27 shops.
Opportunity: John Lewis has stuck to its pricing strategy, despite fierce discounting from rivals, particularly Marks & Spencer and Debenhams. Speculation in the market continues to swirl around Debenhams' near-£1bn of debt and House of Fraser's ownership structure, although there is no suggestion that they are in trouble.
Threat: John Lewis relies heavily on sales of big-ticket items that are inextricably linked to the housing market, which is forecast to remain in the doldrums.
Who? The retailer operates 1,100 pharmacy and health and beauty stores in the UK.
Opportunity: After being taken private in summer 2007, Alliance Boots is well-placed to take advantage of the Government's push of health services, such as in-store GP surgeries, on to the high street. Rivals, such as Superdrug, have been forced into massive discounting.
Threat: The grocers march into health services and beauty products.
Financials: UK health and beauty operation – largely the Boots pharmacy chain – posted retail sales up 0.5 per cent for six months to 30 September.
Who? The world's third-largest retailer with more than 2,000 UK stores.
Opportunity: Tesco said the launch of hundreds of new discounter branded products had attracted 300,000 new customers since they launched in September. Tesco delivered more than £11bn of non-food sales globally last year, but the fastest growth over the next few years is likely to come from its burgeoning financial services division.
Threat: In the longer-term, Tesco may find it harder to open larger grocery stores if the Competition Commission's new guidelines on planning get the green light.
Finances: For the year to 23 February 2008, Tesco's group pre-tax profits were up 5.7 per cent to £2.8bn, on total sales up 11.1 per cent to £51.8bn.
Who? The value fashion giant has a total of 187 stores in Ireland – where it trades under the Penneys brand – Holland, Spain and the UK.
Opportunity: Primark has benefited over the past year from the collapse of some of its value rivals, including MK One and Ethel Austin, which emerged from administration in the spring. The retailer has aggressive expansion plans and is set to grab further market share next year.
Threat: It faces fierce competition from Tesco and George at Asda.
Financials: Full-year operating profit increased by 17 per cent to £233m.
Who? The carpet specialist has more than 400 stores and concessions in the UK and the Republic of Ireland.
Opportunity: Carpetright is likely to reap the rewards from the woes of its rivals next year. Its rival Floors-2-Go emerged out of administration under new owners this year. The future of the 220-store chain Allied Carpets, whose French owners have put it up for sale, is also uncertain.
Threat: A prolonged recession and housing market slump.
Financials: Carpetright posted a 67.6 per cent fall in pre-tax profits to £8.8m for the 26 weeks to 1 November.
Who? DIY retailer with 323 UK stores.
Opportunity: Many experts forecast that B&Q will benefit from additional capacity in the home improvement market in 2009, as rival retailers sell stores or hit the buffers. B&Q is already benefiting from the collapse into administration MFI, which sold kitchens and bathrooms, and Fads, which had a strong focus on paint.
Threat: Fortunes inextricably linked to the housing market and the forecast is of further price drops.
Financials: Total sales fell 7.8 per cent to £887m in the 13 weeks to November, and underlying sales fell 8.7 per cent.
Who? The Swedish flat-pack furniture giant has 17 stores in the UK.
Opportunity: A number of Ikea's rivals have had a torrid time. Furniture rivals, including Ilva, MFI and New Heights, collapsed into administration this year. Sofa specialist ScS emerged from administration in the summer, while Land of Leather continues to suffer.
Threat: Among its global markets, Ikea's managing director says that the UK, Germany and the US is suffering most.
Financials: Sales in the year to August climbed by 7 per cent.
Who? Entertainment retailer with 250 stores in UK and Ireland, which had a near 30 per cent share of the music and DVD market in early 2008.
Opportunity: Two of its rivals, Woolworths and Zavvi, have fallen into administration over the past month. Wooloworths is set to close 807 stores on 5 January and 125-store Zavvi has not sold CDs and DVDs online since before Christmas.
Threat: Fnac, the successful French entertainment retailer, could be tempted to enter the UK market by bidding for Zavvi's stores.
Financials: HMV UK and Ireland's like-for-like sales rose 1.6 per cent for the 26 weeks ended October 2008.
Who? Kesa Electricals-owned 250-store UK electricals chain.
Opportunity: Like all retailers of big-ticket items, Comet has suffered a dire year of trading, as the tumbling housing market has hit sales of washing machines and TVs. However, the balance sheet of its parent Kesa remains strong and Comet will emerge at the end of 2009 a leaner operation with a bigger home support and installation service, Comet on Call.
Threat: A big, albeit a long-term one, threat to Comet is the launch of Best Buy's big box electricals stores in the UK next year.
Financials: Comet posted a loss of £8.1m for the six months to 31 October.
Who? HMV Group-owned bookseller with 313 stores
Opportunity: Waterstone's will benefit from the expected disappearance of Woolworths' book offer. The leading credit insurer, Euler Hermes, is also turning the screws on suppliers to Borders UK, which may affect stock in stores of its rival next year.
Threat: WHSmith is still a major rival to Waterstone's and is firmly focused on books under chief executive Kate Swann. In the absence of any more Harry Potter blockbusters, Waterstone's faces a market where overall sales are declining.
Financials: Underlying sales at Waterstone's fell by 3.1 per cent for the half-year to 25 October.
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