IRI's Weekly FMCG News Update - w/c 20th June 2016

Macroview Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 24th June

Copyright © 2015 Information Resources, Inc. (IRI). Confidential and Proprietary. 2

• Asda’s income tracker shows family spending power reaching record levels• Tough trading conditions hit sales at Debenhams• My Local on the brink of going into administration• Lidl UK: investment in Scotland and new produce pledge • Tesco forward momentum continues in Q1• Superdrug sponsors Gay Star News• "World first" Sales Assist app by Apple and IBM rolled out in Boots stores• Hobbycraft reports record full year sales• BHS to continue trading ‘for the summer’ in an effort to shift stock• Waitrose rolls out ‘scan as you shop’ mobile app• Retail industry analysts cautiously respond to Brexit vote

Weekly News Summary –20th June 2016


Asda’s Income Tracker Shows Family Spending Power Reaching Record Levels

UK families enjoyed another increase in spending power last month, as weekly discretionary income for May reached £201 – an all time record high for Asda’s monthly Income Tracker.

The latest data revealed that family spending power rose by £13 (7.2%) a week, compared to the same month last year –the highest rate of growth since November 2015. This increase also marks the 19th consecutive month that the growth in discretionary income has remained in double digits.

The retailer said that a combination of the falling cost of essential items, a drop in unemployment levels, and a boost to earnings following the introduction of the National Living Wage, all contributed to the latest rise in disposable cash.

An Asda spokesperson, said: “The amount of discretionary income recorded by Asda’s Income Tracker reached an all-time high, which is very encouraging and demonstrates continued consumer confidence.”

However, they added: “While costs continue to fall for UK households and spending power growth begins to accelerate once more, the long term picture is more difficult to predict as we wait to see the impact of the EU Referendum’s decision on the nation’s pockets.”

Source: NamNews 21st June 2016


Tough Trading Conditions Hit Sales At Debenhams

Like-for-like sales at Debenhams edged down 0.2% in its third quarter 11 June, impacted by the tough trading conditions on the High Street. The result is a slowdown from growth of 1.1% seen in its first half and means that for the 41 weeks of its financial year so far, like-for-like sales are up only 0.7%.

Group gross transaction value in the latest quarter rose by 0.5%, whilst online sales increased 7%.

The department store group said the UK trading environment had been weaker since the new year, particularly in clothing. However, it added that its strategy to increase the mix of non-clothing sales has supported its performance against this background, with health & beauty sales in particular continuing to show “good growth”.

Michael Sharp, who will be replaced this week by Amazon executive Sergio Bucher as Chief Executive, said: “Our strategy remains unchanged, with further progress in driving our non-clothing mix, continuing to improve service for multi-channel customers, and offering a wider choice of products and services in under-optimised space. In response to more uncertain trading conditions in this period, particularly in clothing, we have focused on managing stock and margins and generating cash.

“I am confident that I am leaving the business in the hands of a very strong management team, who will continue to execute our strategy and support our new CEO, Sergio Bucher, through the next phase of Debenhams’ development. Our wide product choice, clear destination departments and improving service proposition gives us a strong platform from which to deliver long term sustainable growth.”

Source: NamNews 22nd June 2016


My Local On The Brink Of Going Into Administration

My Local, the convenience chain born out of Morrisons’ failed c-store business nine months ago, is reported to have filed a notice of intention to appoint administrators.

KPMG, which has been working with the chain’s management and its backer Greybull Capital on strategic options for the struggling business, is said to have been lined up to handle an administration. Greybull’s move to file a notice of intentiongives the chain protection from creditors for 10 days.

Whilst it has not been confirmed that the administrators will be appointed, reports suggested the process will begin next week, potentially putting the jobs of around 1,700 staff at risk.

A team led by retail entrepreneur Mike Greene and backed by Greybull bought the 140 stores from Morrisons last September for £25m, although only around 125 are currently trading. At the time, the group said it had plans to expand the rebranded chain and bring it back into profit in its first year of operation. However, the chain has struggled to competein the cut-throat convenience sector with reports suggesting that supply chain problems and poorly located sites has hampered My Local’s progress.

Morrisons could face liabilities of up to £20m if My Local goes under as it retained a guarantee on a number of store lease obligations as part of the original sale agreement.

Source: NamNews 22nd June 2016


Lidl UK: investment in Scotland and new produce pledge

Scotland: £50m investment in store of the future conceptLidl has announced an investment of £50m in Scotland which will enable the discount retailer to improve ten of its existing 91 stores. As well as these improvements, Lidl is creating eight new 'store of the future' concept stores, which will follow the new look and feel of Lidl Rushden. All future stores will now follow this modern and more supermarket-like format, along with more environmentally friendly technology to create cost-savings which continue to play a key role in the discounter's success.

Talking about the new developments, Ross Millar, Lidl’s managing director in Scotland, has said, “This latest phase in our growth is testament to the continued success of Lidl in Scotland. Our planned investment over the next 12 months signifies our commitment to Scotland and the fact that we are proud to serve Scotland with our best quality for the best price offering.”

Lidl commits to British fruit and veg pledgeFollowing in the footsteps of food discounter Aldi, Lidl has become the second UK grocer to sign up to the National Farmer's Union (NFU) pledge to protect fruit and vegetable growers. Commitments as part of the 11-part pledge include treating suppliers fairly, offering more price certainty to growers, making payments on time and reducing waste. In addition to this, Lidl has also made a commitment to increase its British fruit and vegetables volumes when in season. Ryan McDonnell, commercial director for Lidl UK, has commented on this new move, "We are very proud to have developed and maintained strong, long-standing relationships with all our suppliers, and our commitment to the NFU pledge cements this further. We're also very keen to ensure that our sourcing process supports the growth and development of UK growers, which is vital in encouraging more and more people, particularly our shoppers, to regularly eat more fruit and veg.“

Promotional activity with growers to continueAccording to the NFU website, Lidl has made a commitment to continue its on-going promotional activity with growers. This includes ‘Pick of the Week’ promotions on fruit and vegetables, which are specifically designed to provide flexibility yet security to Lidl's supply base through crop-availability-led planning.

Source: IGD 22nd June 2016

http://retailanalysis.igd.com/Hub.aspx?id=14&tid=1&rid=65&prid=1844


Tesco forward momentum continues in Q1

Tesco has reported total group like-for-like sales up 0.9% for the 13 weeks to 28 May 2016, including a second quarter of positive growth in its core UK operation. Boosted by clear volume growth of +2.2% and transactions up 1.7%, UK like-for-likes were +0.3%, though slightly down on the +0.9% seen in the previous quarter. Meantime international sales were solidly ahead with like-for-likes of 3.0% and the Republic of Ireland operation was also up 0.3%. Overall Tesco achieved positive like-for-likes across continuing business in all regions.

New exclusive UK fresh food brands outperformingThe company has reported that its new UK exclusive produce ranges, launched in March 2016, under a variety of 'farm' banners hasexceeded its expectations, boosting Tesco's volume growth in produce and meat ahead of the market by c5%. However, with their lower price positioning these ranges (providing an average 17% saving) are having an additional deflationary effect on UK like-for-like sales to the tune of some -0.7%. Customer satisfaction ratings for the new ranges are also high at over 90%.

Average weekly shop now 6% cheaper than September 2014Underpinned by the increased focus on giving customers lower, more stable pricing and the Brand Guarantee initiative, Tesco is bringing significant savings to its UK shoppers. To achieve this the business has continued to redirect coupon spend into lower shelf-edge prices and focusing promotional investment on the lines more important to customers. As a result spend on couponing was down 38% on the year, and the number of products on multi-buy down by 42%.

Non-core disposals continueFollowing announcements on the agreed sales of Dobbies and Giraffe, it has now been announced that the Harris & Hoole coffee chain is to be sold to Caffe Nero, the number three UK coffee shop operator. Harris & Hoole currently operates 46 sites, almost 30 of which are located in Tesco stores.

Fourth consecutive quarter of L4L growth in Asia and EuropePerformance in its international markets have continued to improve, and the latest quarter saw particularly encouraging results in Thailand where improvements in fresh food and promotional strategy paid dividends. In Europe Slovakia enjoyed sustained growth and Tesco's operation in Hungary benefitted from the relaxation of Sunday trading laws there.

Dave Lewis, Chief Executive commented:"We are encouraged by the progress we are making ...Our fresh food brands are performing very well, with over two thirds of our customers having bought products from the new (UK) range. By growing volumes, transforming the way we work with our suppliers, and further optimising our store operating model we are rebuilding profitability in a sustainable way."

Source: IGD 23rd June 2016


Superdrug sponsors Gay Star News

Superdrug has committed to becoming a sponsor of Gay Star News during Pride events across the UK over the summer months.

The health and beauty retailer’s sponsorship package will include branding, products, advertising and social media support.

Gay Star News plans to give away thousands of goody bags to the participants of Pride events in London, Bristol, Manchester, Brighton and Glasgow. As a sponsor, the giveaways will bear the Superdrug logo and also contain Superdrug goodies, including shower gel and special discount vouchers for Superdrug Health & Beauty Card holders.

Matt Walburn, Superdrug customer & marketing director, said: “We love surprising and delighting our customers and the LGBT community is no exception. We are proud to support Gay Star News by supporting their activities during the summer Pride season.”

Source: Retail Bulletin 23rd June 2016


"World first" Sales Assist app by Apple and IBM rolled out in Boots stores

Health and beauty retail giant Boots has launched a new app to make it easier for staff members to find any product customers want.

Created in collaboration with IBM and Apple, the new Sales Assist app is dubbed as a world first and has been rolled out to over 2500 of Boots’ stores, on 3700 iPads used by shop floor assistants.

The app allows Boots staff to search any product for a customer, display an image of it on screen, and provide a price –essentially solving those times a shop assistant struggled to know what a product was or whether it was in stock.Sales Assist also shows other related or recommended products and discover if it there is any in stock at the store, or make an order from another location.

Boots UK omnichannel director Robin Phillips said the app would provide a boost for in-store customer service while also growing the Order & Collect business.

“We’re integrating our digital and in-store presence to deliver an even better shopping environment for customers,” Phillips said.

“The unique tool allows our colleagues to quickly show product information, ratings and reviews, look up inventory online and make recommendations based on online analytics, all from the shop floor.“It will help even our smallest stores feel like a flagship shop, with access to the entire Boots range at their fingertips.”

Source: Retail Gazette 23rd June 2016


Hobbycraft reports record full year sales

Art and crafts retailer Hobbycraft has seen its full year sales increase by 7.6% to £151.8 million three years into its business transformation programme.

In the year to 21 February EBITDA climbed by 62.7% to £10.9 million. The company also saw strong growth in online sales which rose by 36.4% to account for 6.6% of turnover.

Hobbycraft chief executive Catriona Marshall said: “Three years of business transformation and investment in infrastructure are paying off. Strong growth was driven by our newly-created distribution centre and supply chain initiatives, together with an expanding store network and established online trading platform. Sales reached record levels, growing for the sixth consecutive year to £151.8 million and with an increase in like for like sales at store level.”

During the year, Hobbycraft expanded its store footprint with the opening of two new stores in Borehamwood and Greenwich, taking the total store network to 83 at the year end. It has also recently opened two stores in Bristol and Ashford, with two more scheduled to open later this year in Newcastle and Ipswich.

Hobbycraft is continuing to transform the business into a multi-channel retailer and said its improved mobile-optimised website boosted online performance.

Marshall added: “As the market leader, we remain focused on delivering the best value and quality for customers, and responding to their ever-changing needs and preferences.

“This year’s performance demonstrates that we are on track to achieve further significant growth in sales, market share and EBITDA.”

Source: Retail Bulletin 24th June 2016


BHS to continue trading ‘for the summer’ in an effort to shift stock

BHS is poised to continue trading through the summer after its creditors were told that a liquidation date has not yet been set.

It is understood that the department store chain, which collapsed into administration in April after seven consecutive years of losses, will seek to shift its seasonal stock before operations are brought to an end.Administrators revealed at the start of this month that the business would be wound down after it failed to find a rescue bidder.

But creditors were told at a meeting in London today that BHS will continue trading for “the next couple of months.”A source who attended the meeting told Retail Week: “They are going to basically carry on trading for the summer, the next couple of months.

“They are just going to sell the stock they have, but are not obviously ordering next season stock.”The Pension Protection Fund, which has become one of BHS’s biggest creditors after the chain collapsed with a £571m pension deficit, voted against the creation of a creditors’ committee and has started proceedings to draft in a second administrator, FRP Advisory, to work alongside Duff & Phelps.

Hilco Capital has also been appointed to assist in “extending the viable trading period of the store network in order to allow administrators the opportunity to realise maximum returns for creditors.”Retail Week understands that liquidators are also reviewing a number of asset sales that were made by BHS in the run up to the insolvency.

Sources said that a number of deals to offload stores, including BHS’s Oxford Street flagship, will be looked into and could potentially be scrapped or re-negotiated.

Source: Retail Week 24th June 2016

http://www.retail-week.com/companies/bhs


Waitrose Rolls Out ‘Scan As You Shop’ Mobile App

Waitrose has rolled out its Quick Check ‘scan as you shop’ mobile app to all its myWaitrose customers.

Following trials, the self-scan mobile shopping app can now be used in all Waitrose’s outlets. The app allows customers to scan product barcodes on their smartphones as they place products in their basket, removing the need for these goods to be scanned at a checkout.

It replicates the chain’s existing Quick Check handset service, but with added benefits. This include options such as digitalshopping lists, the communication of relevant offers to customers as they shop, as well as integrating mobile payment.

Matt Clifton, Waitrose Head of Retail Change, said: “The roll out of the Quick Check mobile app marks a real step change in our aim to make shopping with Waitrose as easy as possible and to lead the grocery sector in smartphone shopping.

“We know that customers are shopping little and often and therefore want the experience to be as convenient as possible. Being able to complete a whole shopping experience using only a smartphone means that shoppers can scan as they go, benefit from tailored offers, detailed product information and pay anywhere in the shop. The dynamic world of smartphone technology means that the future capabilities of this app are endless.”

Source: NamNews 24th June 2016


Retail industry analysts cautiously respond to Brexit vote

Leading retail industry analysts in the UK have expressed a “wait and see” outlook in the wake of the EU referendum result.

Yesterday’s historic referendum saw 52% of voters agree to have the UK leave the EU, while the remaining 48% of voters wanted toremain.

The results also sparked an overnight plunge of the pound, falling as low as $1.32 against the US dollar – the lowest since the 1980s.PwC’s retail and consumer lead Madeleine Thomson said as the UK enters a transition period, the impact of Brexit on retail “remains to be seen”.

“Whilst we may see a short-term impact in consumer confidence, most businesses will have a contingency plan in place and there is no reason why long-term success should be impacted by the referendum outcome,” she said.

According to research undertaken by PwC recently, 43% of respondents said their business and growth plans were not dependent on staying in the EU.

On the other hand, Thomson said the main concerns of CEOs were the rise in prices, a squeeze in margins and the impact on EU imports.Roberto Lobue, a partner at Menzies, said the Brexit result would likely lead to a “disruptive time” for the retail industry with uncertainty in long-term contacts, taxation, the continued employment of EU citizens, and other areas.

Meanwhile, Knight Frank’s Stephen Springham said if the UK slipped into a recession after Brexit, retail sales would not necessarily follow suit. “As the last recession proved, retail sales patterns do not religiously track GDP performance,” he said.“Consumers may tighten purse strings and realign spending priorities, but they will not stop spending altogether. Retail sales performance will remain erratic.”

Springham added that the prospect of rising inflation could be blessing in disguise for the industry.“There has been too large a gap between retail sales volumes and sales values,” he said.“Inflation will help narrow this gap, as long as retailers take the bold step of passing on raw price increases to consumers He also said the Brexit result could have a “surprisingly neutral” effect on retail property markets.“The outcome is unlikely to destabilise occupier markets either way,” he said.“Retail property investment markets will be most affected by a ‘leave’ vote, albeit to no more or lesser degree than other commercial property sectors.

“The retail sector may well benefit from ‘bargain hunting’ investors from overseas, taking advantage of any fall in the value of sterling.”

Source: Retail Gazette 24th June 2016

Macroview Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 24th June

IRI's Weekly FMCG News Update - w/c 20th June 2016

Food

Transcript of IRI's Weekly FMCG News Update - w/c 20th June 2016