The week of reckoning – what the Christmas trading results say!
Firstly, may I take this opportunity to wish you a very Happy New Year! I think that 2014 is going to be a very interesting year for retail and is going to be one of polarisation between retailers, brands, places and people. There is much talk of a recovery albeit it tentatively which is good news as in many cases consumer confidence and resulting sentiment builds off such news. House prices are one good example, which shows the diversity in recovery depending on where you live! Sevenoaks folk will be delighted but the poor folk of Blackburn perhaps not or indeed the folk of Whalley in Lancashire who are due to see a double of their housing stock with new builds.
So this week has been the week of key results from the big retailers. Debenhams got in before this week with its profits warning which was closely followed by Next saying it had had its best Christmas for a long time. A big difference between the two in terms of their sales strategy is that one heavily discounted before Christmas (Debenhams) and one did not (Next) and indeed has never done. As such Next has cleverly conditioned its customers as to what to expect. One thing consumers like is certainty. Next delivered both a 12% growth in sales which means that Next is now worth £9bn whilst M&S is only worth £7.2bn their clothing sales slumped by 2.1%). Of note with regards Next is that sales in stores rose by 7.7pc while online sale rose by 21pc. So online is growing three times faster, which is no surprise but stores are also growing which tells me that Next has got its bricks and clicks strategy right. The role of bricks in support of clicks is one of the big lessons that came out of 2013 and an interesting fact that I learnt this week is that Nike pays for the cost of having shops from its marketing budget and not property.
So, in part do the results of retailers such as Next indicate a turnaround for High Streets per se? You can look at this in a number of ways depending on how you define turnaround be it quantitatively or qualitatively. If Next is your barometer then I would say no as only 15% of their stores sit in High Street locations whilst 36% are in shopping centres and 44% on retail parks. Over the last 12 months Next’s High Street presence has declined by 8% in unit terms and it’s greatest unit growth has been on retail parks (+7). Conversely M&S’ presence on the High Street is 44% with just 13% on retail parks and 37% in shopping centres. In 2013 it only reduced its High Street presence by 1% and only added three more units to its retail park portfolio.
So two big competing retailers one 130 years old and the other 35 years old. Very different location behaviours and very different results but is it down to the magnetism or lack of it in town centres, the product, the service or historical leases and cost structures preventing change and positive financials? On Monday we will publish a significant change to the shop vacancy rate of our top 650 town centres and no doubt many might link this to the wider economic recovery, consumer confidence or the market finally waking up to reality and rebalancing. But vacancy rates are but one side of the coin and it is what replaces the six Next and M&S stores (large units at that) who have left the high street in 2013 along with many others. Arcadia alone have removed 56 (9%) of their trading fascia units from the High Street. The units they have opened (2) have been on retail parks.
So in summary there are many positive and negative messages out there regarding places where retailers and leisure operators exist. In terms of where the good, the bad and the ugly are across the three main location types – high streets, shopping centres and retail parks – then I will reveal this for 2013 and indeed back to 2008/9 at our 9th Retail Summit on 10th February. Watch this space for how to register for this FREE event, as places are limited.
The supermarket’s results are also very interesting and the big one to watch in 2014 but more of that in my next post!