All Retail Property is Theft

Uncle Jez can almost touch the levers, {leavers?} of power.Tantalisingly close to his fingertips. The Socialist Utopia is  only weeks away. And so the benign mask slips.in the excitement. Revealing Karl or maybe even Josef, underneath.

The 'Retail Emergency' requires a five year plan. A collectivisation of commerce. A confiscation of the land of the Kulaks. The giving to the people of that bourgeoisie land that they can work. As a high street farm  Mechanisation, comrades, will free the serfs from the toil of profit obsessed industry.

JEREMY CORBYN has unveiled astonishing plans to nationalise the High Street by seizing control of empty shops.

The Labour leader said vacant properties would be given to community projects and fledgling firms to help revitalise town centres. But the staggering property grab was branded “crude and woolly” and experts warned it was more likely to fuel the problem than solve it. Mr Corbyn said he wanted to give local councils the power to hand over empty shops to start-ups, co-operative businesses and local groups.

Retail has lost 200,000 jobs in two years. It has lost over two million jobs since 2008. Something that has escaped the MSM, who rush down to a steel mill of a few thousand jobs to demand government intervention
 Retail jobs are disappearing faster than any other sector. And will continue to be lost at the same fast rate due to  falling demand. Over taxation. The domino effect of failure and automation.

Price isn't a big factor in occupancy numbers, at present. If you want the big,empty, former BHS store at your local town, the landlord will listen to any proposals you have. Will give you a low rent deal. probably, on those white elephant stores, a no rent deal.

Mr Korbyn,  the shops are not empty because greedy aristos are demanding too much for them. They are empty as they are not required.

The days of the greedy landlord, are over. The 1990s and millennium era retail boom is history.

Kobyn's plans are Zimbabwe or Venezuela economics. Hand over the land to people without the skills, knowledge, capital, drive, vision, work ethic,or desire to have them. It is a recipe for shortages, inflation and mass corruption. The next recession will be here long before any boom that could have supported a neophyte start-up.

As Mr Drew has pointed out many times, it doesn't take much for the Marxists to do immense damage, in even a short period of time. 
 Johnnie has already said he wants your garden for tax. And your inherited or second home, to be confiscated.

The gears of history are turning in the factories of the proletariat. The Great Revolution is at hand. And as a bonus, it will be an Oktober one too!

 

Homebase goes for £1

That is quite a hit, an Australian outfit called Westfarmers buys the place for £340 million two years ago and has now sold it for £1 to Hilco - a group of retail turn-around experts, who can actually turn things around. The total write-down for Westfarmers on the whole farrago is £454 million, so more than the cost of acquisition. Ouch!


So why did it go so wrong for Westfarmers...


1) Business Rates - these are simply rising too quickly on larger premises for either landlords or tenants to maintain margins . Retail operates at 3-5% margin and |Rates are often increasing over this which is pushing up rents, even as occupancy falls across the UK retail space.


2) Amazon - Continues to eat everything that moves, it has lower rates and higher volumes, it is happily eating the whole high street and out of town sector.


3) Housing - UK disposable income has been very tight and doing up your garden or bathroom is only very occasionally a necessity so DIY has had a hard time of it. For the benefit of the nation , it is a long time since all TV was wall to wall property shows.


4) They sacked the management on acquisition and tried to make it like the Australian Bunnings business which put Homebase - aimed at DIY enthusiasts - into a place where instead they had more limited ranges to compete with Wickes. Thus instead of moving the market, they destroyed their margins and business.


I am pretty confident of a turnaround that will save more than 50% of the business.


The usual Company Voluntary Agreement will paste the landlords and deal with point 1. Point 2 is horrid, Point 3 may turn in due course and is about market dynamics (non-food is declining for now) and Point 4 is where the action is and something can be done.


So Hilco have a shot at recovering the business, but the loss of £20 million a month means there is significant risk of closure to much of the business.

House of Closure?

Not a great end to the week in yet another of the long-drawn out retail sector decimation.


Debenhams has don't he usual trick of blaming the weather for its very poor Christmas when in the next breath its CEO admits that Clothing is a massive problem for it, but maybe all the other Chinese tat that it stocks will save it.


House of Fraser also has called in the insolvency specialists. This I can relate to with some anecdata - there is a House of Fraser opposite where I work in the City. I can honestly say I can't afford a single product they sell - it is very high end tat indeed with prices to match. The store always seems busy but you rarely see people walking out with actuals bags. It really does not surprise me to see them struggling, who the hell wants £250 shoes or £200 perfume on a regular basis?


Pre-pack administrations and CVA's  - where companies reduce their rents on in one swipe to try to survive are common practice and no doubt what House of Fraser will be aiming for in this case.


Overall though, the internet continues to destroy retail piece by piece. Still the Governments of all stripes happily let the internet retailers work out of cheap warehouses whilst high street rates and rents are simply beyond imagination - they have been declining a while now even in London but from stratospheric levels. It is beyond me as to why Governments cannot do anything to preserve the high streets and culture of the Country - its not nothing to do with Capitalism in the sense of change must be allowed to happen as technology alters the commercial landscape, yet the tax system is simply being abused by the new entrants to the market. This is causing the harm to city centres which will be hard to recover from, I am amazed that so many coffee shops can currently exist and that demand is there. The collapse in tax revenues from retail also hits local jobs and local government incomes disproportionately - the fact it is ignored by Government continues to amaze me - but it has been this way for over 15 years now!

Next target for the newspaper's oil wrath : retailers

In the recent times the Major petrol retailers get a lot of stick, somewhat justified but not entirely, for not reducing their prices when the price of crude oil falls. As I have gone into before, the refining of the product and margins in that industry are of course more important factors. Not that journalists care.

I have been impressed of late with Journo's uncovering the scams at airports and hospitals where customers are over-charged because of the captive market created in the local environment. These are good things and show the power of a free press, albeit in a small way.

To continue this theme, we can consider what crude oil gets made into - the answer is easier if we try to think of things not derived from crude oil. For example, in a supermarket:

- All the medicines are oil based more or less,
- All packaging that is not pure paper - so, er, all of it.
- Most flavourings and dyes
- All baby products, with each nappy being one  cup of crude oil originally for example
- Then there is the heating and lighting
- Much apparel, including all trainers, are mainly oil based
- Plus the costs of transporting everything to the market.
- Even all the food is grown with oil based fertilisers.

So basically, supermarkets have had a 50% reduction in the input costs to their products in the past year months. It may take some time to feed through as many of the products are a long-time in production and transport. We should really expect to see big reductions in retail prices across the majority of goods. In fact, this alone could well be enough to push the country into deflation for the rest of this year.

However, I have a sneaking suspicion the desperate big Four supermarkets - all suffering from stiff competition, will use the falls to help them rebuild margins and profitability where possible.

Tesco, Leahy, Weinstock and Beyond

Tesco really is the biggest British business story for a while, so no apologies for following on Bill's mega-post of yesterday.

I am interested by the leadership aspect.  Tesco was noted for its clear-sighted strong-men at the top:  Cohen himself, Porter, MacLaurin and of course Leahy.  I met Cohen a couple of times in his dotage - a crusty old chap, I think it is fair to say - and had some slight business dealings with Leahy.  Like everyone else on the planet I was deeply impressed: he struck me as (a) a very straight bat; (b) decisive, if slightly cavalier; and (c) probably very good to work for.

But his legacy appears to have been awful.  Is his a case of getting out before anyone notices you've screwed up ?  - or Weinstock / GEC syndrome, where the successor generation takes a sound business and very promptly trashes it ?

If anyone knows, it would be interesting to hear.

ND 

More good news on the deflation front?

I really hated the Black Friday phenomenon that occurred in the UK last year. A traditional American holiday (er, Thanksgiving, from all of those emigrants so desperate to escape from Blighty?) which had been hijacked by retailers came over to the UK.

The resulting shopping fest was a bizarre confection.

Also, as we said at the time, it clearly showed how much retailers are struggling that they had to have sales right in the Christmas rush. After all, once you show your discounted prices, people are unlikely to buy again at the normal margins.

So it proved, with nearly all retailers suffering a bad set of Christmas results, the latest being Argos today. Diddums, it does means in real terms people did well at Christmas at the expense of the retailers! Hooray.

Also, perhaps the lesson will be learned by the retailers that pre-Xmas sales are only for the really failing stores, better pricing and holding your nerve will be the mantra next year. Maybe they will notice that in America the whole present giving on Christmas day thing is not at the same extreme levels that it is in the UK - hence the need for Black Friday and the timing of it.

No doubt, this mass discounting effort has also aided the steep drop in inflation to 0.5% that the UK experienced in the last quarter of 2014.

And lo, Black Friday can return to America whence it came.

Tesco tantrums

Phil Clarke was an excellent CEO, continuing on from yesterday's theme which gerenated a lot of interest here is why:

- Clarke did not see Lidl or Aldi as the competition on the highstreet. The competition is Amazon and Ocado and Google.

- Tesco was investing lots of money in a digital strategy to develop a better at home expereince and try to own the customers of the future - by offering banking services but also home delivery and even a successful tablet. The tablet will be back to fight Kindle.

- At the same time Tesco had to sell out of its disastrous US adventure which has meant reduced returns.

- The overall debate yesterday about out of town dying is not really held up by recession figures of store closures - there are far more on the high street still. Bluewater, Stratford and Westfield dominate the retail market in the South of England - together with Oxford Street for the tourists.

- Clarke paid the price of being too visionary, as often happens with a CEO, particularly when the finances were in poor shape and with their domestic share so great it was only ever going to go down.

No doubt they will sell their land bank and try to reduce prices further, but the new CEO would be mad to stop the digital drive as that is focused on the next ten years rather than the next two.

Trouble at Tesco, & RBS

Enough of the international scene: back to business.  The Tesco crisis seems to have come to a head - well, the head has been chopped off, anyway.  Mr Q will have a better-informed view, but as a simple punter I'm bemused. 

The bottom line is the bottom line, of course, but as I go about my shopping Tesco doesn't seem to have screwed up visibly (unlike, say, M&S clothing).  In fact, I'd say my local 'superstore' has been steadily upgraded year on year, prices are OK, and if you are in a position to optimise the various promotions they run (particularly by buying in bulk and playing tunes on the petrol points) there is quite a lot of £££ to be saved.

I also thought that they'd responded intelligently to the recession with their phoney 'discount brands'.  But no, it seems not, and Aldi & Lidl have done for them.  Old man Cohen would never have let that happen: but since the days of MacLaurin they have been resolutely pushing the brand away from the bargain basement.  To have been caught in a pincer from below (the Germans), and from above (M&S Foods and Waitrose) is a strange outcome.

The new man ('Drastic Dave' Lewis - sounds promising) comes from Unilever.  By a curious coincidence I happen to know a bit about the energy purchasing operations of that company and of Tesco, and have been moderately impressed by both.  This may have nothing to do with the issue at hand but it's a data-point.

With an operation and asset-base as big as Tesco there is huge scope for turning things around: (they could start by selling land).  Sainsbury was languishing for years, but was never a lost cause and has engineered an up-cycle.  Surely Tesco will eventually figure out a formula for the 21st century.

Which is more than can be said for the recidivists at RBS.  Yesterday in the comments, Hovis brought our attention to this, the latest episode in what appears to be a disgraceful story we looked at back in February.  Were RBS putting the squeeze on SME customers in order to drive the into the hands of their investment arm at knock-down prices ?  It doesn't help their case when senior management is caught being economical with the truth.

As with Lloyds, the taxpayer-owner of these wretched institutions can only marvel that, across all the years we have owned the turkeys no-one from Whitehall has taken the management to the back of the bike sheds and marked their cards for them. 

ND

'Consumer led recovery dangerous' fail for Labour

Another plank of Labour's economic claims is falling apart. Not only is "too far, too fast" a distant, dull memory, but now the chant of the 'wrong sort' of recovery is unravelling too. Post-Christmas, many of the major stores have not done well and were reduced to offering steep discounts to get product out of the door. Consumer spending was reined in.

By contrast, out today with news of expansion and good growth, is, err, Rolls Royce. That Housing Bubble talk is next in line too, as construction picks up and housebuilding will move to reach record levels (which it needs to if prices are to be controlled).

It does not bode well for very strong growth this year as a whole, much as I expect, more of the same from last year at best. But HM Opposition is going to be in a right mess on its economic policy and positioning if it can't analyses what is going on rather than wishing that its fantasies come true (see triple dip recession, RIP).

Fill The Trolley - Update

Hot on the heels of yesterday's post comes this from the DTel, confirming one of the suggested hypotheses and some of the very illuminating comments: 

More than 1bn wiped off the value of leading retailers over Christmas fears

Unsustainable, then.

ND


ANYHOW:  Blog Xmas drinks tomorrow -  details to follow !

'Tis The Season To Fill Trolley

Pix: every supermarket!

 Here We Come A-Discounting... 

Ed Miliband has made mileage this autumn with his "cost of living for ordinary families" refrain, which has clearly stung the government, not to say panicked them.  As a campaign theme for late-2013 it may have saved his bacon, given the dreadful summer he endured.  As regards the next election I suspect he may have gone too early with it, because the coalition probably has the power to bear down on quite a range of prices and costs, and has been handily tipped off on the political need to do so.

In the very short term, though, I'd say its the retailers themselves that are doing most to reduce inflation.  This isn't the result of a scientific survey, but I have the very distinct impression that Christmas this year is costing less than 12 months ago, with a couple of very striking data-points to bolster the general observation.  Never mind stunts like 'Black Friday': there is clearly a deadly serious supermarket  price-war in progress.  The blizzard of vouchers and coupons can hardly be missed - and when even Poundland is doing £1-off-when-you-next-spend-£10, we know things have reached quite a pass.

Do others share this observation ?

Quite what it means for the longer-term is a bit conjectural.  Supermarkets going under ?  Inflationary surge in the spring ?  Who knows.  Meantime - stock up & drink up !

ND 

Marks & Spencer's - sleeve it, its not worth it.

In the popular papers the popular kicking of Marks & Spencers at the shareholding meeting gets some column inches. The retailer is down on 1st quarter results 1.6%  on UK sales. And those against very soft comparatives. Its all pretty standard for M+S. Food good, International steady and clothing poor.
Its been like that at Marks for a long while now.

Sleeves are back!  Ladies aged 45+ seek out long/mid sleeved dresses to hide sagging arms as men of a similar age hunt baggy fit polo tops. I'll never fit into a Peter Werth or Ted Baker  shirt again. This got the cheer in the Guardian fashion pages. And it was surprising M+S last autumn collection had a higher than expected number of cap sleeved tops and dresses. 
But if it was as easy as making sleeves longer..we'd all be doing it. And , of course, others already are.

In Monte Carlo, in the shopping gallery by the famous casino, amongst the designer boutiques and prestige retailers is Zara. It has a big space in one of the most expensive shopping centers in the world.
It still sells its 25-40 euro priced clothes and accessories. Yet it does not look out of place.
Partly because it is very bright, well planned shop and has exceptionally good, modern advertising.
And its clothes are clothes for a young, fashionable, sunny, beachy, metropolitan area.

Marks and Spencers could be there too. It has a fantastic international reputation. The food offering has been in the top two in the UK since we were all children. They just need to get the fashion right.
AND the layouts right. Too many M+S still look like BHS or old C&A shops. They are merchandised tennis tops-shoes-casuals-trousers- dresses {long} - dresses {short} etc. The display mannequins and point of sale feature the collection centre piece outfits ensemble and strap lines.
That's the way it has always been done. Or nearly always.

Debenhams,  John Lewis and House of Fraser, by the nature of their concession branded shop floor layouts, merchandise much more by outfit building. Jeans, shoes, belt, hat bag are within arms reach. The neighbouring concession may have something that would look good with.. And its within a few steps. Not half a floor and an escalator ride away.
Younger aimed fashion stores, in the early 90's started hanging jeans up on the wall so the colour, detailing and leg shape was easy to determine.  Before then they were always flat folded. Always.
It was horrendous logistically as 1 line now took up 2.5 spaces. But then outfit building was possible. And clothes shops were no longer just space planning by type; but also by theme.

This is how online shopping works. 
How X looks with Y...You might also like Z! Other people who bought XYZ also bought V.

If M+S is going to attract that young, fashion conscious, impulsive female shopper that their strategy report demands, then they need to do more than make the sleeves longer,

Tesco fall in the Pond

And so another defeat by the yanks. Tesco's venture into US food retailing has come a cropper and cost the company a good few billion. Indeed, just to close the business int he US will cost them £1.2 billion. New CEO Philip Clarke has clearly had enough of the airmiles for this stuff as he has decided to sell underperfoming businesses in Japan and slow the growth in China too.

UK companies never make it in the US, the scale and level of competition is high and understanding such a complex market takes a lot of energy, effort and luck. Tesco had not enough of any of these. Although there is a nice meme here that Tesco tried to sell fresh food to areas of cities that were undeserved and failed, similarly Jamie Oliver (once of Sainsbury's) tried to repeat his school meals schtick in California and got nowhere with it.

Perhaps the people there are not interested in polenta-based food choices?

Not only this but the US is the home of Walmart and it was quite ambitious to think it could be challenged in its home territory. Let's consider the reverse, how has Walmart done in the UK, it bought ASDA, but how much market share has ASDA grabbed since it was bought - not much really, not even as much as Morrisons.

I wonder which will be the next UK company to try and conquer America - maybe it is M&S's turn again...

Rose Delivery

So, Sir Stuart Rose, a much respected retailer is going to be chairman of Ocado. This has been allied to rumours of A takeover of the Ocado business by M&S.

Now M&S is in trouble on the clothing side but its food business is going quite strong and has been for years. As far as I can see it does a great job in selling to wealthy empty nesters who don't need to make big meals anymore but still want to eat nice food.

How that matches with Ocado is beyond me. Ocado is a slow motion car crash of a business. I am a keen user, as I am of all companies who want to serve me so well that they lose money hand over fist; it always makes me feel satisfied knowing they are going that extra mile (over the cliff...) for me.

The Ocado shareprice since its float is disaster zone and their weird attempts at raising cash last year are ample demonstration of this companies many woes - the main one being that it is much better to have mutiple channels to market and that it is trying to compete in one of our most competitive sectors as a new entrant where size is everything!

If M&S make a bid then I am clearly living in the wrong universe....

HMV Reaction

This is a very delayed reaction given I heard about the administration a good few hours early on Sunday! Such is the state of my work situation currently that blogging output has to take a secondary place to merciless capitalism; c'est la guerre.

I do wonder though about the future of the high street, Bill Quango has written some excellent posts here recently. of course HMV was a business whose time has passed. We are not going to but CD's and DVD's in shops when you can download them at home, its just a societal change and companies will go with it.

However, the sheer cost of high street space with rents and other taxes means that the Internet always wins. And the Internet creates fewer jobs and destroys our high streets. On the one hand, I think this is a sign of progress, times change with technology and no doubt people moaned about the passing of the horse and carriage as a form of transport 100 years ago. So be it.

But could we do something to change the terms of the tax incentives which are so skewed against bricks and mortar businesses? Would this help a create a better society with more jobs and social interaction? I doubt for example that grocery home delivery will ever approach 100% of the market, the scale of the producers is such that it can withstand the competition from dark stores, the internet won't always win.

So how about an enquiry into retailing off and on the net - should we push for one?

 You beat me to it CU..So busy at the moment..not busy enough mind. Trade shows mostly.

As for HMV we looked at it properly almost exactly two years ago.
Here

The consensus then ... 'They were doing the right things but had too little time to achieve them'..And we should have added , if we had known, the recession, triple dip will drag them down quicker.

That was the big, big problem. Something we discussed way back in 2008. A long recession is not survivable except by the strongest or newest or richest. Comet, HMV and even Jessops could have survived a shorter one.

Improved cashflow would have helped them continue with their transition to multi platform retailers.
But they've been getting a smaller slice of a smaller cake. It was not enough.
And the government hasn't any money either. The Portas money had 12 towns being given £100,000.
A tiny drop in a large, leaking, bucket. It won't achieve anything, even if it really knew what they wanted to achieve.

If you look on local papers websites the employees of both Jessops and HMV have generally only good things to say about their companies. Unusual for businesses that have struggled for years. Shows that the chief execs carried their people with them.
A real shame.

And a big problem that hasn't been much discussed is that each failing chain,especially specialist chains, gives one more reason not to visit the high street at all. If its all just Primark, Cafe Nero and The British Heart foundation, why go at all?

BTW - Who knows the link between Jessops and HMV ?

High street observation.

Raedwald has some good observations on the future of the high street.

But in Suffolk's little market towns over Christmas I saw signs that the High Street isn't dead, but in a process of change. The home-knitter who started buying wool in bulk and selling the surplus on eBay has now filled a shop-front with bright balls of wool and irresistible baby garments as a boost to her eBay shop; the ironmongers founded in 1823 that have gained new life by putting 6,000 of their 40,000 stock lines on the web, the farm-direct shop also with its own website, the shop window filled with old planes and woodworking tools from a collector and dealer who also operates on eBay, only opens the shop erratically but mans the computer in his workshop to the rear for about 16 hours a day. 

That's a good spot. The niche provider is a part of the future. The artful retailer, like the ironmonger in the piece above, will have an existing business that is currently successful, and will add an online presence. That business is adding brand new sales, at a minimal additional cost. And there is a move for craft type businesses to band together to share the space and the costs and staffing of their enterprises. 

But many, many more online sellers refuse to move onto the high street, even though they could quite easily sell products there. 

At present it costs £1000 Sq/foot to take a spot in Bluewater. Its £45 sq ft for the warehouses in Sheffield where some of the largest online fashion chains operate from.  Rates are pegged to rents, so the rates bill is less too. And retail rates are determined by a strange method whereby 'frontage'  and front of store, customer area , is rateable at a much higher than rear area storage space. And warehouses are all storage/office space.

Distribution and warehouse and headquarters staff operate from the warehouse facility too, as any high street multiple would. But the the high street business has to fund its HQ and warehouses from its shops. The online trader funds no shops.

A person selling on ebay can operate from their home. Then, as they grow, they move to either a bigger house, local business park or a high street. In the high street they must staff their shop. Someone must be there all the time. They need display equipment, signage, labeling, point of sale and tills and credit/debit facilities and banking issues that they don't really need with a paypal buyer.

They have to have business insurance and liability insurance. They 'should' have full health and safety in place. Trained first aider. The fire 'risk assessment' and so on. They have parking and delivery time, loading/unloading issues.  Alarm companies and security measures. Rubbish collections are less frequent. Theft is likely at some point. Cleaning

And they have to deal with people. Actual people. Something the online business never need worry about. 

Its expensive to be on the high street. Even with the small business rates relief, its expensive compared to a shed unit somewhere. 

I am aware of some quite well known ebay sites, that have sales feedback in the 100,000s that operated solely from their homes. One had planning for a triple garage and indoor swimming pool and extension approved. All that space went to stock. The swimming pool  had nothing but trainers in it until the house was sold a few years back. A husband and wife team. They didn't even need childcare. After school the kids were at home with the working parents. In their own house. Something that could not be done on the high street.

That's how some online ebayers manage to profit on just a 20% margin. Their costs are minimal. No rent. No rates. No bureaucracy. No extra insurance. Minimal extra utilities bills.

Its a risk. If the house burns down, or floods , no insurance company will pay up. But its cheap working from home. A high street business trying to survive on 20% margin is in trouble at the first downturn.

But even with all the disadvantages of the high street traders will still come. Some goods just sell better being seen. And eventually even the government and the local councils and the landlords will realise that unless they offer a reason for businesses to move into their retail premises by tax breaks, rent free periods, rate capping, funding, advertising, parking free services etc, they will have filled the barns of the countryside with small businesses, whilst leaving themselves with long stretches of tarmac with very large, empty windowed, unusable premises on them.

Next to go?

Generally electrical retailers and clothes retailing are very separate and dsitinct businesses. Comet has gone under this week and today is a sad day when it is expected that many of the shops will be closed and the staff made redundant - hardly an enjoyable Xmas looming for many of these… It has been a particularly tough time for electrical retailers of late. People increasingly shop for these products online and are less likely to feel the need to see the goods in store- hence internet based shops are doing much better and with their lower cost bases and consequently have taken huge bites out of the high street industry.

The leader in the on-line clothing sphere is ASOS (standing for “As seen on line”) and whose technology leading website and approach to sales has been impacting the market for clothes for some time. ASOS is a fantastic business and has been on my conviction buy list ever since I saw first-hand how terrified Debenhams management were of it when doing a strategy review for them in 2008.

Next though is the most successful clothing retailer in the country and one of the best, if not the best, performing stock on in the FTSE100 over 20 years. In CEO Simon Wolfson, they have a super and experienced Chief Executive. They are most certainly not going to go the way of Comet and have invested in a good online offering as well as their store catalogue - both actually act in complement to each other.

Just recently they announced their intents to carry a share buy-back when their share price is at an all time high - always an ominous sign for business that “suffer” a surfeit of cash as Apple pays testimony to in recent weeks! Last quarter’s results were not the best however with a warning of a tough time ahead and of course we have seen this week that headline Retail Sales in the UK fell sharply in October. It is not likely to be a good Christmas for retailers - again.

A look at the chart below looks to be setting up the feared double-top. Many people have been trying to pick the top in Next for some years and each and everyone has been steam rollered. Perhaps this time it’s safe to throw out a short? The downside could be as much as 300 points. There looks to be an alignment of both technical bearish analysis and a macro bearish situation in the near term adding weight to this argument.

 

You've used all your lifelines...

So, JJB tips into administration.

As an ex-employee of their much more successful rival, I should say Ha-ha?

But not really. From a pure image view JJB always looked sharp whilst Sports Direct makes Lidl look well presented. In market sports casual , or 'sofa clothes' share market Britain price and brand was all important. Mike Ashley at SD buys labels and brings the price way down, volume selling. JD just has better products, even if expensive. JJB never moved on price, preferring to keep its brands exclusive.The poor squeezed middle.

 The model that had made them the largest sports retail company in 2006, was followed long after others were showing how to tread a different path.

JJB is set to close its remaining 180 stores and lose many of its 4,000 staff when KPMG are expected to be appointed to split up the company and sell what they can.  Its long been reported here that they couldn't survive with the Gordon Brown style debts they'd built up in the good times, purchasing other companies and interests that were largely loss making. 

As one wag has written 

"They've had more lifelines than Chris Tarrant." 

So..who's next? Can't see another old C@W  favourite making it beyond the January rent bills. 

HMV , for all the very innovative and solid business plans they have put into place still continues to slide. The Guardian reported that Sales down 14.8% – but retailer hopeful pre-Christmas music, DVD and games releases will boost performance.

yeah...hopefully. But if they are relying on the eighth year of the 'X' factor and Halo 4 and FIFA 2013 .. not that likely.

The squeezed middlemarket

JJB Sports has put itself up for sale and warned its shares may be worthless after the struggling retailer failed to secure a fresh funding injection from investors. The shares immediately fell 71 per cent to 0.67p.

JJB has long  been on the C@W no-no, don't touch list. The company has been bailed out, restructured, refinanced, remodeled and rebuilt many times in the last few years. Its had two company voluntary arrangements already.

Nothing has worked. The glory days when an England squad even taking part in the Euro's soccer tournament or Manchester United beating Arsenal were enough to sell a million replica strips are long gone.

Rival sportswear chains JD and Sports Direct are much more successful. Sports Direct is +46% on its share price this year. JJB is -97.95%. JD likes to move in the higher end of the sports brand market, taking a higher margin. Sports Direct like to bottom feed, volume selling cheap goods. And Sports Direct is quite a bit cheaper than JJB. And its been pouring cash and brains into its online offer and is doing very, very well there too. And Sports Direct very recently pinched JJB's contract to supply, design and retail Rangers FC merchandise after the JJB arrangement was cancelled after Rangers went into administration.

US sporting store giant Dick's, an investor at JJB, recently put £20 million in to the company. That wasn't enough to make the turnaround.

JJB is down 3.3% on August like for like figs. This August most larger shops should have seen a boost in sales. Big sports shops particularly. 

A boost from the 2012 Olympics itself and the relaxation of Sunday trading laws. And 2011 August sales were nothing to get excited about, being down -0.5% on 2010. If you can't get ahead during August 2012, then you're not going to make it.

The Capitalists@Work 'Woolworths'  test is now complete. As sales have fallen so have margins. Borrowing has increased. Investment is scarce. Support staff are axed. Training lapses, staff numbers fall, service declines, inventories shrink, refurbishments cease, image decays. Stock suppliers begin to seek alternative retailers. Shoppers scale back and then search for cheaper alternatives. They find others are doing it better.  Investors panic...

If the recession isn't quick the money required to repair all those negatives will never be found.

This recession has been deadly and JJB has never really looked like they were going to make it in their current form.

They think its all over

Its been a while since we had a look at the retail figures. 

They have been so poor that there hasn't really been any point. But now having had a look I can confirm that the figures are not just bad but dire.

When chains collapsed into administration , a good many of them emerged from a pre pack voluntary administration arrangement in essentially the same format. they shed their outstanding tax liabilities, dumped their unprofitable leases and carried on.

It was assumed that without the burden of debts, too high rents, old units and excess stock the chains could rebuild. This does not appear to have happened.

Looking down the administration retail page is like looking at a Verdun war memorial. The casualties go on and on. Those that we rated poorly, Blacks, Woolworths, Zavvi {and Head- who bought Zavvi} have long gone. but firms that would be expected to survive have not.

Here's the casualties since the recession.

Companies failing Stores Affected Employees Affected 2012 (6 months to end June) 35 3,053 37,538 2011 (12 months) 31 2,469 24,025 2010 (12 months) 26 944 10,930 2009 (12 months) 37 6,536 26,688 2008 (12 months) 54 5,793 74,539 2007 (12 months) 25 2,600 14,083

This is medium to large chains only. The 10 units or less of which there are hundreds and the sole proprietors, of which there have been thousands are excluded. In the chains alone its 150,000 jobs lost.

Lots of other big names on the list of the dead from back along.

Adams

D2

Officers club

MKOne

Barretts

Faith shoes

MFI

Suits You

Oddbins

Habitat

TJ Hughes

Hawkins Bazaar

The 2012, 6 month, casualties are of Somme proportions already.

Ethel Austin

Julian Graves

Allders of Croydon {tragedy. Lovely, if old fashioned store}

Clinton Cards

Micro Anvika {4 or 5 shops on Tottenham court rd for as long as I can remember}

Acquascutum

Ellie Louise {Ladies fashion - 97 stores}

Game 

Firetrap

USC

Fenn Wright Manson

Madhouse

Shoon

Ugo

Pumpkin Patch

Peacocks

La Senza 

Past Times

Blacks Leisure {taken on by JD stores and now giving that successful group a headache -They bought Blacks for £20 million and it will cost them another £15 million in losses this year}

 JoePound { a local 99p store - they have 12 outlets} says they are down 50% on 2008 figures and looking shaky. That's a 99p store!

Some of these chains have been bought by others. Some are pre pack and coming back. But even that is fraught. 

Madhouse went into and out of pre-pack administration 3 or 4 times in the last 8 years. It was owned by its original owners, investment companies, rival companies and back to original owner.

It had 60 shops many on zero rent deals with a notice to quit. { If the landlord fins a buyer the tenant must vacate within 48 hours.}

Even with low debt, paying next to no rents, selling cheaply priced clothing it couldn't make a profit.

They were up for sale in the mid 90's, valued at £32,000,000.

Today the value is nothing. Its closed and the company gone.

Back in 2007/8 C@W said retail recession was survivable as long as it didn't run on & on. The fear was QE and interest rates of 0.5% would stop the depression but increase the recession length to 2-3 or 4 years. That appears to have been the case. And it looks like lasting until 2015.

The calls for a business stimulus grows ever louder.