Home Retail Inflation Is Just One of British Retail’s Many Problems Right Now – Sourcing Journal

Inflation Is Just One of British Retail’s Many Problems Right Now – Sourcing Journal

by Ozva Admin

High inflation is holding back retail sales in the UK, as evidenced by slowing traffic for three consecutive months.

September rose just 6.8 percent year over year, marking a decline from August’s 8.6 percent rise and a 15.6 percent improvement in July, according to data firm Springboard. Footfall on the street increased 9.5 percent from a year earlier, down from August’s 13.9 percent increase. While major retailers are battling inflation, they also have fewer people to sell to, with about half of all professionals still working from home, said Diane Wehrle, director of marketing and insights for Springboard.

That is not the only factor at play. “The energy price guarantee introduced by the government has alleviated some of the severe doom felt by many households,” he said. British Prime Minister Liz Truss last month capped household energy costs for two years. She estimated that the average annual bill for a typical household rose 80 percent to 3,549 pounds ($3,987) from 2,500 pounds ($2,808). Energy costs, particularly gas, have risen across Europe after the invasion of russia from Ukraine

“However, the current rate of inflation combined with the recent rise in interest rates means that from October buyers will inevitably exercise greater discretion and be more considerate in their buying behavior,” Wehrle said. “The impact on footfall and therefore retail sales will be immediate, and there is also likely to be fewer trips to larger hubs incurring higher travel cost.”

Retailers across the pond are feeling the effects of what is shaping up to be an economic downturn.

Next Plc issues profit warning

nextThe decision to cut the orientation of the second semester shows its concern about inflation that will continue until the end of the year. retailer first The alarm rang in January, saying demand could take a hit after prices increased from the spring season.

Last month it said it expects full-year earnings of 840 million pounds ($963.7 million), up 2.1 percent from a year ago but below initial estimates of 860 million pounds. $986.7 million).

“August trade was below our expectations and cost of living pressures will increase in the coming months. Sales in September have improved, and we may see benefits from the recent Government [stimulus] measures,” Next CEO Lord Wolfson said in a statement. Second-half full-price sales are expected to fall 1.5 percent instead of growing 1.0 percent. That would mean full-year sales could grow 4.8 percent.

For the first half ending July 30, 2022, pre-tax earnings increased 15.5% to £401 million ($460.1 million) and total retail sales at full price, excluding Next Platform , rose 12.4% to 2.44 billion pounds ($2.8 billion). Including sales from the Next platform and those made through the company’s franchise division and Next Sourcing, the group’s total sales increased by 14.9% to £2.55bn ($2.92bn).

Wolfson said retail prices could rise in the second half, particularly if the pound continues to weaken. “It looks like we may be poised to have two cost-of-living crises: this year a supply-side-driven contraction, next year a currency-driven price hike as devaluation kicks in,” he said. .

The company is due to report third-quarter earnings on November 2.

JD sports fashion

Interim first-half results for the sports and fashion retailer through July 30, 2022 showed an 18.2% drop in pre-tax profit to £298.3m ($342.2m), or 3.58 pence ($0.046), from 364.6 million pounds ($418.3 million) 4.44 pence ($0.046), in the same period a year earlier. Revenue for the period grew 13.7 percent to 4.42 billion pounds ($5.07 billion) from 3.89 billion pounds ($4.46 billion).

The company has reached a deal with former chairman and chief executive Peter Cowgill that is valued at 5.5 million pounds ($6.3 million). He will be paid $3.5 million pounds ($4.0 million) over a two-year period for his agreement not to work for or advise any of JD Sports’ competitors, and not apply for any JD employee. And he will be paid 2 million pounds ($2.3 million) over a three-year period as a consultant to help chairman Andy Higginson and chief executive Régis Schultz transition into their new roles. That comes on top of a year’s salary of at least £906,000 ($1 million) and a potential bonus of up to £450,000 ($516,291.75), as the retailer decided not to “comply with its contractual notice period” of 12 months.

Cowgill left in May under a cloud after British regulatory authorities fined the retailer 4.3 million pounds ($5.8 million) when he learned that he violated an interim order related to JD’s banned Footasylum deal. Cowgill was told not to share any confidential or commercially sensitive information for the purpose of the acquisition, but a video surfaced showing him meeting with Footasylum chairman Barry Brown. JD lost 48.5 million pounds ($66 million) when the Competition and Markets Authority (CMA) forced him to back off the deal.

CMA accused JD of price fixing due to the “level and timing of discounts” on some Rangers-branded apparel towards the end of the 2019 football season, also under Cowgill’s tenure. Because JD fully cooperated in the investigation, CMA reduced the final fine to 1.5 million pounds ($1.7 million). JD said it would recognize a charge of 2 million pounds ($2.3 million) for the 52 weeks ending January 29, 2022, including legal fees. “No JD directors or senior management were involved in the infringing conduct,” he said in a statement, saying he is working to strengthen competition enforcement.

JD said he reached a settlement with former Chairman and CEO Peter Cowgill worth $5.5 million. Matthew Horwood/Getty Images

Boohoo also warns about annual sales and earnings

Boohoo Group Plc said a spate of customer returns and the dismal economic climate forced it to cut its annual forecast.

“Performance in the first half was affected by a more challenging economic environment weighing on consumer demand,” said John Lyttle, CEO of Karen Millen owner PrettyLittleThing and Nasty Gal.

For the first half ended August 31, Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was £35.5 million ($40.7 million) on sales of £882 million ($1,010 millions of dollars). It reflected a 58 percent drop from 85.1 million pounds ($97.6 million) last year, while revenue for the middle fell 10 percent from 975.9 million pounds ($1.12 billion). of dollars).

Gross revenue before returns increased 4 percent due to higher average order frequency and spend per customer offset by lower consumer demand. fast fashion e-tailer in July started charging a fee of £1.99 ($2.37) for customer returns, following in Zara’s footsteps. Boohoo said UK revenue fell 4 percent as “inflationary pressures increased and consumer demand appears to have been hit by cost-of-living pressures.” International revenue fell 17 percent as longer delivery times curtailed sales.

Boohoo has responded by increasing nearby sourcing and reducing future inventory commitments.

It expects sales to fall 10 percent, similar to the first half, instead of growing 2 percent. Adjusted EBITDA margins are expected in the range of 3 to 5 percent, down from previous forecasts of 4 to 7 percent.

Joules in response amid CVA rumors

With joules embittered by Next Plc, it is now said to be considering a CVA or company voluntary arrangement, meaning it could agree to pay creditors over a fixed period without resulting in administration i.e. bankruptcy or settlement.

Joules said Thursday that he is “making good progress” in developing a turnaround plan focused on growing profits, pursuing more profitable categories and optimizing his channel mix. “Interpath Advisory is assisting the Board with an initial evaluation of certain elements as part of the development of this turnaround plan,” he said.

Interpath, once part of KPMG and now owned by HIG Capital LLC, is known for its restructuring and mergers and acquisitions.

Joules has been working with experts to improve liquidity after he said full-price sales were falling. Sales “softened materially” during the first 11 weeks of the new fiscal year, he told her in August. It is scheduled to report financial results for the year ending May 31, 2022 in November.

Frasers increases its participation in MySale

Frasers Group could have gotten the big snub when MySale Group ENC turned down his offer, but that didn’t stop Sports Direct parent from increasing its stake in MySale.

The British conglomerate said on Monday it had acquired 100 million MySale shares from Jackson Family Capital Pty Ltd., as well as 61 million shares from Jamie Jackson, former vice chairman and founder of retailer Jamie Jackson, all for 2 pence ($0.023). per action. Frasers also redeemed his interest in contracts for difference on 1.4 million shares of MySale and acquired almost 13.2 million shares by “means of market or other purchases.”

Frasers acquired its initial 28.7 percent stake in the Australian firm in June. Including the newly acquired shares, he now owns a 45 percent stake in MySale. Frasers also said that he agreed to buy an additional 1 million shares of MySale from others.

John Lewis Clothing Rental

john lewis The association is working with hurr in women’s clothing rentals for periods of 4, 8, 10 or 20 days.

Search results can be filtered by category, brand, availability, size and price. Consumers choose their delivery dates and use prepaid packages to return their rentals. “High Value” rentals require ID verification and a refundable security deposit requirement. John Lewis also created a £5 ($5.75) Damage Protection add-on for minor repairs. Renters are responsible for full replacement value in the event of theft or irreparable damage.

Items that do not fit are eligible for a refund of the full rental rate, less dry cleaning and shipping costs, and must be returned by the second day of the rental agreement. The retailer may charge a late return fee of £25 ($28.65) for each day after the last rental date.

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