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Happy New Year to all our readers, and welcome to the first SnapShop Blog post of 2009! As is [to become a] tradition with these things, we’re going down the ‘a year, in retrospective’ route. So without further adieu, here’s a not-so-quick review of the hottest stories of 2008 (from a retail industry perspective, anyway).
1. Freshest in our head is the demise of the largest pick n mix chain in the world, Woolworths. I can’t remember which witty journalist coined the aforementioned pick n mix phrase, but it does sum up, in essence, what poor old Woolies became. With today marking the closure of the last few stores, it’s with a furrowed brow that we bid goodbye to the golden child of the 1990s. At least you won’t be alone…
2. From perfume to media, to childrenswear to savil row tailors, the sheer numbers of retailers being affected by administrations and closures in 2008 was immense.
Our Managing Director, Geoff Nicholson, comments as follows:
“I think we will have to deal with the factor that has hit all business – the move from it being not only smart, but de rigeur, for high performing businesses to have as much debt as possible. As long as debt was freely available, at reasonable rates of interest, it seemed a no-brainer. However, when the availability of credit dried up, as it did throughout 2008, the rules of the game suddenly changed. Now, trying to service debt, if you’ve still got the loan, or to renew it if the term has come to an end, is somewhere between impossible and very expensive.
Thus, when we look at retail failures, there are two basic causes:
-Retailers, such as Woolworths, whose retail proposition was un-compelling. Loads of the fashion retailers are likely to fall into this category but also some of the household goods retailers.
-Retailers with financial problems – retailers backed by Icelandic money are a particular case of a general problem – who can’t renew their debt funding. Not all of them are poor retailers; the problem is with the lack of credit.”
If you say so, Geoff! Moving onto something less depressing!
3. 2008 saw fuel prices rise to record levels, peaking at a UK average of 119.5 pence per litre in July. The knock on affect of the rise was felt across the retail industry, with transportation costs pushing up the cost of food, in particular.
One savvy PR department did see the silver lining, however, by giving away £20k worth of petrol at a London station to promote its new computer game… much to the chagrin of local moaners!
Thankfully, though still high, prices have returned to a much more reasonable 83.9ish ppl.
4. Next to grab our attention was the opening of 4 major regional shopping centres in 2008, namely; Highcross Leicester, Cabot Circus Bristol, Liverpool One and White City, London.
Liverpool One and Highcross hit the 1m visitor mark in 2 weeks, White City notched up 2m in 3 weeks and Cabot Circus clocked 2 million visitors in its first month of trading.
5. Though Christmas may be over for most of us, the retail world will likely remember Christmas 2008 for a long time still to come! Spurred on by plummeting consumer confidence and desperation to get us handing over the green, a raft of top name retailers slashed their prices in half in the most vicious pre-Christmas discounting seen in recent memory! Great news for us, not so great for the profit margins.
6. Not strictly retail, but still important, 2008 and its inherent gloom brought the car industry across the world to its knees. By November, production in the UK was down by a third, Honda pulled out of F1, and Nissan, Vauxhall and Ford announced short-time hours for its remaining workers. Luxury brands are expected to suffer next, as demand for extravagant cars such as Jaguars and off-roaders subsides.
7. Where to start with the economic news of 08! VAT cuts, inflation rates, income tax rebates…its all, quite frankly, beyond me, but obviously worth a mention.
8. And last but by no means least, Sir Phillip Green/Iceland/Baugur. This is what I understand;
September 08
The Icelandic economy starts to collapse. Glitnir bank is handed over to receivers along with Landsbanki and Kaupthing. All 3 are nationalised.
October 08
Icelandic Prime Minister Geir Haarde says that Iceland's banks might have to sell stakes that they hold in foreign companies…Icelandic banks hold significant stakes in a number of Baugur's retail chains, including House of Fraser, frozen food supermarket Iceland, Oasis, Principles, Mosaic and Jane Norman.
Coface pulls credit insurance for Baugur suppliers.
Baugur quashes speculation that it will suffer as result of the nationalisation of Icelandic bank Glitnir and the administration of Stodir. Chief Executive Gunnar Sigurdsson say that Baugur's facilities with its banks are solid.
It’s rumoured that the management teams of several Baugur-backed businesses are looking at buying back their chains.
Rumours that Sir Philip Green would buy Baugur’s debt from the Icelandic banks and the Icelandic government under the deal start. Alchemy Partners are also rumoured to be interested.
Baugur do not deny that the assets owned by the banks are up for sale, but do deny that an administration is on the cards.
November 08
Jon Asgeir Johannesson says that a quick fire sale of assets controlled by the Icelandic government would be impossible before Christmas.
Baugur chief executive Gunnar Sigurdsson has said the Icelandic investor has no intention of altering its portfolio of brands and that it is 'business as usual'.
Sir Philip Green buys Baugur's 28% stake in Moss Bros, which is later sold to Simon Berwin.
January 09
Rumours for the New Year is that Baugur are on the brink of receivership, despite claims that the Icelandic government would not allow such a travesty! (Really, how much does Geir Haarde care about retail...)
So, it’s been a rocky year, and although I’m sure there must have been some good news out there, it certainly wasn’t hot and I was unable to recall it! 2009 will continue on a similar trend, so I’m sure next years review will be just as, erm, exciting!
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