Retail relief
It's been no secret that department stores have been struggling in the face of increased online competition, rising property overheads and weak consumer sentiment in recent months. After delivering disappointing Christmas sales, House of Fraser may have found some much-needed fresh capital after Chinese retailer C. banner International agreed to take a 51 per cent stake in the group. The Hong Kong-listed retailer will acquire existing shares from majority shareholder Nanjing Xinjiekou and subscribe to new House of Fraser Group equity. The group will undertake a conditional voluntary arrangement as part of the deal, which will likely result in the closure of some of its 59 UK stores.
Lifting the veil
Offshore concerns
Is the game up for the British overseas territories? The economies of the British Virgin Islands, Bermuda and Cayman among others rely heavily on their long-standing roles as offshore financial centres. But some of the ‘benefits’ of registering companies there look set to be stripped away after the UK parliament this week approved plans to force companies registered there to reveal the identity of their owners in an effort to crack down on global tax evasion and, potentially, money laundering. Officials in the British overseas territories reacted angrily at the imposition, which is due to be in place by 2020, and predicted an exodus to other jurisdictions.
Eurozone slows
Growth dips
After a better-than-expected performance in 2017, it appears that the eurozone economy took something of a breather in the first quarter of this year. The eurozone economy is still growing but an expansion of 0.4 per cent in the opening three months of the year represented a slowdown against 0.7 per cent growth in the final quarter of 2017. Other indicators this week also pointed to a slowing in manufacturing output, with a Purchasing Managers’ Index for the economic bloc showing a reading of 56 for April, down from 56.6 in March, although anything above 50 still represents positive growth.
Price concerns
Inflation dips
The sharp dichotomy in the retail sector remains, with food price inflation still on an albeit modest upwards curve while wider non-food prices continue to slide. The latest data from the British Retail Consortium showed that overall shop prices fell by 1 per cent for April, the sharpest decline in over a year, with a 2.2 per cent fall in non-food prices overshadowing a 1 per cent uplift in food prices. The hardest hit sectors were clothing and footwear, where prices fell by 6.8 per cent, and furniture and flooring where the average price declined by 3.1 per cent, almost double the 1.6 per cent fall seen in March.
Scandi calling
Ocado hat-trick
Is Ocado’s dream of shifting from an online grocer to a global technology business a step closer? This week the company announced a third international partnership for its grocery warehouse fulfilment technology, this time with Swedish grocer ICA which controls around a third of the domestic market through 1,300 stores and recorded sales of more than €10bn (£8.8bn) in 2017. Following on from deals in France with Casino and Canada with Sobeys, the deal bolstered confidence that Ocado’s technology is finding traction in international markets as a genuine option to building an organic online offering.
Risers and fallers (%)
| CARPETRIGHT | +19.11 |
| LUCECO | +18.75 |
| SAINSBURY J | +18.19 |
| WPP | +13.57 |
| DIGNITY | +11.73 |
| CHARTER COURT FINL.SVS. | -10.42 |
| GLENCORE | -10.09 |
| CONNECT GROUP | -8.58 |
| CONTOURGLOBAL | -6.87 |
| CHARLES TAYLOR | -6.79 |
Week to 1 May 2018
Supermarket sweep
Mega deal proposed
Britain’s big four supermarkets could become a big three if regulators see fit to clear the proposed tie up between Walmart-owned Asda and Sainsbury, which could catapult the combined group to the top of the rankings with more than a 30 per cent market share. And the latest supermarket sales figures shed some light on why Sainsbury is so keen to take a quantum leap. Its sales in the 12 weeks to 22 April rose by 0.2 per cent, the slowest rate recorded for more than a year. In comparison Tesco and Morrison grew sales by more than 2 per cent and Asda by 1.4 per cent. The discount challengers continue to grow apace, with sales at Aldi and Lidl up by 7.7 per cent and 9.1 per cent, respectively, although this is boosted by new space opening up.
Rise abandoned?
Mixed prospects
The Bank of England’s Monetary Policy Committee meeting next week is likely to be even more closely watched than usual. For months a rate rise was seemingly nailed on for the May meeting but recent mixed economic data and continued uncertainty over the UK’s Brexit plans has seen the pound weaken significantly in recent weeks as the odds of a rate rise have begun to widen again. A weaker set of first-quarter economic data, with the latest figures from the manufacturing sector suggesting this performance has continued into the second quarter and easing inflation, have taken some of the pressure off Mark Carney and company.
