IER-JAN2010-PG41-42.2 04/01/2010 12:39 Page 41
Multiples column
Investing for
the future
Tom Cole reviews recent events in the multiples sector
and the prospects for 2010.
Though the Bank of England believes Lewis in particular are clearly determined At Argos, consumer electronics showed
the economy is now 'bumping along the to take share off the specialist multiple some growth during the year, with strong
bottom' and the final quarter of 2009 groups, DSGi and Kesa. television and personal computer sales
should at last record a return to growth, DSGi is in the midst of a renewal and offsetting weakness in video games. The
for many businesses any such upturn will transformation plan which is spearheaded internet now accounts for 28% of its
come too late. The Local Data Company by chief executive John Browett who business, and online Check & Reserve
reports that one in ten retailers closed believes shoppers have responded well to grew by nearly 50%. Changes in the
their doors in the first nine months of changes made, such as store sales mix and the net impact of adverse
2009. reformatting, the launch of megastores currency movements hit margins.
However, with consumer confidence and new service initiatives. "We are not Tesco delivered double-digit like-for-like
improving, for surviving retailers spending out of the recession. It will be another 18 growth in electricals where its own brand
has been resilient, and aided by weak months until we are back to historical Technika is now the fifth best-selling TV
comparatives many have seen good levels," said Browett, adding that though brand in the UK. Tesco Tech advice staff
increases in the final quarter. However, cautious about the outlook he is ‘not in the are now present in all Extra stores,
any feel good factor may be short-lived double-dip camp’. He has brought helping boost sales by 10% and reduce
with the CBI warning ‘in 2010 the high together back office functions to simplify returns by thirty. The other major
street will find that recovery is fragile and processes, reduce costs and deliver better supermarkets, particularly Asda and
slow’ – a message similar to that put out services for customers. These include the Sainsbury’s, agree that non-food offers a
by each of the major multiples in recent introduction of next day delivery in three huge opportunity and are investing
trading reviews. hour timed delivery slots and reduced accordingly.
With interest rates for savers at record repair times, with for instance laptops now
lows, it is not surprising that in October down to six days on average. At home
consumer borrowing, excluding The group’s major store refurbishing Half-year profits at John Lewis were
mortgages, recorded its biggest month- programme continues to deliver double- down, but with the opening of a major
on-month fall since records began in digit gross profit gains and the new new store in Cardiff and the first ‘at home’
1993. Whilst the number of mortgages combined 2-in-1 Currys and PC World at Poole it has since recorded good year-
approved for house purchases rose for stores have started well. on-year sales increases, with only five
the eleventh month in a row, those Comet too is investing in store portfolio stores still in negative territory for the 17
remortgaging reduced again, so that the upgrades, converting more to a weeks to 28 November. Including those
source of extra funds for major purchases mezzanine format. It has also recently new outlets, sales of ‘electricals and
has dried up. opened two trial city centre stores in home technology’ are 8% up year-on-year
Leeds and Manchester with the emphasis (and by 30% in the final week of
Investing on brown goods, computers and smaller November).
Against this background, the major items. Staffing levels are higher than John Lewis Direct is becoming
electrical retailers have struggled over the usual with a strong focus on customer increasingly important to the group, with
past year, with like-for-like sales almost service. It has also launched a mobile- around half of all shopping visits starting
universally lower and profits reduced. friendly version of its website, with with customers researching its website.
However, all continue to invest heavily, customers able to reserve a product When launched in 2001, the aim was
indicating how much there is to go for in online by phone and collect from a local eventually to match a medium-sized
the electricals market. Tesco and John store within thirty minutes. store. In 2008, sales outstripped its most
January 2010 TheIndependentElectricalRetailer 41
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