Weekly Retail & Leisure News - 16 May 2018
Following the mini-revival
in clothing and footwear sales in April reported by the BRC last week, Next’s
Q1 results provide a further fillip to the UK fashion sector. Next recorded
total sales up 6% in the 14 weeks to 7 May, with Directory sales up 18.1% and
store sales down 4.8% in the same period. Although against weak comparables
from 2017, this represents a positive start to the financial year for Next,
particularly as 2017/18 was predicted to be ‘one of the most challenging in the
past 25 years’ by Lord Wolfson.
Clearly, the online channel continues to drive total sales - Next now generates
almost half of its revenue from e-commerce. For Next and other retailers with a
well-defined omni-channel operation, a strong performance online can drive
overall positive sales, and offset slowing sales in-store. Superdry also
demonstrated the importance of online to its business, recording annual group
revenue up 16% on the back of 25.8% growth in e-commerce revenue. In this
context, it is perhaps not surprising that House of Fraser’s sales continue to
decline. The department store operator recorded sales falling by 6.3% to
£787.8m in 2017; while there are clearly other issues at play, the lack of any
growth in online sales (down by 7.5% over the Christmas period) is undoubtedly
a major contributing factor.
One sector that remains relatively immune from online disruption is the
convenience food sector, where growth is being driven by demographic and
lifestyle forces. Despite slowing growth due to a weather-related fall in
footfall, Greggs for one continues to benefit, recording total sales growth of
4.7% in the 18 weeks to 5 May. Despite strong competition from the grocers and
other fast-casual operators, Greggs’ strategy of focussing on a more healthy
product range, and expanding its store network into ‘footfall resilient’ travel
locations, should ensure it maintains its positive trajectory.
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