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Market Commentary

​​Weekly Retail & Leisure News - 19 September, 2016

Positive week for retailer results

JD Sports, Fat Face and Dunelm are amongst a host of retailers that reported positive sales and profit results last week. JD Sports recorded a 20% jump in sales in its half-year to July 31, with profits up 73% for the period. Fat Face saw sales grow 7% in the year to May 28, helped by online sales up 20.6%, as well as 12 new store openings in the UK. Home furnishing retailer Dunelm reported a 7.1% rise in total sales for the year to June 27, while LFLs were up 2.5%.

Positive sales results were also reported by grocers Morrisons and Ocado. Morrisons’ pre-tax profits jumped 11% for the six months to July 31, the first increase in half-year profits for four years. LFLs were up 1.4% while total sales fell 0.4%. Ocado group sales were up 15.4% in the quarter to August 7. However, despite the positive results, Ocado’s share price has taken a hit. Tim Vallance, head of JLL UK Retail & Leisure, comments: “The supermarket price war is now spilling over into the online world. This is part of a general shift away from approaching physical retail space and online sales as separate entities and focusing on convenience for the consumer. Amazon’s recent entry into the market is really shaking things up as Ocado’s share price fall indicates. Further technological innovation and fulfilment deals amongst grocers will further ramp up the pressure on Ocado.”

In other news, while the retail market has seen a decrease in investment volumes following the EU referendum result, the UK remains the largest retail investment market in Europe in H1. And investor demand for retail remains strong, from domestic and overseas buyers. According to a recent survey of overseas investors undertaken by JLL, 72% viewed the fall in sterling as an opportunity to invest in the UK. JLL believes that investors are increasingly becoming more selective however, focussing on attractively priced stock and preferring off market opportunities. Fraser Bowen, Head of JLL UK Retail Capital markets commented: “The search for core assets from investors remains strong. Private equity buyers are still targeting the secondary market and benefiting from cheap and readily available debt. Debt markets remain buoyant with attractive loan to value ratios and increased use of mezzanine finance.”

Were you at BCSC? In case you missed it, please download JLL's Manchester Retail City Profile here.

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