Flexing the Muscle The High Street Giants

The High Street is ever expanding and with high competition, many companies are flexing their muscles. With the agenda of the supermarket being to drive volume with cheaper prices they are continuing to gain more market share. To thrive in this price deflation environment, companies must become more efficient every year, with continual and refined improvement.  Managing in a deflationary environment is far from easy but with this strategy, growth can be revitalised and profits lifted.     

Philip Green, the billionaire owner of Bhs and Arcadia Group, acquired the 213-outlet chain from French firm Etam Developpment.

Mr Green’s Arcadia Group has more than 2,000 outlets across the UK and he told news agency AFX that the buy was a “strategic fit” for his business.

Etam UK – whose brands include Etam, Tammy and Emily May suffered a £25.9m loss in 2004. The buy follows Mr Green’s failed £9.1bn bid to buy High Street name Marks & Spencer last year.  Philip Green has moved swiftly to reverse the loss-making Etam Fashion chain by selling 47 leasehold stores to fashion retailer Monsoon, in a £43m deal with Philip Green.  Monsoon said it would convert the shops to Monsoon or Accessorize formats, with the move boosting its UK High Street presence, by expanding its portfolio to around 370 outlets including towns where it does not yet trade and add 30% to its trading space, whilst saving 980 jobs.

Green has also sold a further 20 Etam shops to his friend and associate, Scots entrepreneur Tom Hunter, whose West Coast Capital includes shoes brands Office and Kube and menswear chain USC.

This leaves Green with around 133 Etam shops, at least 15 of which he plans to convert into Top Shop outlets, with the rest of the stores being used for Mr Green”s Arcadia chain, which include Dorothy Perkins and Miss Selfridge. Green will boast his Bhs chain by incorporating Tammy Girl, Etam’s teen brand into his fashion and homewares chain, whilst also keeping standalone Tammy shops.  

In February Mr Green bought ten Allders stores that he plans to convert into Bhs sites. Retail insiders have also speculated that he is interested in Littlewoods, the chain that is being auctioned by the Barclay brothers.

Another retail giant, Asda also approached the Barclay brothers with an indicative offer of up to £500m for Littlewoods, the department store business. The group, owned by Wal-Mart, is understood to be one of a number of retailers to have made unsolicited bids for Littlewoods in recent months. Having received the offers, Sir David and Sir Frederick Barclay, who own the Ritz hotel and The Daily Telegraph, have now initiated a formal sale process for the store chain. Other retailers believed to have expressed an interest in some or all of the stores include New Look and Primark.

Asda is gearing up for a major expansion of its clothing and other non-food outlets as it tries to close the gap with its archrival Tesco in overall retail sales in the UK. Asda will open three further George stand-alone stores as well as Asda living stores, which will include clothing over the next three months, bringing its total to nine.

In addition, the group says it plans to open 15 new super-stores in 2005 and build extra floor space at 20 other existing sites at a total cost of $600m. The expansion will include a 100,000sq ft superstore in Milton Keynes and will create 6,000 new jobs, according to the company. Asda is to also acquire 13 former Safeway stores in Northern Ireland from the Wm Morrison supermarket.

And so the story continues with Debenhams and New Look, two of the biggest names on the high street, who have been conducting a low-key concession tie-up.  The department store group has been testing two New Look concessions in its stores in Hull and Harrow since last year.  At present New Look have over 500 stores in the UK but no other concessions.  Debenhams is opening its first womenswear store in Truro, Cornwall, selling women’s clothing, accessories and cosmetics and will open next to M&S on Lemon Quay in June.  If this trial is successful the Company have said there is potential for around 120 smaller stores in the UK with the same concept.  Debenhams, acquired eight Allders stores earlier in the years and are currently spending £18m on refurbishment, with the Sutton store being reopened and refurbished by the end of July. 

But its not all about amalgamation on the high street as Eisenegger, part of the discount clothing group Basebuy went into administration, due to the affect of increased competition on the High Street and aggressive expansion into high rental units.  This highlights how a high fixed cost business cannot adapt quickly enough to rapidly intensifying competition on the high street.

More than 300 shopworkers lost their jobs followed by a decision to close 38 of the 70 shops run by Blackpool-based Basebuy, which also owns the Foxhole brand on the high street.

But hopes for the future of the remaining 300-plus staff were raised by news that several parties had expressed an interest in buying the remainder of the group.

Even though Basebuy generates more than £55m in annual sales, it has been badly hit by the slowdown in consumer spending and paid the price for opening outlets where rents were sky-high.

With many companies demonstrating takeovers and consolidation activity, the impact of this on the High Street is uncertain, especially with the increasing market share of e-commerce trading.  However with shopping still being the most important leisure activity for the majority of people, retailers have to ensure they deliver retail therapy in a manner consumers will still enjoy. 

Rachel Costa