Retail Round up – The Sunday papers

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Slough Estates to quit Tesco retail venture, India opens up to retailers, shops brace for return of inflation, row looms at John Lewis

The Sunday Telegraph

The Indian government could lift restrictions on foreign investment in its retail sector as soon as next month. Last week Kamal Nath, India's commerce minister, said the government would announce plans for a further opening up of the sector "soon". "We are looking at allowing FDI in electronic goods, sports goods and it may be even multi-brand retailing," Gibson Vedamani, the chief executive of the Retailers Association of India, said: "It is the right move. The industry is expecting an announcement on more relaxed FDI. . . in parliament next month. We believe that the Indian retail sector will open for 100 per cent FDI soon, but it will be in a phased manner."

Retailers are preparing themselves for the onset of price inflation after almost a decade of falling prices. Last week Stuart Rose, the chief executive of Marks & Spencer, said there were signs that prices were starting to creep up across the board. "The appetite for reducing prices seems to have diminished a bit. Businesses are seeing price inflation coming through," lower prices have meant that retailers have had to sell more products to make headway they have acted as a massive spur to consumer spending. David Greenwood, the finance director of JJB Sports, said prices had been driven down by store groups sourcing products from the Far East. "Prices are not going to fall further. The significant deflationary impact of the Far East has happened. Indeed, prices might increase in areas like clothing and footwear but not by a lot,".

Woolworths has demanded dramatically -better payment terms from its suppliers in a move that will see the store group save tens of millions of pounds.Suppliers have been told to give it discounts of between 2.5 and 5 per cent on their products from the start of its new financial year, which starts next month. Currently the retailer demands discounts averaging 2.5 per cent. Some suppliers were disheartened by the changes. "We are basically being asked to fund Woolworths' poor Christmas," said one.

The rise of downloads could render the compact disc dead as a mass-market music format by 2020, analysts have predicted. HMV reported a significant loss and sacked its managing director, while rival chain Music Zone has collapsed into administration. There is no end to the slump in sight. "It is difficult to see anything changing over the next 12 months really," said Paul Smiddy, analyst at HSBC. A spokesman for HMV said the prediction of the CD's decline was "a little too apocalyptic". Steve Oliver, managing director of Music Zone, said the music sector "has possibly reached a tipping point". But he said its woes were not caused by the fall-off of CDs' popularity, but more by supermarkets selling CDs as a loss-leader. He also blamed a VAT loophole that lets online retailers cut prices.

Slough Estates International is to exit retail property by unravelling its joint venture with Tesco. The sale should realise more than £75m and negotiations with the supermarket group are expected to open shortly. The Shopping Centres vehicle owns stores let to Tesco in York and London's Docklands. It is owned equally by the two companies but Slough, which will concentrate on industrial property, this month converted into a tax-efficient real estate investment trust and the venture does not qualify as a Reit asset. Reit rules require Slough to distribute 90 per cent of its qualifying profits as dividends and it will need cash from sources such as asset sales to finance future development.

The Sunday Times

ASDA and J Sainsbury have held exploratory talks about collaborating on a distribution centre. The initial talks centred on a so-called consolidation centre — where branded goods are stored before being transferred to distribution centres. News of the discussions came as it emerged last week that the preliminary findings of a Competition Commission probe into the £100 billion grocery sector had been delayed and were now unlikely to be released until the week starting January 22. The initial statement from the Competition Commission will focus on supermarkets' relationships with suppliers, planning issues and land portfolios. In the run-up to the findings' release, speculation has resurfaced that Tesco could be forced to sell off its land portfolio under the most extreme remedies. Andy Bond, chief executive of Asda, has accused supermarkets of being “disappointingly slow” to collaborate and has tried to find ways for rivals to work together on non-competitive issues. “We are a bloody competitive lot,” Bond told The Sunday Times. “But for green issues or saving costs we should find the balance between competition and collaboration.”

John Lewis will this week name Andy Street as its new managing director in a controversial move that could prompt Gareth Thomas, its high-profile director of retail operations, to quit the business. Street, director of personnel and a board member, will replace Charlie Mayfield, who is soon to step up to the chairman's role, replacing Sir Stuart Hampson. It is thought Street, who has been with John Lewis since 1985, has been selected because of his strong grounding in personnel, supply-chain and store management — which if paired with Mayfield's marketing skill could create a “dream team” at the top.

The Observer

Two senior retail figures say they fear a new year hangover following the shock rise in interest rates. Stuart Rose said he is 'not happy' about the hike. He added: 'We were surprised at the increase. It is not helpful. There is a tipping point when husbands start to tell their wife to go easy and that multiplies across millions of households.' Rival John Lewis echoed his sentiments, saying: 'The recent rise and any future rises are not helpful to the retail sector.'

The Independent on Sunday

Tesco is set to confirm its dominance of the retail sector this week by un- veiling another bumper Christmas performance. The chain updates the market on its trading on Tuesday, and underlying sales growth is likely to come in at close to 6 per cent after shoppers snapped up festive foods and presents. the update will confirm a strong Christmas for the entire grocery sector. J Sainsbury last week said that third-quarter sales had jumped 5 per cent, while Wm Morrison's sales soared by a better-than-expected 6.3 per cent, excluding fuel, in the six-week festive period. Tesco is unlikely to better Morrisons' sales growth, but the Bradford-based chain is midway through a recovery programme, meaning that comparisons with Christmas 2005 work in its favour. Morrisons reported a rise in sales of just 2.8 per cent last Christmas, while Tesco enjoyed an increase of 5.7 per cent.

The Mail on Sunday

Woolworths is expected to deliver dismal Christmas trading figures which will pile pressure on Trevor Bish-Jones. Woolworths said that like for like sales in its 800 stores were down 6.5 per cent for the 18 weeks to December 2nd. While analysts expect sales to have rallied in the final week before Christmas, most remain pessimistic about the groups overall performance. City sources believe that time is running out for Bish-Jones as Baugur , who own a ten per cent stake, is expected to increase pressure on him to devise new ways of driving sales growth or call for his head.

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