The second quarter of 2010 was a turbulent affair for UK retail, with both the election and subsequent emergency budget damaging consumer confidence. Verdict Research has noted that, while many retailers have struggled with the tough conditions, some have fared worse than others.
With Game massively exposed to the severe declines of the cyclical video games market, CEO Lisa Morgan and COO Terry Scicluna have recently stepped down. As in 2009, 2010 has seen sales plummeting as games consoles, and the Nintendo Wii in particular, reach maturity. Furthermore, strong comparables, combined with a weak release schedule, have resulted in declining software sales. In a sign of how badly Game has fallen, even its online sales are currently declining. Consequently, the new CEO now faces the considerable challenges of improving the performance of the retailer's internet offer and finding a way to diversify what it offers in-store.
With inflation rapidly subsiding from the food & grocery market, Asda has been the most severely impacted of the grocers, recording its first quarter of negative like-for-like sales in more than four years, at -0.3% for the 12 weeks to March 31, 2010. With a lack of space growth and a relatively one dimensional, price-focused offer, Asda's underperformance has been particularly notable. New chief executive Andy Clarke will need to utilize all of his operational experience in order to implement outgoing chief executive Andy Bond's ambitious strategic plans for turning the retailer around.
Electricals has endured a turbulent start to 2010, and Comet has been among the most severely impacted retailers. In the final quarter of its financial year (from January 9 to April 30, 2010), its sales declined by 3.4%. Even allowing for the impact of poor weather in January, this represents a worrying deterioration at a time when the UK economy remains inherently fragile, with VAT having gone back up, unemployment rising again and uncertainty over the level of national debt and how it will be addressed. Comet also faces a number of other challenges, such as the expansion of non-specialists, the arrival of US retailer Best Buy, the lack of exciting new products on the horizon and the move to contract-purchasing for items such as computers. However, perhaps most worrying of all is the fact that Comet still appears to have no clear long-term strategy in place for addressing these issues.
Allied has been the victim of a market which has contracted massively, finding itself significantly squeezed. After entering a pre-pack administration in 2009, and with the administrator unable to find a buyer for the majority of its outlets, it shrank from a portfolio of over 200 stores to just 51. Unsurprisingly, therefore, 2010 has seen Allied's sales plummet, as it trades from this considerably smaller estate. However, it is not loss of space alone that has driven Allied's poor performance; it has also suffered from ongoing uncertainty in the housing market, a lack of consumer confidence for large purchases and the relative strength of rival Carpetright.
Fashion retailer French Connection reported a disappointing set of results for the 14 weeks to May 15, 2010, with a 1.9% like-for-like fall in revenue from the UK and Europe, despite the return of reasonable growth levels to the wider clothing market. The retailer has suffered on its wholesale side from the failure of many of the small independents that had previously made up a significant proportion of the buyers of its premium womenswear. On the retail side, it is struggling to compete with niche-orientated, high-fashion rivals such as Ted Baker, Jack Wills and Superdry, and re-establish itself as an iconic fashion brand by shaking consumer perceptions that it is just another mass market, high street retailer.
Source: Verdict Research