Retail round up - The Sunday papers Asda could lose its place to Sainsbury's, House of Fraser close to issuing profits warning, Boots merger with Alliance Unichem under attack from shareholders, Tchibo looks to join forces with Sainsbury's and Somerfield, Halfords treatment of suppliers could spark OFT probe. The Financial Times Asda could lose its place as the UK’s second largest supermarket as early as next month according to CEO Andy Bond. His warning came during an interview with the FT in which he envisaged that Asda recovery could take six months longer than previously thought. Asda has missed internal sales and profits targets for the past two quarters. Bond acknowledged that he was partly responsible saying “The general leadership of the business has got to take accountability for that and I was one of those people. “ But what amazes me is what perspective you have on a business when you are the chief executive. You realise how much you weren’t focused.” Christmas shopping over the internet has reached a peak in popularity this month. About one in six internet users log on specifically to go to online sites. Mintel, the market research group, expects 38 per cent of adults to do at least some of their shopping online. Amazon is expecting up to 24 per cent growth in sales year on year. Sunday Telegraph House of Fraser is close to issuing a profit warning after a sales slump, according to retail insiders. Like for like sales are believed to have been down by double – digit or high single-digit amounts for five of the past seven weeks. A banker close to the group said “How they have not had to issue a profit warning I don’t know” A spokesman for HoF said “The company understands its obligations. It has got a trading statement scheduled for January 12. If it needs to do a trading statement earlier it will” Other retailers such as M&S and John Lewis are seeing positive sales growth. Asda will unveil a new energy efficient store format next year as it seeks to bolster its green credentials. The retailer will apply for planning permission to install wind turbines at six of its UK distribution centres at a cost of £9m. The plans will be announced as part of a strategic update by Andy Bond on Tuesday. Alan Giles is confident that HMV group will be able to revive its £96m bid for rival Ottakar’s despite the deal lapsing last week as it was referred to the Competition Commission by the OFT. Giles said “You wouldn't’t willingly go into another intense period of engagement with a public body unless you intend to follow it through, we are confident here is no substantial lessening of competition” Richard Charkin, the president of the Publishers Association which opposed the bid said that the referral meant his objectives had been achieved. “The important thing now is for these bloody booksellers to get off their ***** and sell some books” he added. The Sunday Times Fears of dire Christmas trading at Boots have sparked renewed opposition to the group’s £7bn merger with Alliance Unichem. Shareholders in Alliance Unichem are mobilising to block the proposed merger as speculation mounts that Boots has had a disappointing start to the Christmas trading period. One big Alliance Unichem shareholder said “Boots trading doesn’t look strong, which makes a difference” “The management has singularly failed to convince us that this is a good deal. We have two courses of action. One is to keep pressuring the company and the other is to vote against the transaction” Asda is expected to reveal plans on Tuesday for a new mini format supermarket – a move that could see the Wal-Mart subsidiary take on Tesco in its heartlands of London and Southeast. Strict planning regulations have, until now, frustrated Asda’s attempts to open new supermarkets to compete with Tesco – but obtaining planning permission for the new format smaller stores should be easier. Under current planning rules retailers must prove that there is a need for a full size supermarket: So in “Tesco Towns”, where there is more than one Tesco store, rivals are in effect blocked from opening – unable to prove the demand for a new full size store. The first trial store is due to open in Northampton and if successful more will follow. Last year Asda was blocked from bidding for Safeway by the OFT and complicated rules also meant that Asda was unable to pick up few of the Wm Morrison stores that the CC asked them (Morrison’s) to dispose of. The Independent Tchibo, the German retailer and coffee shop chain, is joining forces with J Sainsbury and Somerfield supermarket chains to expand in the UK. The goal is to create 200 shops in shops within Sainsbury’s and Somerfield during 2006. Both Sainsbury’s and Somerfield lag behind rival s Tesco and Asda in their non food offering. The Walt Disney Company is seeking a partner to launch a ‘family friendly’ mobile phone service in the UK. It has also emerged that Disney is in talks with Vodafone in Japan about launching a service there. If Disney secures a partner in the UK it could have a service available by next Christmas. The Disney phone will have a number of characteristics that the company thinks will make it an attractive purchase for parents. It will have keys that can call home or to a parents mobile in an emergency, tracking systems and controls to stop unsuitable internet access as well as accessing ring tone or information services. Financial Mail on Sunday Halfords is demanding tough new payment terms from suppliers in a move that could spark a major OFT investigation into its dominance of the sector. Halfords has told its suppliers that from next year they will be paid 120 days after invoicing the company instead of the present 90 days. In addition Halfords is demanding a five per cent across the range cut in prices. The OFT said it would hold an investigation if there was enough evidence that Halfords behaviour was hitting competition. Halfords denied it was using suppliers to pay for expansion “the growth of the business is being funded by sales and suppliers will grow with the company” Halfords said. Source: Retail Bulletin

DSG closes HQ after explosions DSG International, owner of Currys and Dixons, has closed its head office, following Sunday’s fuel depot explosion at Hemel Hempstead in Hertfordshire. However, the group said there was no disruption to trading. “DSG International confirms that, following the oil refinery fire at Hemel Hempstead on Sunday, all staff are safe and all stores and business systems are operational,” the retailer said. It is running its business from other locations. “These offices have been closed on the instructions of the authorities and under the company's contingency plans central business functions are being run from alternative sites,” the retailer said. Source: Retail Week

Littlewoods jobs threat Hundreds of staff at the Barclay brothers-owned Littlewoods Shop Direct office in Manchester are facing redundancy this Christmas after they were told the planned move to a new office in Liverpool will begin in earnest next month. As many as 600 people are expected to leave the 1,000-strong HQ once the 90-day consultation period with unions and staff is complete on February 15. Staff had originally been told 
to expect the move by 2008. A Littlewoods Shop Direct spokesman said: “We have listened to our staff, who have said: ‘Does it need to take that long?’” Chairman David Simons said: “It [600] is the maximum number of people that could be affected. My guess is that it will be nearer a couple of hundred, rather than 600.” He said the business was working hard to offer appropriate packages to encourage staff to make the move and it may have to recruit in Liverpool to cover any shortfall. However, he said the total number of jobs available at Speke would be less than 2,000. Union bosses fear that the figure of 600, which accounts for more than a quarter of the 2,100 staff across the Liverpool and Manchester offices, could grow. Usdaw home shopping representative Val Pugh said: “We are very disappointed. I don’t expect to see many staff at Manchester go [to work at Speke]. The journey to Speke will be beyond the majority of people, with the exception of company management.” Pugh said the number of people that have been made redundant since the Barclay brothers acquired Littlewoods catalogues business in 2002 and the GUS home shopping business in 2003 now runs into “thousands”. The agency catalogue market was struggling well before the Barclay Brothers acquired and merged the businesses. However, Pugh said: “We are waiting for the company to tell us what they are going to do to stop the decline.” The retailer said its strategy is to move into smaller, better-targeted catalogues and e-commerce sector, away from the declining agency catalogue market. Source: Retail Week

FCUK warns on profits Fashion retailer French Connection has warned that full-year profits will fall short of expectations. The clothing retailer, known for its once-controversial FCUK campaign, now expects pre-tax profits to be between £11 million and £14 million, compared with about £20 million forecast previously. French Connection chairman Stephen Marks said trading had been tough, especially in recent months. He said: “Since the group's interim results in September, we have seen an improvement in retail trading. However, this has not been sufficient to meet our targets and this, combined with a shortfall in our wholesale orders for summer 2006, has resulted in pressure on the group's financial forecasts.” Retail analyst Nick Bubb said the fashion brand – one of the most successful of the 1990s – is now “French disconnection”. The group has been critised for not updating its image and failing to keep up with trends predicted by fashion experts. Source: Retail Week

Waitrose Chip and PIN fails The Chip and PIN payment system at Waitrose has collapsed as the grocer enters its busiest time of year. Shoppers are being forced to sign for their purchases as the grocer, which is part of the employee-owned John Lewis partnership, works to get the system back online. A Waitrose spokeswoman told reporters: "We did not want to inconvenience customers. We are working to get it fixed as quickly as possible." It is not clear how long it will take to resolve the problem. Card reader supplier Ingenico and software group Wincor-Nixdorf have been called in to reinstate the system. Almost a year after the Chip and PIN initiative was launched, key retailers including Bhs, H&M and WHSmith are yet to upgrade all stores to the electronic payment scheme. Valentine’s Day is the next milestone as far as customers are concerned. From February 14, stores can refuse to allow shoppers to sign for purchases if they choose not to use their PIN. Source: Retail Week

Iceland workers out of the cold The threat of a strike affecting Christmas shoppers at Iceland stores was lifted this morning after it was revealed that warehouse staff have been given a pay rise. The retailer imposed a pay freeze this year. However, the Transport and General Workers Union (T&G) has secured a lump sum payment of £540 for drivers and £360 for warehouse workers at the company’s distribution depot in Enfield, north London. In addition, Wincanton – the contractor that employs the workers – has agreed to pay overtime rates of time and a quarter for Saturday shifts and time and a half on Sundays. Previously there was no extra pay if workers were asked to work at the weekends. “This is a very good result for Iceland’s customers, our members and, of course, the union,” said T&G senior regional industrial organiser Peter Kavanagh, who, together with the local union shop stewards, negotiated the deal with Wincanton. “We’re very pleased we didn’t have to resort to strike action over the matter and that supplies will continue to flow to the local stores,” he added. Source: Retail Week

Primark flies in Christmas stocks Clothes giant Primark has flown 400 tonnes of cheap clothing into the UK for Christmas sales following a severe warehouse fire in November. The firm used a giant Russian aircraft to bring in stock to replace the items lost in the fire at Lutterworth, Leicestershire. The Antonov-225 flew into Nottingham East Midlands airport carrying clothing from Shanghai, Hong Kong and Dhaka. Primark's Geoff Lancaster said it took about six hours to unload the plane. "We wanted to ensure we were in a position to take advantage of the busiest part of our sales year," Mr Lancaster, head of external relations for the firm, said. We lost 50% of our stock in one night so we needed to act quickly Geoff Lancaster, Primark spokesman He said the fire did have some effect on growth but added sales have "held up very well... considering how devastating the fire was." Stock flown in over the weekend on the Antonov 225 and four other aircraft ranged from nightwear to winter coats and is being distributed to the retailer's 125 UK stores. "The aircraft took six hours to unload as it was holding millions of garments, as many as 25,000 of each," Mr Lancaster added. "We lost 50% of our stock in one night so we needed to act quickly," he said. "Our stock comes by container by sea from Asia - long-haul items - so we decided to bring this shipment in by air." The company's suppliers in the Far East stepped up production to make replacements after the fire on 2 November. Source: BBC News

OFT refers HMV acquisition of Ottakar's to CC The OFT today referred the anticipated acquisition by HMV Group plc through Waterstone’s plc of Ottakar’s plc to the Competition Commission The OFT has decided that the test for reference is met in relation to the retail sale of books to consumers, particularly by dedicated book retailers who sell a wide range of titles (‘large range book retailers’). John Fingleton, Chief Executive of the OFT, said " This transaction brings together two book retailers that compete closely on a number of non-price factors such as range and variety of books, and service quality, primarily at the local level. In particular our economic analysis shows that Ottakar’s competes harder on non-price factors when a Waterstone’s is nearby. ‘The unusually high level of consumer complaints to the OFT shows that UK book-buyers value the fruits of this competition, which the merger would eliminate. We are asking the CC to explore these concerns further.‘ The CC is expected to report by 22 May 2006 The Reference Test Explained — The OFT makes a reference to the CC if it believes that it is or may be the case that a relevant merger situation has been created; and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services. Source: Retail Bulletin

Retail round up - the Sunday papers Tesco takes on the telecoms chains, Wal-Mart eyes up Germany, Computacentre directors in tough talks. Sunday Express Tesco is poised to go head-to-head with the UK’s high street telecoms specialists by opening a string of phone shops. The move will strike fear into the bosses of phone chains which will have to compete with the country’s most successful retailer as it invades their territory. Tesco’s first telecoms centre will open in Slough, Berkshire, tomorrow and will be followed more next year. Andy Dewhurst, chief executive officer at Tesco Telecom, said shoppers confused by the different technologies on offer would find help at Tesco. “Staff would not be paid on a commission basis to avoid the problems of pressure selling”, he added. Tesco plans to launch a range of handsets with an annual contract next year. Fears that the high street faces a dismal Christmas have risen sharply after a survey showed shopper numbers had plunged. The Financial Sunday Express exclusively reveals the number of consumers out on the high street between last Monday and Thursday was down 10 per cent compare with the same period a year ago, according to monitoring agency Footfall. Despite hopes that this weekend would see a surge of people in the shops, the retail sector is braced for more gloomy news from the British Retail Consortium, which announces the latest retail figures on Thursday. Greedy credit card companies are putting the squeeze on shoppers in the run-up to Christmas with hefty charges and sky-high interest rates, as well as extracting extortionate penalties from people who struggle to make repayments on time. Typical interest rates on plastic have risen during 2005 despite a an overall fall in the Bank of England base rate. Penalty charges levied on credit card users have risen by up to 40 per cent in the past three years. Mail on Sunday Wal-Mart is in talks to buy German discount chain Norma in a move that the US supermarket giant will kick-start its plans to take on Tesco in eastern Europe. Tesco has been hugely successful in Eastern Europe. Along with Asia, the region accounts for about a fifth of its £2billion-a-year profits. Norma has 1,200 shops in Germany, many in the former East Germany. It also has 34 sites in the Czech Republic and 114 in France. Norma, which is owned by the Roth family and is the fifth-largest discounter in Germany, denied last week that it was up for sale. Staff at Dixons, Currys and PC World are to be paid bonuses based on customer satisfaction rather than sales in a desperate bid to stem a flood of complaints. The stores’ owner, DSG International, has been the target of internet campaigns by customers who are furious at what they claim is poor service and delays in resolving problems. PC World services chief Jon Naylor pledged: “Our vision is that every customer who goes into one of our stores feels better about us than they did previously”. He suggested that Financial Mail readers who had problems with computers bought from PC World should contact him on his company email address…. rather difficult if the computer does not work. The new scheme introduced in DSG’s 1,400 stores uses shopper surveys to reward staff who have been helpful rather than basing bonus payments on the number of products sold. Financial Times Saturday/Sunday The independent directors of Computacenter are set for a weekend of tough talks with the management team seeking to take the company private after they rejected an initial buy-out offer of £485 million. Sir Peter Ogden and Philip Hulme, co-founders and largest shareholders in the computer hardware company, made an informal offer of 255p a share to the independent directors this week but were rebuffed. The 255p price was a 26 per cent premium over the share price two weeks ago before news of the bid emerged but lower than the 263p price that the shares reached this week. Independent directors Nick Cosh and Cliff Preddy are understood to be taking a “hard line” on the management bid. Their tough line followed concerns expressed by some shareholders that the offer price may not reflect the potential of the company. B & Q are to start charging its customers for plastic bags in an attempt to dissuade people from using the bags, which stay intact for hundreds of years in landfill sites. The revenue from the 5p per bag charge will be given to the Keep Britain Tidy charity. The DIY retailer currently gives out more than 70 million plastic bags a year. In a Scottish pilot scheme, the charge dissuaded 80 per cent of people from taking plastic bags. The Scottish parliament is considering proposals for a levy on plastic bags in order to cut their use, which could be passed next year. The Independent on Sunday Using ‘pester power’ to sell toys and junk food may soon become a criminal offence under proposals due to be released by the Department of Trade and Industry in the next few days. A consultation paper on how to implement the European Commission directive on Unfair Commercial Practices is expected to say that trading standards officers can bring criminal charges against companies that aggressively market to children.What defines ‘aggressive is gioing to be an important flashpoint, as food companies in particular have come under fire for using cartoon characters and celebrities to push their wares. Advertisers fear that the DTI incorporation of the EU directive into law could kill off many promotions for the likes of Walkers Crisps or McDonalds. The Sunday Telegraph Retailers could sue the owners of one of Britain’s largest regional shopping centres which was forced to close last week and will remain shut over Christmas. The 40-outlet Castlepoint centre in Bournemouth, whose stores include Marks & Spencer, B&Q, J Sainsbury and Asda, was closed following safety concerns over its car park. It is not expected to re-open until 2006. Retailers anticipate trading losses of more than £60 million. Many contacted by the Sunday Telegraph are considering legal action. “We are keeping a very close eye on what our sales would be. We are absolutely going to take some sort of action,” said Asda. A spokesperson for Castlepoint Limited Partnership, which runs the centre, said that the management would stand by its contractual obligations to tenants. There has been an unexpected pick-up in retail sales, which rose in November for the first time in eight months. Figures released tomorrow by the British Retail Consortium and KPMG, will reveal that like-for-like sales grew by around 0.3 per cent last month compared with last November. The BRC’s monthly figure was last in positive territory in March. The figures will be welcomed by retailers who feared a pre-Christmas meltdown and fly in the face of last week’s survey from the CBI which suggested that November was the high street’s worst month for 22 years. Source: Retail Bulletin