Asda takeover of Netto - surprised?

With latest accounts ('09) at Companies House showing Netto's
- ROCE at 2.1%
- Net Margin at 0.8%
- Stockturn at 16.8 times per annum
today's announcement was a 'no brainer' (although paying 100 times earnings shows extent of Asda's appetite...)

As you know, to maintain its independence these ratios needed to have been:
- ROCE at 10.5-15%
- Net Margin at 2.5%, minimum
- Stockturn at 20 times per annum, minimum

Key issue for suppliers has to be the possibility of any pricing and/or terms disharmonies in their dealings with Asda vs. Netto.
Action: A narrow window possibly exists to correct such differences before the authorities allow the deal to go through…

Meanwhile, where does this leave WalmAsda, Dansk, medium-term….? (A signal for your continental colleagues?)

Incidentally, why not let us help your team anticipate the inevitable, via our inhouse bespoke finance workshops? - More on KamTraining

The Retailer's Perspective on GSCOP

Some key questions for the weekend?

• How much will retailers lose via the 'banned conditions'?
• Can you expect them to simply absorb the losses? (Would you?)
• How can they recover the losses from suppliers?
• Do you really believe that nothing is happening, because nothing appears to be happening?

See above for the answers and insights
Have a retailer weekend, from the Namnews Team!

Buying a shop, the original public-private battle for Harrods

Photograph: Stefan Rousseau/PA

With all the drama of a 'who-done-it', the saga of Lonrho (Tiny Rowland) and Mohamed Al Fayeds' fight for control of Harrods, involved government intervention, a DTI enquiry, a threatened injunction, two libel actions, and two rulings by the Monopolies and Mergers Commission: 'it was against the public interest for Lonrho to own Harrods since it also owned Brentford Nylons and might therefore discriminate against other suppliers of bed linen'

The story goes back to 1981, when the Monopolies and Mergers Commission made two rulings affecting Lonrho, the international conglomerate led by Tiny Rowland: one approved the company's purchase of the Observer; the other prevented it bidding for House of Fraser, owner of Harrods, which Rowland had been pursuing since 1977.
[For more details on 'warehousing' the Harrods shares, the implementation of one of the City's greatest 'stings' and subsequent use of several firms of accountants and solicitors, private detectives and freelance journalists in an investigative operation, said to cost many millions of pounds, together with illicit bugging devices and some of the money going in bribes to officials to unearth incriminating documents in Egypt, Haiti, Dubai, Brunei, France and Switzerland, see the original article]

The Department of Trade and Industry then launched an official Inquiry, but declined to publish the result. Rowland obtained a copy and The Observer produced a special midweek free edition of the newspaper to circumvent an anticipated injunction, expected later that day…

Insight: ..makes todays local tussles by the multiples with the planning authorities seem mild by comparison…

A GSCOP-thought for the weekend?

Given that the designated retailers have little to gain and lots to lose from the spirit of GSCOP, it is unlikely that they are currently preparing to merely observe the letter of the new Code of Practice.

For instance:
Losses from Banned conditions:

• No delay in Payments (they currently pay in 45 days approx., scope for negotiating extension, 90 days ring a bell?)
• No requirement to predominantly fund a promotion ( move from fully-funded to 50%?)
• No obligation to contribute to marketing costs (your current payments reduced to zero?)
• No Payments for shrinkage (say average shrinkage = 2% of retail sales?)
• No Payments for wastage (say 5% of sales, conservatively?)
• No Payments as a condition of being a Supplier (your current payments for listing, etc = zero?)
• Compensation for forecasting errors (think refund of incremental margin from normal sale of promo-stocks)

Potential recovery from:

• Extending credit (by negotiated agreement?)
• Trade funding (currently up to 20% of purchases, scope for more?)
• Deductions off invoice (say 3 -10% of invoiced sales, scope for more?)

The designated retailers have to be working on ways of recovering losses from banned conditions, and also maintaining the status quo by signing suppliers up to a retailer-driven supply-agreement, written in whose favour…?

Are you missing a trick by simply awaiting the outcome?

Have a fair-share weekend, from the Namnews Team!

Who owns whom in UK retail, & so what?

According to Bloomberg, the Qatari's £1.5 billion-pound ($2.2 billion) purchase of Harrods may herald more investment in the industry as foreign buyers take advantage of a consumer-spending revival, a falling pound, and the rolling Euro-dice on the continent.
Qatari's 26% stake in Sainsburys will probably result in 100% acquisition (costing them approx £5bn), Liberty has been approached by Bluegem Capital Partners, Harvey Nichols is controlled by Hong Kong entrepreneur Dickson Poon, while Selfridges is owned by Canadian billionaire Galen Weston, and Asda is probably up for sale.
Add to these changes recent CEO moves in retail management coupled with Asda's planned extension of its Living format by 150 stores, the new entrant Best Buy's intention to open 150 stores, and the monumental change taking place in UK retail becomes obvious…(?)
At the very least, this degree of change in 'ownership' and influence at corporate and local level has to result in fundamental change in the competitive-mix.
Ultimately, the relative appeal of the different players in the eyes of distracted but increasingly savvy consumers needs to be reassessed and their marketing-mix readjusted, at least .
In other words, the relative appeal of each retailer's 8Ps (Products & Assortment, Pricing, Promotional activities, Place i.e. store location, Personnel, Physical distribution & handling, Presentation of stores & products, & Productivity) need to be realigned to avoid being found to be dangerously out of sync with the realities of the new UK hung-environment…

It hopefully goes without saying that, for suppliers, 'business as usual' is not an option...

A non-election quote that re-sets our priorities:

"These are the highlights"
Chris Martin, Coldplay frontman, after his wife Gwyneth Paltrow asked when the action would start as they watched cricket on TV
Mail on Sunday

Aldi's answer to all our old problems…

News that Aldi's Lacura Multi-Intensive Serum Anti-Ageing, at £3.49 a pop, beat 2,000 rival products in a blind test, raises fundamental issues. A key question is why use a 'blind-test' to prove a result based on appearance? Also, timing may be more than a lucky coincidence, given the way in which the elections have hung around, putting ages on us all…
But, as always, the extra-low price takes centre-stage, given the depth and duration of cuts necessary to restore the wrinkle-free appearance of UK finances….

Have a smooth weekend, from the Namnews Team!

The essential shopping environment?

……….At first glance the composition appears unintentional and the construction shoddy. But further investigation reveals a clear delineation between indoor/outdoor space with a design focus on protection through the use of barrier. Planes are shifted off the orthogonal to accommodate function; as a side effect it relieves inhabitants from a harsh Euclidian geometry…..

Andrew Sullivan Blog