Mintel’s Month in Retail highlights the stories that have made headlines in the European retail markets over the past four weeks, with exclusive analysis from Mintel’s expert retail team on potential implications.

Germany – Edeka and Budnikowsky cooperation given the green light

The competition authority has given the green light to the collaboration between the Hamburg-based pharmacy chain, Budnikowsky, and supermarket chain, Edeka. While the existing 181 Budnikowsky stores will remain under the control of the existing family business, Edeka is thought to be planning to open up to 50 new drugstores nationwide using its acquired know-how. However, the expansion cannot be undertaken as a joint venture as this would not be allowed by the Federal Cartel office.

“As we saw in Mintel report Beauty Retailing Germany 2017, spending on personal care has been growing more strongly than overall household spending in Germany and some of the grocers and discounters have been increasing their ranges in this area. As a result they have been increasing their market share, which we estimate to be 17% of Germany’s total beauty retailing market.”

 

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UK – Greggs makes a ‘good start’ to the year

Greggs has reported a 7.5% rise in total sales during the first 19 weeks of 2017, ahead of the bakery retailer’s annual general meeting. Growth has been seen in categories such as breakfast, drinks and healthier ‘Balanced Choice’ options.

“Mintel’s latest Bread and Baked Goods research found that the UK market for bread fell 3.6% in 2016, marking the third year of decline in a row. This decline is forecast to continue with the market contracting by a further 7.5% by 2021. By contrast, the lunch-out-of-home market is booming with 64% of consumers saying they buy lunch out-of-home for everyday occasions and a third of those making purchases from a bakery, mainly from Greggs.”

 


UK: Kingfisher revenue held back by France

Sales in the UK & Ireland increased 1.5% in the year to £1.2 billion. The growth was led once again by Screwfix which grew sales by 20.3% to £362 million while sales at B&Q fell 4.4% to £908 million, reflecting the completion of the store closure programme. In France total sales were down 5% to £1.1 billion with Castorama sales falling 4% and Brico Depot down 6.2%.

“In the UK, B&Q’s LFL sales growth of 0.5% in a quarter which included the important Easter period looks relatively weak given that the company is predicting that, on an annual basis, there will have been around a 1% LFL sales transference benefit from the stores it has closed. Once again, the more trade-oriented Screwfix has saved the day for the UK & Ireland division with its 12.6% LFL growth”


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Uk map

UK: B&M revenues rise 19.4%

The non-food discounter achieved group sales of £2.4 billion, up 19.4% on the previous year. Meanwhile, sales in Germany increased 34.4% to £178.4 million. During the period B&M opened 53 new stores in the UK, including 9 relocations to larger stores. Plans remain for another 40-50 UK stores in the next financial year with a further 15 in Germany.

Chairman, Sir Terry Leahy, said, “There was a robust return of trading momentum during the second half which has continued into the early weeks of the new financial year, affirming B&M’s offer resonates well with customers during a period of economic uncertainty and profound structural change in retailing.”

“Is B&M right to be opening so many out-of-town stores? B&M has succeeded by bringing the concept and disciplines of limited assortment discounting to non-food retailing and its progress has been dramatic.”.


UK: Clark profits down

The footwear specialist reported a 14.6% decline in group operating profits to £39.1m – impacted by ongoing investments to stabilise the business.

“Mintel estimates that sales of footwear in the UK rose 4.5% in 2016 – down from 7.8% in 2015. Our latest research shows that Clarks is not only associated with being good value, it is also thought to be worth paying more for – highlighting an opportunity to introduce more premium lines. However, Clarks does suffer from a tired image according to Mintel research, suggesting the retailer needs to be more innovative and trend-focused.”


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UK map

UK – McColls eyes up One Stop

Jonathan Miller, the boss of McColls has unveiled his intention to acquire some, or all of the One Stop convenience stores if Tesco is forced to offload the chain as part of its merger with Booker. The move comes after McColls acquired 300 Co-Op stores with the chain planning to continue expanding its 1,300 store estate by around 50 more shops per year.

Tesco and Booker still have to file with the Competition and Markets Authority but the two companies have argued that its convenience chain will not be an issue as Booker does not own its 5,463 franchise stores which include the Premier, Londis, Budgens and Happy Shopper brands.

We expect that either Tesco or Booker will have to offload one of its chains, or a significant amount of stores, to push the deal through. One Stop is the logical chain to go, Booker does not own the stores under its symbol chains and therefore forcing members into a new symbol system is unlikely to happen, unless Tesco looks to cut its Express numbers. One Stop would be attractive to most in the market; sales are estimated to have grown by 5.3% in 2016, and in terms of market positioning McColl’s would seem a good fit.”

 


Spain – Eroski’s pre-tax profits surge 97% to €40m

Eroski has announced pre-tax profits of €39.9m for the full year to 31 January 2017, reporting that performance was boosted by the success of its ‘With You’ business model alongside improvements in its supply chain. Eroski invested €87m into the business during 2016, as it continues to remodel its network of supermarkets and hypermarkets. 512 stores at year-end had been converted to the ‘With You’ business model, which focuses on improved customer service, greater focus on fresh produce and sourcing of local products where possible.

“The turnaround programme is evidently working well. Sales may be stable, but the switch in emphasis of the business has led to a pleasing increase in profits, and operating margins that now stand at 2.4%.”


 

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Uk map

UK – AO sales surpass £700m mark

Total sales at the online electricals retailer increased 17% during the year to 31st March 2017, with sales growing in both the UK and Europe. UK website sales increased 14.5% to £557.9 million, while European revenue grew 52.3% on a constant currency basis to £37.5 million.

Chief executive Steve Caunce, said: “In the first half of the year, our investment in marketing and brand translated into encouraging sales growth. In the second half, trading in the UK became more challenging as we began to feel the impacts of dampening consumer confidence following the UK’s vote to leave the EU.

“AO comments on a slowdown in the second half and that ties in with the Dixons Carphone figures for the fourth quarter. But AO’s second half also includes Black Friday, so it is surprising that overall sales growth was disappointing.”

 


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