The UK department store John Lewis has scrapped plans to expand in the Middle East and has quit talks with Dubai’s Al-Futtaim Group to manage its brand in the region.
The reversal comes amid a high-street crisis in the UK, with numerous retailers shutting up shop, scaling back operations or consolidating positions in an increasingly competitive market.
John Lewis "took the easy decision, which was to do nothing", said Phil Evans, the director for retail leasing at Al-Futtaim. "I think they felt they would rather focus on their UK expansion than dip their toe overseas. It’s a great business and brand and would have done well in the region."
Al-Futtaim and John Lewis were in advanced talks to bring the brand to the Middle East as a franchise. The plan had been for John Lewis to open several stores in the Middle East, including in Dubai and Egypt, from next year.
Al-Futtaim’s Dubai Festival City space and a Cairo Festival City store were set to open next year as John Lewis department stores. "John Lewis is always looking for opportunities to expand. However, our international plans are currently focused on delivery from our website," a spokesman at the company said.
It is unclear whether the move will affect the licensing deal in the UAE between Spinneys and Waitrose, which is owned by John Lewis. "It’s not because they didn’t want to invest," said Evans.
"The way it works with a franchise is that the franchisee invests. It was due to human resources and time.
"Focusing on the UK expansion may well have been what’s best for the business at the moment."
Al-Futtaim said it intended to expand its brand portfolio, which includes the UK company Marks & Spencer.
"It’s not necessarily that we wanted a department store to sit within our retail brands," Evans said. "It’s on a brand basis. John Lewis is a great brand."
John Lewis has been bucking the gloomy economic and retail trend in the UK, enjoying a 20 per cent increase in sales for the week beginning June 25 compared with the same period last year.
Ben Hunt, a retail analyst at Oriel Securities in London, said the company reported a 2 per cent increase in sales in the first half of the year over the same period last year.
The performance is stronger than most retailers, with many reporting a fall in sales year on year.
"I think what you notice about stocks in the past is that when retailers have tried to go abroad its been a disaster, so retailers are now cautious," said Hunt.
"It’s much better to get a local partner because it’s less risky, and people are looking for low-risk models."
From an investor’s perspective, Hunt said many people now perceived UK retailers as no longer offering growth. "One way to get a share price going is to expand internationally," he said.
This is currently not an option for many UK retailers though, with many struggling to stay in business.
Thorntons, a chocolate chain, Carpetright, a floor-covering specialist, and Habitat, a home furnishings store, have all said recently they would close stores. The clothing retailers TJ Hughes and Jane Norman both went into administration last month.
Source – The National