After putting in place austerity measures global retail giants in general seem to be showing improved performances. This holds true even for players like carrefour, versace, and burberry. Though these brands still continue to tread a cautious path, their performance in various key markets are reassuring. A report.
Again Japan headquarted Fast Retailing is spearheading a push abroad for its core Uniqlo
brand as sales slump at home, where the population is ageing and declining. It said it had seen encouraging growth in China and other overseas markets in the first half. However Seven & I Holdings presents a complete different picture when it announces that it plans to open a record 1600 convenience stores in Japan by the fiscal year ending 2015 amidst tricky consumer behaviour. Such dichotomy exists in retail off course!
LUXURY BRANDS ON A SLOW BUT STEADY GROWTH PATH
Italian fashion house Versace felt it had started 2014 on a strong footing thanks to a double-digit rise in sales from its own shops in the fi rst quarter, following a 19 percent increase for the whole of 2013. Total revenue at the luxury group, which plans an eventual stock market listing after the recent sale of a stake to U.S. private equity group Blackstone, rose 17 per cent last year to 479 million euros ($660 million).
Core earnings rose nearly 60 percent to 71 million euros once adjusted for currency effects, it said in a statement. Versace said sales at shops it manages directly rose by nearly a third in the United States, adding to a strong performance in 2012, and by 18 per cent in Asia. Direct sales accounted for nearly 56 per cent of last year’s total. The group, which returned to profit in 2011, last month agreed to sell a 20 per cent stake to
Blackstone for 210 million euros to fund expansion. Versace, which competes with the likes of Kering’s Gucci, said it had invested 24 million euros last year to boost its retail and e-commerce presence. It plans to double the contribution from its e-commerce business this year. “The main engine of the company’s growth continues to be the Versace Prima Linea (high-end collection), which accounts for 60 per cent of overall sales,” the company said in a statement.
Again, British luxury retailer Burberry said strong sales in China and Korea helped it to a 19 per cent rise in second-half revenue, beating analyst expectations, but said it expected currency headwinds to hit profits in the next two years. Burberry, known for its trenchcoats and leather goods, said that total revenue for the six months to March 31 was 1.298 billion pounds ($2.17 billion), higher than a companycompiled analyst consensus of 1.296 billion pounds.
The company said should exchange rates remain at current levels, retail and wholesale profit for full-year 2014 would fall by 30 million pounds while the impact on full-year 2015 would be “material”.
However, Fast Retailing Co, Asia’s biggest fashion retailer has lowered its domestic sales forecast for its Uniqlo casual wear brand as consumers stuck to discounted goods. Fast Retailing said its sales costs for the year would be higher than initially anticipated and also reduced the sales outlook for domestic Uniqlo stores to 715 billion yen from 720 billion yen. It said sales costs had increased due to more advertising for part-time staff. The company is accelerating a push abroad for its core Uniqlo brand as it sees sales slowing at home, where the population is ageing and declining. It said it had seen brisk growth in China and other overseas markets in the first half.
The retailer has opened its first store in Germany as it marches towards its goal of becoming the world’s top-selling apparel brand by 2020, climbing from its current fourth place. That ambition involves opening 20-30 stores in the United States every year over the next few years. Store rollouts have been most aggressive in Greater China, where the company is targeting a 30 per cent-plus jump in revenue and improved profit margins in the business year ending August 31. It said it would have 374 stores in the country by that time. For the six months ended February 28, Fast Retailing reported operating profit of 103.2 billion yen up 6.8 per cent from a year earlier. Sales grew 24.3 percent to 764.3 billion yen, helped by a jump in revenue at the company’s GU fast-fashion brand, mainly sold in Japan.
CARREFOUR IMPROVES SALES GROWTH ITS KEY MARKETS
Carrefour, Europe’s biggest retailer, said in a statement that underlying sales growth accelerated in the first quarter, driven by Brazil, the group’s second largest market after France, while sales in austerity-hit Spain rose for the second consecutive quarter.
Sales at closely-watched French hypermarkets slowed amid a price war, however, while China, another key emerging market Carrefour has earmarked for expansion, also stayed weak. Chief Financial Officer Pierre-Jean Sivignon said in a statement that that Carrefour saw the market’s consensus for core operating profi t of around 2.38 billion euros this year as “reasonable at this stage”. Carrefour is battling to reverse years of underperformance in Europe, where it earns 73 per cent of its sales. Its problems are partly due to a reliance on the hypermarket format it once pioneered now that customers’ habits have changed to favour more local and online shopping. The world’s largest retailer after Wal-Mart said first-quarter sales were 19.79 billion euros, close to the analyst consensus.
First-quarter sales were also dented by a later Easter holiday, which is in April this year instead of March last year, and lower petrol prices. Excluding these factors, like-for-like sales growth was 3.7 per cent in the quarter, acceleration from 3.2 per cent growth in the fourth quarter 2013. This was Carrefour’s “best underlying quarterly sales growth performance in over two years”, Sivignon said. In France, which accounts for almost half of group revenues, same-store sales at Carrefour’s hypermarkets rose 0.7 percent, a slowdown from a 1.4 per cent rise in the fourth quarter 2013. In Spain, Carrefour’s third-largest market, sales grew 0.6 per cent like for like after rising 0.2 per cent in the fourth quarter, in what was the country’s fi rst growth in fi ve years.
Carrefour said like-for-like sales growth in Brazil accelerated to 6.4 per cent from 5.8 per cent growth in the fourth quarter. Sales at Chinese stores open over a year fell 3.1 per cent in the fi rst quarter, a decline similar to that of the fourth quarter. Again Seven & I Holdings, the world’s biggest convenience store operator, said that it plans to open a record 1,600 convenience stores in Japan in the fiscal year ending February 2015. The company also said it expects consumer business conditions to be volatile this financial year. Seven & I forecast a slowdown in profi t growth for the year from March 1 as a sales tax increase erodes earnings at its supermarkets and department stores even as sales remain strong at its 7-Eleven shops.