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Global retailers bounce back amid slowdown

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At a time when retailers across the globe are shaken due to the slowdown in China, some are pulling up their socks and taking new and improved measures to combat the downturn. McDonald’s Corp for instance plans to open 150 outlets where clients can customise burgers to suit their tastes…
Meanwhile, high-end watchmakers have indicated a shift in strategy with an expanded range of more affordable products to counter the most severe downturn the industry has faced since the 2008-09 financial crisis.
McDonald’s plan to launch customized menu across 150 outlets in China
McDonald’s Corp plans to launch in China this year 150 outlets where clients can customise burgers to suit their tastes, as the world’s top restaurant chain aims to grow sales in the country after being hit by a fast-food scandal in 2014. The US burger chain currently has 11 such outlets on the mainland, including in Shanghai, Guangzhou, Shenzhen and Beijing. McDonald’s beat analyst forecasts for quarterly same-restaurant sales this week, adding momentum to a global recovery for the chain as demand picked up in China.
Its same-store sales in China rose 4 per cent in the fourth quarter of 2015, the second straight quarter of growth after four quarters of falling sales.
McDonald’s and Yum Brands Inc, the parent of KFC and Pizza Hut, are slowly turning things around in China, although same-restaurant sales for both firms remain below pre-scandal levels, according to a Reuters analysis of available data. The so-called ‘Create Your Taste’ outlets allow customers to build customized burgers from a wide selection of ingredients. The chain claims to have seen “very positive feedback” from local diners, who analysts say are increasingly tough to win over due to greater health awareness and a boom in the range of available dining options.
McDonald’s Chief Executive Steve Easterbrook launched a turnaround plan last year that INVolved making the menu simpler, improving service times and raising worker wages.
Meanwhile, Seattle based Starbucks sales rose nine per cent in its flagship U.S. market and eight per cent globally during the final three months of the year. The increase at home and abroad was the result of a mix of higher customer traffic and increased spending. Over the holidays, the company said $1.9 billion was loaded onto Starbucks gift cards. It said one in six American adults received a Starbucks gift card over the holidays, up from one in seven a year ago, and one in eight two years ago. The strong results came despite an online backlash from some corners when Starbucks unveiled its minimalist red cups bearing only its logo for the holidays. That was a change from past years, when the company’s holiday cups were decorated with reindeer, snowflakes and Christmas ornaments.
Starbucks has been pushing up sales by rolling out pricier drinks like the “Flat White” and more food options. It said sales of breakfast sandwiches were up 40 per cent during the quarter from a year ago. The company apparently wasn’t affected by the warm weather, which hurt retailers that sell items such as winter coats and boats.
Starbucks noted that its sells both cold and hot drinks. For the quarter, the company earned $687.6 million, or 46 cents per share. That was a penny more than Wall Street expected. Total revenue was $5.37 billion, short of the $5.38 billion analysts had forecast, according to Zacks INVestment Research. For the current quarter ending in April, Starbucks expects its per-share earnings to range from 38 cents to 39 cents.
Watchmakers signal shift in strategy to beat slowdown
High-end watchmakers have signaled a shift in strategy with an expanded range of more affordable products to counter the most severe downturn the industry has faced since the 2008-09 financial crisis, executives at a watch fair in Geneva said. The industry has to adapt to a market with fewer Russian, Middle Eastern and Chinese buyers than a year ago, executives said, feeling the combined effects of record low oil prices and signs of economic weakness in China. Cartier, Richemont’s leading brand and main source of profit, is presenting a higher than usual number of models at more accessible prices at this week’s Salon International de la Haute Horlogerie (SIHH), the industry’s first event of the year. Among them is Cartier’s new Drive model, a steel-cased men’s watch priced at a little more than 5,000 euros ($5,430). Previously, Cartier would only offer new models in gold and leather, with prices starting at more than 10,000 euros, before offering them in more affordable versions. Sister brand Piaget, the timepieces
of which generally start no lower than 10,000 euros, launched a women’s line starting at just over 7,000 euros. Richemont stablemate Mont Blanc, meanwhile, has INVested in a wide range of lower-priced models. The brands are feeling that there is different price awareness among customers now and less price elasticity than there used to be. In fact times are difficult. The market has changed and, in terms of pricing, it has become much more competitive. Russian and Middle
Eastern customers’ purchasing power has been dented by the slide in oil prices. In China, the luxury sector’s biggest growth engine, demand has slowed down partly because of a drop in the pace of economic growth and a government crackdown on giving gifts and ostentatious spending by civil servants. Meanwhile, Hong Kong and the United States, two of the world’s biggest luxury markets, have been hit by a sharp drop in Chinese tourist spending.
There has been gradual erosion in the industry’s global growth since a peak reached at the end of 2012. Swiss watch exports dropped 3.3 per cent in the 11 months to last November after two years of modest growth of close to 2 per cent. The downturn has been less painful than in 2008 and 2009, when the Swiss watch industry lost more than 5,000 jobs, said Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry, though he acknowledged the danger that market conditions could worsen.
Industry experts feel that looking at this year much will depend on how the geopolitical situation evolves. The luxury goods sector is very much tied to tourist flows, but the deadly attacks in Paris last November have deterred many from traveling to Europe, the traditional home market for high-end watches and jewellery. In recent months, several watch makers have cut jobs, such as Kering’s recently acquired Ulysse Nardin and privately owned Parimigiani and Christophe Claret.
Piaget closed a boutique in Shanghai last month while Parmigiani said it would cut its number of sales points globally to about 250 from around 300 by the end of the year, including outlets in Russia and Turkey.
Van Cleef & Arpels, one of the fastest growing jewellery and watch brands within the Richemont group, said it had also felt a slowdown in Hong Kong, Macao and the United States. Van Cleef & Arpels is examining new growth opportunities in countries such as Thailand, where it just opened a shop, as well as in Australia and Canada.
Morrisons slash prices of key products to attract customers
Britain’s fourth-largest supermarket operator Morrisons have cut the price of more than 1,000 products, with an average drop of 19 per cent across fruit and vegetable lines. The firm said it was launching a rolling programme of reductions that will see the price of selected items cut for a minimum of three months. Morrisons said it would use it own fresh food manufacturing business to help keep prices down. The announcement of discounts comes as the four main supermarkets of the country, Asda, Tesco, Sainsbury’s and Morrisons battle to stem a loss of customers to discounters Aldi and Lidl.
Earlier this month, Morrisons posted a surprise rise in sales over the festive period, ending three years of declines.

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