BREXIT: WHAT recession
would mean for RETail
preview edition
executive summary
BREXIT: WHAT recession would mean
for RETail
(preview edition)
T
LE
he UK is facing an uncertain future following the shock EU referendum
result. While the economy appears to have weathered the initial impact of
the vote perhaps better than expected, many are forecasting a substantial
slowdown in economic output in 2017 and beyond.
Whether Brexit will indeed lead to a full recession remains to be seen, but what is
clear is that the retail sector will almost certainly be affected. This has already been
highlighted by the recent sharp fall in the value of sterling, which will create its own
challenges for the sector over the coming year.
MP
This report looks at how the retail sector was affected by this economic shock and
what lessons can be learnt from those that adapted to the new economic reality
and managed to thrive. In this context, the recessionary period is defined as having
started in 2007/08 and ended in 2013/14, when the UK economy had managed to
grow back to its pre-financial crisis size.
SA
Philip Wiggenraad
Head of Research, Retail Week Prospect
Many retailers now carry with them experience forged in the fire of the previous
recession in the aftermath of the financial crisis. It is experience that was in much
shorter supply when the credit crunch struck in 2007.
The initial impact of the recession could be clearly seen in retailers’ margins.
Businesses specialising in discretionary items – such as those in the home, DIY and
electricals sectors – experienced a sharp reduction in operating margins, or even
became loss-making as they faced difficulties in clearing excess stock.
The downturn also led to a changed consumer mindset. No longer were value
retailers the preserve of lower socio-economic groups and retailers such as Home
Bargains, Poundland and Aldi managed to widen their appeal to the middle
classes.
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brexit What recession would mean
for retail
preview edition
This was coupled with physical expansion at a breakneck pace. Within four years
the leading general discounters added as many stores as Woolworths had operated
prior to its collapse in 2008, while cumulatively their sales increased by £3.6bn
over the recessionary period.
MP
LE
There was also upheaval in the grocery sector, with a polarisation taking place
within several years of the start of the downturn. Hard discounters Aldi and Lidl
experienced phenomenal sales growth, while at the other end of the scale Waitrose
and M&S also performed strongly. This left the Big Four squeezed in the middle,
many of which had to rebase their operating margins to remain competitive.
SA
There was also upheaval in the grocery sector, with a
polarisation taking place within several years of the
start of the downturn. Hard discounters Aldi and Lidl
experienced phenomenal sales growth...
Retailers that came out stronger from the challenging trading conditions included
those that shifted their focus on their multichannel operations, such as John
Lewis, House of Fraser and Argos. But pureplays also capitalised on the increased
popularity of online shopping, with the six online retailers tracked for this report
quadrupling their combined turnover to £8bn between 2008/09 and 2014/15.
Lastly, this report provides case studies on three retailers that collapsed during the
recession but have risen from the ashes: Jessops, Dreams and Game. In all three
cases, the administration process allowed these businesses to shed themselves
of excess stores and become leaner organisations as they adapted to the new
multichannel reality.
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brexit What recession would mean for retail
preview edition
sample data
FIG. 1: MULTICHANNEL DATA
FIG. 2: Grocery operating margins
2014-15
36.0
33.0
15.4
6.5
13.6
6.2
2015-16
39.0
37.6
18.9
6.7
7.5
Sales (£m)
2011-12
2,910
495.0
678.6
2012-13
3,600
769.4
792.1
2013-14
4,000
975.5
948.9
2014-15
4,400
1,150.8
1,107.6
2015-16
4,900
1,444.9
2008-09
1,435
165.4
402.0
2009-10
1,865
223.0
515.7
2010-11
2,360
339.7
598.3
21.8
52.3
84.1
142.4
157.2
184.3
248.0
333.5
89.1
81.5
2,195
126.7
152.5
2,935
162.5
238.1
3,783
207.4
368.1
4,801
274.9
434.7
6,028
384.9
532.7
7,026
476.7
654.1
8,037
599.2
SA
Amazon UK
Asos
Ocado
The Hut
Group
Ao.com
Net-a-Porter
Total
2013-14
34.2
28.1
12.5
5.5
12.3
6.3
LE
2008-09
26.2
11.8
0.7
3.5
2.4
2.4
MP
Argos
John Lewis
House of Fraser
Tesco
Debenhams
Marks & Spencer
% of overall sales generated online
2009-10
2010-11
2011-12
2012-13
26.8
27.3
27.8
32.1
13.5
16.7
20.4
25.4
1.4
2.3
5.0
8.7
3.7
4.0
4.1
4.6
4.1
6.8
9.3
13.2
3.2
3.8
4.8
5.3
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brexit What recession would mean for retail
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FIG. 3: Physical expansion of general merchandise discounters
2012-13
432
365
217
210
315
75
372
1,986
LE
2009-10
263
89
126
83
200
43
337
1141
2013-14
497
373
239
242
345
89
374
2,159
2014-15
547
417
250
280
370
100
375
2,339
2015-16
843
499
315
423
120
383
2,583
MP
2008-09
207
67
72
68
181
40
321
956
SA
Poundland
B&M
99p Stores
Poundworld
Home Bargains
The Range
Wilko
Total
2007-08
167
49
53
58
151
38
295
811
UK store numbers
2010-11
2011-12
327
380
271
324
136
174
112
164
230
275
52
64
350
366
1,478
1,747
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brexit What recession would mean for retail
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FIG. 4: UK operating margins of selected retailers
Homebase
2.9
1.0
IKEA
Lakeland
Marks & Spencer
ScS
Carpetright
6.0
5.6
11.7
-4.6
12.8
3.5
3.5
8.0
-3.1
4.0
2011-12
2.1
2.0
17.1
4.8
2012-13
2.8
2.6
18.2
3.4
2013-14
3.4
2.5
19.3
3.2
2.6
3.1
1.5
0.8
1.3
4.7
7.1
8.2
1.5
5.6
1.8
7.3
7.8
-2.1
3.2
3.0
4.8
7.4
0.3
0.7
4.8
3.9
7.1
2.3
2.9
3.8
1.5
6.6
2.4
2.8
SA
MP
Dixons
John Lewis (department stores)
Next
B&Q
2007-08
4.1
8.2
16.1
2.2
LE
UK operating margins of selected retailers (%)
2008-09
2009-10
2010-11
-0.4
2.2
1.8
6.3
6.9
2.7
14.6
15.6
16.4
1.5
3.9
4.0
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brexit What recession would mean for retail
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FIG. 5: Growth in pureplays
1. Data for 2015/16 will not be available until December
2. Data for 2015/16 not comparable due to merger with Yoox
Aldi
Lidl
2008
1,700
1,900
Sales (£m)
2011
2,325
2,650
SA
FIG. 6: Growth of food discounters
2010-11
2,360
339.7
598.3
84.1
162.5
238.1
3,783
2009
1,770
2,150
2012-13
3,600
769.4
792.1
157.2
274.9
434.7
6,028
2013-14
4,000
975.5
948.9
184.3
384.9
532.7
7,026
2014-15
4,400
1,150.8
1,107.6
248.0
476.7
654.1
8,037
2015-16
4,900
1,444.9
-1
333.5
599.2
-2
2013
4,250
3,360
2014
5,695
4,000
2015
6,635
4,600
LE
2009-10
1,865
223.0
515.7
52.3
126.7
152.5
2,935
MP
Amazon UK
Asos
Ocado
The Hut Group
Ao.com
Net-a-Porter
Total
2008-09
1,435
165.4
402.0
21.8
89.1
81.5
2,195
Sales (£m)
2011-12
2,910
495.0
678.6
142.4
207.4
368.1
4,801
2010
1,815
2,370
2012
3,250
2,975
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brexit What recession would mean for retail
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800
FIG 7: Expansion of food discounters (store numbers)
700
LE
600
MP
500
400
SA
300
200
100
0
2008
2009
2010
2011
2012
Aldi
2013
2014
2015
Lidl
08
availble in the full report
BREXIT: WHAT recession would mean for RETail
This report and associated data is ideal for retail analysts trying to create a sound long-term strategies and for
consultants or financial institutions that need to build a cast-iron understanding of the future of retail at organisation
and sector level.
With this data you will be able to create a forecast for the future of the sector so that you can create a robust retail
strategy. You can download and analyse the data that you need to create a thorough understanding of the performance
of any of the top 130 retailers or sectors.
Included in the report:
- Analysis of the UK retail market between the 2000 and EU referendum earlier this year
- Example tables analysing the performance of key sectors over the last fifteen years
- Tabulated trading data for the top 50 retailers including UK sales, online sales, pre-tax profit and UK sales densities
- A full data set of 130 retailers that you can cross-tabulate or analyse in whichever way you choose.
- More than 10,000 individual data points that can be used to understand the trading performance of top retailers
categories covered
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Grocery
Fashion
Department Stores
Home & DIY
Electricals
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Health & Beauty
General Merchandise
Entertainment
Sports & Leisure
key stats at a glance
15
years of data
130 10k
retailers available
data points
09
For more information or to order the full report
and data-set please contact:
Samantha Compton
Sales Manager
[email protected]
+44 (0) 203 033 4318