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Chinese to gain control over UK House of Fraser

The London Telegraph reported that the Hong Kong-based parent of UK toy retailer Hamleys (C.banner International), has signed a memorandum of understanding to acquire a 51% share in House of Fraser. The deal is with China's Nanjing Xinjiekou Department Store, which owns an 89% interest in the UK department store.

Gap betting on Old Navy

CNBC reported that the discounted apparel brand will add 60 more stores across North America this year, pushing its total to more than 1,000 Old Navy locations in the US by the summer. Gap, which also owns the flagship Gap banner, Banana Republic and Athleta, currently operates more than 3,500 stores globally.  Gap is meanwhile trimming back its fleet of Gap and Banana Republic stores, which haven't performed as well as Old Navy and Athleta of late. This demonstrates that a brick and mortar fleet can be profitable, but its offer and brand mix must be morphed in line with evolving markets.

Google: victim of its own success?

The Wall Street Journal reported that net profit soared at Google's parent Alphabet, which also got an earnings boost from its stakes in companies such as Uber. Profit jumped 73% to $9.4 billion in the first quarter, up from $5.4 billion in the same period last year. This was partially driven by selling targeted advertising, which sooner or later will put Google under public scrutiny related to internet privacy. The new regulations currently in the making are unlikely to spare the biggest player in this business.

UK House of Fraser in trouble

The BBC reported that the department store chain has appointed KPMG as turnaround specialists, to advise it on a restructuring plan which could involve store closures and job losses.  KPMG will examine all options, including an insolvency process called a Company Voluntary Arrangement (CVA).  House of Fraser has 59 stores, 6,000 staff and 11,500 concession staff.  In January it asked landlords to cut rents, after poor Christmas trading. Under a CVA House of Fraser would again try to get agreement from landlords to reduce rents and maybe shut some of its 59 stores. 

North Korea's elite hackers

The Wall Street Journal commented that North Korea’s “cyber army” is becoming one of the world’s most sophisticated and dangerous hacking machines. Over the past 18 months, the skill level of North Korean hackers has rapidly improved and their targets have become more worrisome. Pyongyang is cultivating elite hackers much like other countries train Olympic athletes. How good are they? Dangerously good - South Korean officials estimate their country is targeted 17 times every second.  We have pointed out many times that cyberspace will become increasingly dangerous and, therefore, the need for retailers to develop defense abilities.

Messing with perfection?

According to the South African BusinessDay, Pick n Pay reported sales growth of 8% during the quarter, reaching an annual turnover of over AUD 8 billion.  Yet, the CEO announced a pretty serious shift in Pick n Pay's model, aiming to lift private label form 19% to 30% over the next 18-24 months.  In our view, this signals an entry into potentially dangerous territory. Once 30% of stock is sold under private label, supplier relationships tend to turn hostile.

US home improvement stores disappearing

According to Market Watch, the home improvement sector has been shrinking in the US. The store count has declined nearly 12% since the peak level of 2007. The number of locations fell 1.1% year-over-year.  Home Depot and Lowe’s account for about 45% of the subsector’s sales. The downward US trend makes us wonder when will Bunnings start to level off?

Amazon launches international shopping from the US

Reuters reported that has launched an international shopping feature that will enable customers across the world to shop more than 45 million items that can be shipped to their country from the United States.  The international shopping feature will display pricing, shipping costs and import duty estimates, with Amazon managing courier service and customs clearance in case of potential surprises at the time of purchase or delivery.  This initiative will be welcomed by people who needed to purchase items other than books and movies in the US and were forced to use expensive re-mail services such as MyUS.

Grocery chains need to build brands to compete with Aldi

The AFR reports that grocery retailers need to shift focus from copycat private label products and focus on building strong brands to avoid losing share to discounters amid a Millennial-led shift in shopping habits. The AFR noted a statement by Boston Consulting Group MD, Gavin Parker saying, "the major chains risk losing market share to vertically integrated value retailers such as Aldi, which are increasingly popular with Millennials, and to major FMCG companies, which have started selling online directly to consumers, unless they develop real brands that build strong connections with customers." The article echoes a sentiment we've shared last week: that Coles and Woolworths progressive destruction of branded groceries and the narrowing of their range has taken them to a dark alley, where they have to compete on price with Aldi and this is a war they cannot win due to their high-cost structure.

US retail sales increase 5% over last year

According to the NRF, March retail sales increased 5% and NRF Chief Economist said that the increase "reflects a strong job market, gains in wages, improvements in confidence, rising home values and sensible use of credit."  Specifically, online sales were 7.5% up, while general merchandise and clothing were 6% up. Electronics and appliances, health and personal care, as well as sporting goods performed poorly.