Value Clothing in European Retail

Table of Contents

EXECUTIVE SUMMARY

• It is recession boom time for European value clothing retailers,
• Consumers trading down as a reaction to the recession means that every retail proposition with a strong and deep value focus should do well.
• Value is a growing segment in a declining sector, as overall clothing volumes are down.
• However in recessionary times the value players will have to contend with strong discounting from middle market players
• As Tesco' s halo has slipped somewhat in the recession, Ireland' s Primark is set to take up the torch of sharpest and most feared retailer from the British Isles.
• The fashionability and the focus on a young demographic are perhaps Primark' s unique selling points and something much of the competition obviously lacks - with perhaps the exception of H&M.
• The harsh lesson UK fashion multiples had to learn in recent years stands to be repeated across the continent.
• Indeed C&A' s capitulation of its Avanti fascia makes us unsure about the retailer' s future prospects altogether,
• As such the race between ABF' s Primark and C&A' s Avanti to conquer the European value clothing market has come to a premature conclusion.
• Kik and Takko look the most interesting competitors to Primark for the young value fashion crown
• H&M need to focus on l-f-l growth.
• TKMaxx is a class apart, as it operates a different business model without a dedicated private label line.
• That said, Primark and the value fashion retailers in general need to focus their efforts on ethical issues as clothing retailing in consumers' perception has become holistic.
• For the value players strategic decisions need to be made about store locations, and management will have to choose between offensive and defensive tactics in terms of expansion abroad also.
• Another key decision will have to be taken about foreign expansion.
• Now is the time to grow and the value clothing specialists should not sit idly by while the hypermarkets and grocery discounters battle it out amongst themselves at the value end of the market.

CLOTHING MARKET STRUCTURE

• First major fall in a decade in EU27 clothing expenditure
  • Per capita figures demonstrate catch up potential of newer member states
• Specialists sales follow downward trend
• Specialists space growth stagnates
• Pressure on sales densities builds
• Store numbers continue long term decline
• Average sales per specialist clothing store in EU about to reach € 500,000 ...
• ... while specialist clothing store average sizes spanned 156sq m range in 2008

STRATEGIC ISSUES

• Economic picture - GDP crawls back up
• Euro interest rate remains at historic lows
• No sign of inflation yet
• Unemployment time bomb
• Massive opportunity for EU value players
• Internationalisation and emergence of pan-European value clothing retailers
• Diverse strategies stretch value model
• Migration online and multichannel development
• Non-specialists - from Aldi to Tesco - threaten specialist value players
• Discounting - more competition on low cost front
• Ethical concerns and the environmental implications of throwaway fashion

FRANCE

• Potential for value chains to grow and consolidate
• Recent key events
  • Varying growth strategies for French value chains
• Outlook - value chains will expand long term regardless of midmarket discounts
  • (Untitled sub-section)

GERMANY

• Value clothing sales grow robustly
• Recent key events
  • C&A pulls Avanti out of race
• Outlook - competition in value clothing will increase
• Kik and Takko expand in town centers and shopping malls
  • (Untitled sub-section)

ITALY

• Discretionary cutbacks
• Recent key events
  • (Untitled sub-section)
• Outlook - expect more M&A activity post-recession

SPAIN

• Severe economic downturn takes toll
• Recent key events
  • (Untitled sub-section)
• Outlook - fast fashion value (like Primark) appeals to Spaniards in financial tough times
  • (Untitled sub-section)

UK

• Value clothing well established and highly competitive
• Recent key events
  • (Untitled sub-section)
• Outlook - low cost operators with scale will prevail
  • (Untitled sub-section)

COMPANY COMPARISONS

• Sales
• Value positioning
  • Primark top
• Stores
  • New Look catches up
• Sales densities slip
  • But Primark stays top

C&A

• Shuts down Avanti value fast fashion format in Germany and Poland
  • Avanti
  • Sourcing
• Recent key events
  • Avanti throws in the towel
• Financials
• Stores
• Outlook - C&A format needs continual development for mature markets
  • (Untitled sub-section)

H&M

• Global fashion retailer
• Recent key events
  • (Untitled sub-section)
• Financials
  • Current trading
• Stores
• Outlook - closes on Inditex by targeting new customer groups
  • (Untitled sub-section)

KIABI

• France' s leading value clothing retailer focuses on Europe
• Recent key events
  • Acquires 100 Veti stores
• Financials
• Stores
• Outlook - a serious threat to C&A and Primark?
  • (Untitled sub-section)

NEW LOOK

• Develops beyond EU through franchises
• Recent key events
  • (Untitled sub-section)
• Financials
• Stores
• Outlook - under pressure from weak sterling
• (Untitled sub-section)

PRIMARK

• Density towers over rivals
• Recent key events
  • (Untitled sub-section)
• Financials
  • Group 24 weeks ended February 28, 2009
  • UK year to September 2008
  • UK 40 weeks to June 20, 2009
• Stores
• Outlook - needs to manage ethical stance more proactively
  • (Untitled sub-section)

TK MAXX

• Flight to value plays into TK Maxx' hands
• Recent key events
  • (Untitled sub-section)
• Financials
• Stores
• Outlook - now is the time to break into Europe
  • (Untitled sub-section)

APPENDIX

• Definitions
  • Value clothing market definition 2009
• Glossary
• Abbreviations
• Financial statistics - VAT
• Source - Verdict Research
• Verdict Research consulting
• Disclaimer

TABLES

• Table: EU clothing expenditure (€ m) by country 2003-2008
• Table: EU clothing expenditure growth rates by country 2003-2008e
• Table: EU27 clothing expenditure ranking matrix 2008
• Table: Sales through specialist clothing retailers of EU27 2003-2008e
• Table: Clothing s pecialists sales growth rates by country EU27 2003-2008e
• Table: EU27 clothing specialists sales ranking matrix 2008
• Table: Clothing specialists selling space (000 sq m) estimates by country 2003-2008e
• Table: C lothing specialists space growth by country 2003-2008e
• Table: EU27 c lothing specialists selling space ranking matrix 2008
• Table: EU27 clothing specialists store numbers estimates by country 2003-2008
• Table: EU27 clothing specialists estimated store numbers by country 2003-2008
• Table: EU27 clothing specialists store numbers ranking matrix 2008
• Table: Latest GDP data August 2009
• Table: Monthly HICP rates y-o-y Jan-Jul 2009
• Table: Monthly unemployment rates y-o-y Jan 2009-Jun 2009
• Table: Value clothing market definition 2009
• Table: A selection of European value clothing retailers EU27 store portfolios - summer 2009
• Table: French clothing expenditure and value retailers sales 2003-2008
• Table: German clothing expenditure and value retailers sales 2003-2008
• Table: Italian clothing expenditure and value retailers sales 2003-2008
• Table: Spanish clothing expenditure and value retailers sales 2003-2008
• Table: UK clothing expenditure and value retailers sales 2003-2008
• Table: Leading European value clothing retailers sales (ex VAT) 2008/09
• Table: Leading European value clothing retailers stores and space 2008/09
• Table: C&A company overview 2009
• Table: C&A benchmarks in EU27 year ended February 2008 and 2009
• Table: C&A trading record 2004-2009
• Table: C&A EU trading record by country 2007/08 and 2008/09
• Table: C&A European store portfolio February 2009
• Table: H&M company overview 2009
• Table: H&M benchmarks in EU27 year ended November 2007 and 2008
• Table: H&M trading record (SEKm) 2004-2008
• Table: H&M trading record (€ m) 2004-2008
• Table: H&M sales by country (SEKm) 2007 and 2008
• Table: H&M net sales by country (€ m) 2007 and 2008
• Table: H&M store portfolio 2007 and 2008
• Table: Kiabi company overview 2009
• Table: Kiabi benchmarks year ended December 2007 and 2008
• Table: Kiabi trading record 2003-2008
• Table: Kiabi store portfolio 2002-2008
• Table: Kiabi store portfolio country split Dec 2008 and April 2009
• Table: New Look company overview 2009
• Table: New Look benchmarks (EU only) year ended March 2008 and 2009
• Table: NNew Look Group trading record 2004-2009
• Table: New Look Group sales changes % by country 2004-2009
• Table: New Look Group trading record by country 2004-2009
• Table: New Look group store portfolio 2007-2009
• Table: New Look sales area by country (000 sq m) 2007-2009
• Table: Primark company overview 2008
• Table: Primark benchmarks years 2007-2008
• Table: Primark EU trading record (£) 03-2008
• Table: Primark EU trading record (€ ) 2003-2008
• Table: Primark UK trading record 1999-2009e
• Table: Primark UK trading record 2002-2008 in €
• Table: Primark store portfolio as at March 2008 and June 2009
• Table: Primark selling space provision 2008 and 2009
• Table: Primark UK store portfolio 1999-2009e
• Table: TK Maxx company overview 2009
• Table: TK Maxx benchmarks in EU year ended January 2008 and 2009
• Table: TK Maxx EU trading record year to January 2004-2009
• Table: TK Maxx EU trading record by country 2006/07-2008/09
• Table: TK Maxx store portfolio 2004-2009

FIGURES

• Figure: EU27 clothing expenditure per capita 2008e
• Figure: EU27 clothing specialists sales density estimates in € per sq m 2008e
• Figure: EU27 sales per specialist clothing store in € 000 2008e
• Figure: EU27 specialist clothing store average size (sq m) 2008
• Figure: ECB interest rates 2006-2009
• Figure: EU value clothing market 2008
• Figure: Value clothing retailers pan-European presence 2009
• Figure: Kiabi, Russia 2009
• Figure: Takko, Bratislava, Slovakia 2009
• Figure: Internationalisation of clothing retailers 2009
• Figure: Economics of moda low cost 2009
• Figure: Sainsbury' s TU clothing 2009
• Figure: Midmarket clothing retailers discounting in Europe, spring 2009
• Figure: European value clothing retailers environmental initiatives 2009
• Figure: European value clothing retailers labour and production initiatives 2009
• Figure: French clothing expenditure and value retailers sales 2003-2008
• Figure: C&A, Calais, France 2008
• Figure: La Halle new store layout, Maurepas France 2009 - emphasis on the price
• Figure: La Halle new store layout, Maurepas France 2009 - large signage emphasizng the price
• Figure: Pimkie, Calais, France 2008
• Figure: German clothing expenditure and value retailers sales 2003-2008
• Figure: Kik, Dusseldorf 2007
• Figure: Takko, 2009
• Figure: Italian clothing expenditure and value retailers sales 2003-2008
• Figure: OVSindustry new concept store, Mestre C.C. Le Barche 2009
• Figure: OVSindustry new instore layout, Mestre C.C. Le Barche 2009
• Figure: Spanish clothing expenditure and value retailers sales 2003-2008
• Figure: Koodza, Olias del Rey, Spain 2009
• Figure: UK clothing expenditure and value retailers sales 2003-2008
• Figure: Leading European value clothing retailers by positioning and countries 2009
• Figure: Leading European value clothing retailers sales densities 2007/08 and 2008/09
• Figure: Yessica, C&A, Rotterdam, NL 2009
• Figure: C&A, Geneva, Switzerland 2009
• Figure: H&M, Prague, Czech Republic 2009