Out-of-Town Retailing 2009

Table of Contents

EXECUTIVE SUMMARY

• Key findings
• Main conclusions
  • (Untitled sub-section)

• Out-of-town summary

RETAIL ISSUES

• Key messages
• Polarisation of space
  • New OOT players demand prime locations as secondary ones stagnate

• Risks for discretionary retailers
  • Discretionary retailers will always struggle out-of-town

• Recovery of home-related sectors
  • Eventual revival in housing should boost secondary locations

• Up and coming players
  • To drive market growth and reinvigorate competition

• Capitalising on success of grocers
  • Robust footfall on offer in retail parks anchored by grocers

• Factory outlet centres continue to excel
  • Discounting strikes chord with consumers and retailers alike

STRATEGIES FOR SUCCESS

• Retailers need to react to recession-hit market
• Landlords must be proactive as vacancies reach high levels

OUT OF TOWN VS OTHER LOCATIONS

• Robust footfall driven by a resilient tenant mix makes OOT a relatively safe place
• Retail sales by location
  • Neighbourhood performs best but out-of-town holds its own

• Retail spend by location
  • Grocers and niche specialists keep out-of-town growing

• Sales and sources of growth
  • Food price upward spiral drives inflation

• Out-of-town retail sales
  • Online growth via OOT retailers outweighs plummeting trade sales

• Space by location
  • Collapse of big players partly offset

• Store numbers by location
  • Declining for first time but more resilient than other channels

• Forecast
  • OOT a good bet due to grocers, online and inevitable recovery in home

MAJOR PLAYERS OOT: WINNERS & LOSERS

• Few major non-food retailers are on the up
• OOT sales - majors breakdown
  • Home-related retailers struggle

• Total sales
  • Grocers extend dominance

• Operating profits
  • Matalan only non-food retailer to grow profits

• Operating margins
  • Widespread deterioration

• Space
  • The trend of the past five years has been towards larger stores

• Store numbers
  • Expansion of major players slows

• Advertising
  • Expenditure increases as retailers attempt to stimulate consumer spend

SPACE PERFORMANCE

• Changing mix of retailer and space consolidation to boost density
• Sales densities by location
  • Struggling home-related sectors subdue out-of-town density growth

• Sales densities by retailer
  • Grocers continue to benefit from their ability to convert high footfalls

• Sales densities by sector
  • Electricals to benefit from space consolidation as DIY underperforms

• Space performance for food vs non-food
  • Non-food set to be boosted by new entrants to the out-of-town market

SECTOR SUMMARIES AND FORECASTS

• Out-of-town will grow share of retail but faces tough times
• OOT sales - sector breakdown
  • Grocers, fashion retailers and general merchandisers grow share

• Forecast consumer spending OOT for each sector
  • Out-of-town to grow share of food, furniture and electricals spends

• Forecast sales for each sector
  • But all sectors face a tough five years

• OOT space - sector breakdown
  • DIY and furniture space in long term decline

• Forecast space for each sector
  • Massive decline in non-food space

• OOT store numbers - sector breakdown
  • General merchandise on course to have largest number of stores

• Forecast store numbers for each sector
  • Home-related sectors drive decline

• Out-of-town store size by sector
  • DIY store sizes have grown substantially

CLOTHING & FOOTWEAR

• Clothing and footwear specialists capitalise on weak property market
  • (Untitled sub-section)

• Sales
  • Set to decline in 2009, but OOT still outperforms

• Stores
  • Expansion plans scaled back significantly

• Space
  • Lowest rate of space expansion since Verdict' s records began

• Sales density
  • Reflects declines in consumer demand and out-of-town footfall

• Key players
  • Traditional out-of-town specialists benefit from value positioning
  • Matalan benefits from investment
  • Frugal consumers boost sales at TK Maxx
  • Marks & Spencer reduces capital expenditure
  • New Look continues expansion
  • Next capitalises on weak property market
  • Other clothing specialists
  • Footwear specialists

DIY

• Leaner sector as stronger players rightsize and capacity reduces
  • (Untitled sub-section)

• Sales
  • Out-of-town continues to outperform despite significant deterioration

• Stores
  • Rate of store closures limited by consolidated nature of DIY retail

• Space
  • Specialists rightsize as expansion plans are scaled back significantly

• Sales density
  • Declining consumer demand and overcapacity erode density

• Market shares
  • B&Q gains market share in 2009 as Focus struggles

• Key players
  • Wickes flourishes at expense of Focus
  • Wickes ideally positioned to capitalise on reduced capacity
  • B&Q aims to consolidate market leading position
  • Homebase cuts back space expansion signficantly
  • Focus faces uncertain future

ELECTRICALS

• Out-of-town stores face major challenges
  • (Untitled sub-section)

• Sales
  • Relatively robust in 2008 but now exposed to big-ticket slowdown

• Stores
  • Unprecendented decline but less exposed than high street

• Space
  • Years of expansion to come to abrupt halt

• Sales density
  • Falling despite retailer consolidation

• Market shares
  • Grocers continue to gain at expense of specialists

• Key players
  • New arrivals set to take market by storm
  • Best Buy' s excellent service reputation means it has potential
  • John Lewis core strengths will see it do well
  • Comet cuts costs and waits for market recovery
  • Game Group explores new avenues but should avoid overexpansion
  • Argos under pressure from grocers
  • DSGi has a lot of work to reinvent itself

FOOD & GROCERY

• Props up OOT but neighbourhood is future for food & grocery growth
  • (Untitled sub-section)

• Sales
  • Inflation keeps growth high but momentum swings to convenience

• Stores
  • Proportion of store numbers out-of-town starts to plateau

• Space
  • Grocers aggressive out-of-town space expansion continues

• Sales density
  • Increasing non-food exposure sees densities declining

• Market shares
  • Big Four increase dominance

• Key players
  • Asda retains biggest out-of-town focus
  • Asda continues to be frustrated by out-of-town planning restrictions
  • Morrison nears nationwide coverage
  • Sainsbury targets non-food and convenience
  • Tesco approaches saturation out-of-town

FURNITURE & FLOORCOVERINGS

• Non-specialists to move in out-of-town where specialists depart
  • (Untitled sub-section)

• Sales
  • Dire economic conditions have a significant impact

• Stores
  • Decline in 2009 will be the worst since Verdict' s records began

• Space
  • Weak trading conditions and overcapacity to drive decline in space

• Sales density
  • Specialists downsize as sales densities decline for second year in a row

• Market shares
  • Non-specialists gain market share at expense of struggling specialists

• Key players
  • Key players benefit from consolidation as John Lewis enters OOT arena
  • Carpetright ramps up space expansion as Allied exits market
  • DFS ideally placed to take advantage of capacity exiting market
  • Dreams benefits from comparative resilience of beds
  • John Lewis to be a significant out-of-town player
  • Argos increasingly under threat from grocers
  • IKEA pushes ahead with town centre format
  • Homestyle consolidates store portfolio
  • ScS considers disposal of loss-making stores under new ownership
  • Sector casualties

GENERAL MERCHANDISE

• Retailers with offers meeting niche needs will drive growth
  • (Untitled sub-section)

• Sales
  • Remarkably resilient despite slowing growth

• Stores
  • Opportunistic retailers maintain growth

• Space
  • Robust growth despite casualties

• Sales density
  • Most stable non-food sector

• Key players
  • Specialists meeting niche needs move into limelight
  • Dunelm offer well targeted to foster extensive growth
  • Halfords should not be overly cautious
  • Niche operator Hobbycraft has excellent opportunities to expand OOT
  • John Lewis will rely more on electricals to drive footfall OOT
  • Mothercare continues shift out-of-town with great success
  • Pets at Home shows no signs of slowing down
  • Sports Direct shifts huge volumes
  • Toys R Us flotation could trigger renewed expansion out-of-town
  • Alliance Boots not well suited to large out-of-town stores
  • Argos needs to avoid direct competition with grocers
  • Borders faces uncertain future
  • JJB Sports needs to focus on sports equipment

GLOSSARY

• Terminology
• Abbreviations

TABLES

• Table: Out-of-town sales, space and stores 1998, 2003, 2008 and 2013e
• Table: Out-of-town retailers strategies for success 2009
• Table: Out-of-town landlords strategies for success 2009
• Table: Retail location definitions 2009
• Table: Retail spending by location at current prices 1998-2009e
• Table: Sales through out-of-town retailers 1998-2009e
• Table: Sources of growth for out-of-town retailers 1998-2009e
• Table: Out-of-town retail sales at current prices 1998-2009e
• Table: Floorspace out-of-town vs all stores 1997-2007
• Table: Store numbers by location 1998-2009e
• Table: Retail sales out-of-town vs total retail spending 1998-2013
• Table: Key retailers estimated share of out-of-town sales 2003-2008
• Table: Key out-of-town retailers total UK retail turnover record 2003-2008
• Table: Key out-of-town retailers operating profits 2003-2008
• Table: Key out-of-town retailers operating margins 2003-2008
• Table: Key out-of-town retailers total selling space (000sq ft) 2003-2008
• Table: Key out-of-town retailers total store numbers 2003-2008
• Table: Top 10 out-of-town retailers by advertising expenditure 2008
• Table: Sales densities by location at current prices 1998-2009e
• Table: Key out-of-town retailers overall sales densities 2003-2009e
• Table: Superstore/out-of-town sales densities by sector 1998-2013e
• Table: Sector spend out-of-town % of each sector total 1998-2013
• Table: Out-of-town sales by sector 1998-2013
• Table: Superstore/out-of-town selling space by sector 1998-2013
• Table: Superstore/out-of-town numbers by sector 1998-2013
• Table: Clothing & footwear specialists OOT sales values 1998-2009e
• Table: Clothing & footwear specialists OOT store numbers 1998-2009e
• Table: Clothing & footwear specialists out-of-town space 1998-2009e
• Table: Clothing & footwear specialists OOT sales density 1998-2009e
• Table: DIY/hardware specialists out-of-town sales values 1998-2009e
• Table: DIY/hardware specialists out-of-town store numbers 1998-2009e
• Table: DIY/hardware specialists out-of-town space 1998-2009e
• Table: DIY/hardware specialists OOT sales densities 1998-2009e
• Table: Leading retailers market share of DIY & garden spend 03-09e
• Table: Electricals specialists out-of-town sales values 1998-2009e
• Table: Electricals specialists out-of-town store numbers 1998-2009e
• Table: Electricals specialists out-of-town space 1998-2009e
• Table: Electricals specialists out-of-town sales densities 1998-2009e
• Table: Electricals market share trends 2003-2009e
• Table: Food & grocery specialists out-of-town sales values 1998-2009e
• Table: Food & grocery specialists OOT store numbers 1998-2009e
• Table: Food & grocery specialists out-of-town space 1998-2009e
• Table: Food & grocery specialists OOT sales densities 1998-2009e
• Table: Grocery market share trends 2003-2009e
• Table: Asda store portfolio at June 2009
• Table: Morrison store portfolio at February 2009
• Table: Sainsbury store portfolio at March 2009
• Table: Tesco store portfolio at February 2009
• Table: Furniture & floorcoverings specialists OOT sales 1998-2009e
• Table: Furniture and floorcoverings OOT store numbers 1998-2009e
• Table: Furniture & floorcoverings specialists OOT space 1998-2009e
• Table: Furniture & f' coverings specialists OOT sales density 1998-09e
• Table: Major furniture retailers market shares 2003-2009e
• Table: Floorcoverings retailers market shares 2003-2009e
• Table: General merchandise retailers OOT sales values 1998-2009e
• Table: General merchandise retailers OOT store numbers 1998-2009e
• Table: General merchandise retailers out-of-town space 1998-2009e
• Table: General merchandise OOT sales densities 1998-2009e

FIGURES

• Figure: Key issues for out-of-town retailing 2009
• Figure: How the makeup of primary retail parks is changing 2009
• Figure: Dealing with secondary out-of-town retail space 2009
• Figure: Needs-driven and niche offers drive higher OOT footfall 2009
• Figure: Retail experiences of out-of-town footfall 2009
• Figure: Furniture & f' coverings vs housing transactions 2006 Q3-2009 Q2
• Figure: OOT non-food retailing supply and demand trends 2004-2013
• Figure: Non-food retailers can attract footfall from grocers 2009
• Figure: Advantages of factory outlet centres over town centres and retail parks 2009
• Figure: Growth of retail sales by location 1998-2009e
• Figure: Growth of retail space by location 1998-2009e
• Figure: Growth of retail store numbers by location 1998-2009e
• Figure: Retail spending by location 2008 and 2013e
• Figure: O ut-of-town spending growth vs retail overall 1998-2013
• Figure: Each key retailer - OOT vs overall sales growth 2008
• Figure: Positive, neutral or negative - OOT players prospects 2009
• Figure: Key out-of-town retailers total sales growth 2008 on 2003
• Figure: Key out-of-town retailers total sales growth 2008 on 2007
• Figure: Total space growth of key OOT retailers 2008 on 2003
• Figure: Total space growth of key OOT retailers 2008 on 2007
• Figure: Change % in key out-of-town retailers store numbers 2008 on 2003
• Figure: Change % in key out-of-town retailers store numbers 2008 on 2007
• Figure: Sales densities by location 1998-2009e
• Figure: Change in sales density of key OOT retailers 2009e on 2003
• Figure: Change in sales density of key OOT retailers 2009e on 2008
• Figure: Change in sales density by sector 2013e on 2008
• Figure: Food vs non-food sales 2003-2013e
• Figure: Food vs non-food space 2003-2013e
• Figure: Food vs non-food sales densities 2003-2013e
• Figure: % share of superstore/OOT sales by sector 1998, 2003 & 2008
• Figure: Out-of-town sector sales growth 2003 to 2008 and 2008 to 2013
• Figure: % share of superstore/OOT space by sector 1998, 2003 & 2008
• Figure: New out-of-town space 1998-2008 and forecast to 2013
• Figure: % share of superstore/OOT store nos by sector 1998, 2003 & 08
• Figure: Change % in superstore/OOT nos 1998-2008 and fcast to 2013
• Figure: Average out-of-town store size 1998, 2003 & 2008
• Figure: Clothing & footwear out-of-town sales growth against clothing & footwear sales growth in other locations and OOT sales growth in other sectors 2004-2009e
• Figure: Clothing & footwear out-of-town space growth against clothing & footwear space growth in other locations and OOT space growth in other sectors 2004-2009e
• Figure: Positive, neutral or negative - key clothing & footwear OOT players prospects 2009
• Figure: DIY out-of-town sales growth against DIY sales growth in other locations and OOT sales growth in other sectors 2004-2009e
• Figure: DIY out-of-town space growth against DIY space growth in other locations and OOT space growth in other sectors 2004-2009e
• Figure: DIY & gardening retailers market share growth 2009e on 2003
• Figure: Positive, neutral or negative - key DIY out-of-town players prospects 2009
• Figure: Electricals out-of-town sales growth against electricals sales growth in other locations and OOT sales growth in other sectors 2004-2009e
• Figure: Electricals out-of-town space growth against electricals space growth in other locations and OOT space growth in other sectors 2004-2009e
• Figure: Major electricals retailers market share growth 2009e on 2003
• Figure: Positive, neutral or negative - key electricals OOT players prospects 2009
• Figure: Food & Grocery out-of-town sales growth against Food & Grocery sales growth in other locations and OOT sales growth in other sectors 2004-2009e
• Figure: Food & Grocery out-of-town space growth against Food & Grocery space growth in other locations and OOT space growth in other sectors 2004-2009e
• Figure: Big Four grocers market share growth 2009e on 2003
• Figure: Positive, neutral or negative - key food & grocery OOT players prospects 2009
• Figure: Furniture & Floorcoverings out-of-town sales growth against Furniture & Floorcoverings sales growth in other locations and OOT sales growth in other sectors 2004-2009e
• Figure: Furniture & Floorcoverings out-of-town space growth against Furniture & Floorcoverings space growth in other locations and OOT space growth in other sectors 2004-2009e
• Figure: Major furniture retailers market share growth 2009e on 2003
• Figure: F loorcoverings retailers market share growth 2009e on 2003
• Figure: Positive, neutral or negative - key furniture & floorcoverings OOT players prospects 2009
• Figure: General merchandise out-of-town sales growth against General merchandise sales growth in other locations and OOT sales growth in other sectors 2004-2009e
• Figure: General merchandise out-of-town space growth against General merchandise space growth in other locations and OOT space growth in other sectors 2004-2009e
• Figure: Positive, neutral or negative - key general merchandise OOT players prospects 2009