UK Department Stores 2009

Introduction

Verdict Research: The UK department store sector has been through a period of change since the millennium driven by exits and consolidation. It now faces further contraction as the non-food sector suffers during the recession. This report examines expenditure trends in the sector, the performance of the market leaders and highlights threats and opportunities available to drive future growth.

Scope

• Consumer expenditure via department stores 1999-2009e, growth and inflation/deflation trends, store numbers, space and sales densities.
• Market shares 2004-2009e, sales, space, operating profits and margin and sales and profit densities of Top Ten retailers in the sector.
• Trading and space performance, with product allocation, of Top Ten department store operators, including analysis and outlook for each.

Highlights

The department store sector came to a virtual halt in 2008, with 0.1% growth. The core department store shopper, the 45+s saw their incomes cut by falling interest rates, and were hit by pension worries, declining house prices and fuel and food inflation. In 2009 we expect the market to be even tougher, falling -2.6% to £13.95bn.

In 2008 and 2009 together, the sector is set to increase its floorspace by 5.6%. This extra capacity is coming into a market with consumer demand in steep decline. As a result, average sales densities per square foot will decline by 5.7% in 2009 alone, to £353 per sq ft, putting operating profit margins under severe pressure.

Supermarkets are an increasing competitive threat to department stores. The expansion of their non-food ranges as well as the development of new formats, Internet retailing and higher quality products have the potential to take sales from midmarket operators. This is particularly true in a climate where customers are trading down.

Reasons to Purchase

• Understand the issues that face the department store sector and the opportunities available for growth.
• Discover how previous recessionary trends affect each sector and how retailers can exploit this.
• Identify where the risks lie for the sector and individual operators.

TABLE OF CONTENTS
 

CHAPTER 1 EXECUTIVE SUMMARY 17
Key Findings – Profitability under threat 17
Main Conclusions 18
 

CHAPTER 2 MARKET ANALYSIS 21
Market Definition and Methodology 21
Department store sales trends – contracting 22
Deflation worsening in non-food 26
Shift in product mix as competitive environment changes 27
Space increasing, sales density diluted 29
Share of non-food sales 31
 

CHAPTER 3 COMPANY DATA ANALYSIS 33
Market shares - consolidating for leaders 33
Sales & operating profit densities – polarising performance 36
Key Operating Statistics 39
Product space allocation 40
Advertising Media Expenditure 43
 

CHAPTER 4 OUTLOOK 46
Current Market Situation 46
Overexpansion Now a Threat 46
Need to Focus on 45+ ABC1s 49
Advantages of an Ageing Population Profile 51
Previous Recession Taught Lesson 53
Sector performances in previous recession 54
Supermarkets Up Competition 57
Online Opportunities Outweigh Threats 58
Factors for Success 62
 

CHAPTER 5 BEALES 65
Company Overview 65
Market Share 66
Trading Record 67
Year to October 2008 67
Current Trading 68
Store Portfolio 68
Retail Proposition 70
Space Allocation 71
Management, Marketing & Operations 73
Outlook 74
 

CHAPTER 6 DEBENHAMS 76
Company Overview 76
Market Shares 77
Trading Record 78
Year to August 2008 78
Current Trading 79
Store Portfolio 80
Retail Proposition 81
Management, Marketing and Operations 85
Outlook 85
 

CHAPTER 7 FENWICK 87
Company Overview 87
Market Share 88
Trading Record 89
Year to January 2008 89
Year to January 2009e 90
Store Portfolio 90
Retail Proposition 92
Space Allocation 93
Management, Marketing & Operations 95
Outlook 95
 

CHAPTER 8 HARRODS 97
Company Overview 97
Market Share 99
Trading Record 100
Year to January 2008 100
Year to January 2009 101
Store Portfolio 101
Retail Proposition 102
Space Allocation 104
Management, Marketing & Operations 106
Outlook 107
 

CHAPTER 9 HARVEY NICHOLS 109
Company Overview 109
Market Share 110
Trading Record 111
Year to March 2008 111
Year to March 2009e 112
Store Portfolio 113
Retail Proposition 114
Space Allocation 115
Management, Marketing & Operations 117
Outlook 117
 

CHAPTER 10 HOUSE OF FRASER 119
Company Overview 119
Market Shares 120
Trading Record 121
Year to January 2008 121
Year to January 2009 121
Christmas Trading 122
Store Portfolio 122
Retail Proposition 125
Space Allocation 127
Management, Marketing & Operations 129
Outlook 129
 

CHAPTER 11 JOHN LEWIS 131
Company Overview 131
Market Share 132
Trading Record 133
Year to January 2009 133
Current Trading 134
Store Portfolio 134
Retail Proposition 137
Space Allocation 138
Marketing & Operations 140
Outlook 142
 

CHAPTER 12 MARKS & SPENCER 144
Company Overview 144
Market Share 145
Trading Record 146
Year to March 2009 146
Store Portfolio 148
Retail Proposition 150
Space Allocation 151
Management 153
Marketing & Operations 154
Outlook 154
 

CHAPTER 13 SELFRIDGES 158
Company Overview 158
Market Share 160
Trading Record 161
Year to January 2008 161
Year to January 2009e 161
Store Portfolio 162
Retail Proposition 163
Space Allocation 164
Management, Marketing & Operations 166
Outlook 167
 

CHAPTER 14 TJ HUGHES 169
Company Overview 169
Market Share 170
Trading Record 171
Year to January 2008 171
Year to January 2009 171
Store Portfolio 172
Retail Proposition 173
Space Allocation 174
Management, Marketing & Operations 176
Outlook 177
 

CHAPTER 15 GLOSSARY 179
`Market Definition 179
Financial Statistics – VAT 179
Trading Profile 179
Key Operating Ratios 180
Physical Development 180
Abbreviations 180
 

LIST OF TABLES
Table 1: Department store market definition and methodology 2009 21
Table 2: Department store sales (including M&S) 1999-2009e 22
Table 3: Department store sales (excluding M&S) 1999-2009e 22
Table 4: Department stores product mix 2003 and 2008 27
Table 5: Department store share of overall sector sales 2003 & 2008 28
Table 6: Department stores, space and sales density 1999-2009e 29
Table 7: Department store retailers market shares 2004-2009e 33
Table 8: Department stores key operating statistics 2007/08 39
Table 9: Department stores (A-H) space allocation 2008 40
Table 10: Department stores (H-R) space allocation 2008 41
Table 11: Department stores (S-Z & Av) space allocation 2008 42
Table 12: Department store retailers advertising spend 2003-2008 43
Table 13: Department store ad spend as a % of sales 2003-2008 43
Table 14: Department store retailers advertising spend £m 2008 45
Table 15: Department store retailers advertising spend % 2008 45
Table 16: Threats to stores online propositions – & opportunities – 2009 61
Table 17: Beales company overview 2009 65
Table 18: Beales key operating statistics 2003-2008 66
Table 19: Beales trading record 1998-2008 67
Table 20: Beales store portfolio 1998-2008 68
Table 21: Beales store locations January 2009 69
Table 22: Beales retail proposition 2009 70
Table 23: Beales space allocation 2008 71
Table 24: Debenhams company overview 2009 76
Table 25: Debenhams key UK operating statistics 2003e-2008e 77
Table 26: Debenhams trading record 1998-2008 78
Table 27: Debenhams UK store portfolio 1998-2008e 80
Table 28: Debenhams retail proposition 2009 82
Table : Debenhams space allocation 2008 83
Table 29: Fenwick company overview 2009 87
Table 30: Fenwick key operating statistics 2004-2009e 88
Table 31: Fenwick trading record 1998-2009e 89
Table 32: Fenwick store portfolio 1998-2009e 90
Table 33: Fenwick store locations January 2009 91
Table 34: Fenwick retail proposition 2009 92
Table 35: Fenwick space allocation 2008 93
Table 36: Harrods company overview 2009 97
Table 37: Harrods key UK operating statistics 2004-2009e 98
Table 38: Harrods UK trading record 1999-2009e 100
Table 39: Harrods store portfolio 1999-2009e 101
Table 40: Harrods retail proposition 2009 102
Table 41: Harrods space allocation 2008 104
Table 42: Harvey Nichols company overview 2009 109
Table 43: Harvey Nichols key operating statistics 2004-2009e 110
Table 44: Harvey Nichols UK stores trading record 1999-2009e 111
Table 45: Harvey Nichols UK store portfolio 1997-2009e 113
Table 46: Harvey Nichols UK & Ireland store locations January 2009 113
Table 47: Harvey Nichols retail proposition 2009 114
Table 48: Harvey Nichols space allocation 2008 115
Table 49: House of Fraser company overview 2009 119
Table 50: House of Fraser key operating statistics 2004-2009e 120
Table 51: House of Fraser trading record 1999-2009e 121
Table 52: House of Fraser store portfolio 1997-2009e 123
Table 53: House of Fraser retail proposition 2009 125
Table 54: House of Fraser space allocation 2008 127
Table 55: John Lewis company overview 2009 131
Table 56: John Lewis key operating statistics 2004-2009e 132
Table 57: John Lewis Stores trading record 1999-2009 133
Table 58: John Lewis store portfolio 1999-2009 134
Table 59: John Lewis department store opening/relocation plans 2009-2014 135
Table 60: John Lewis retail proposition 2009 137
Table 61: John Lewis space allocation 2008 138
Table 62: Marks & Spencer company overview 2009 144
Table 63: Marks & Spencer UK key operating statistics 2004-2009e 145
Table 64: Marks & Spencer UK trading record 1998-2009e 146
Table 65: M&S store portfolio 1999-2009 148
Table 66: Marks & Spencer retail proposition 2009 150
Table 67: Marks & Spencer space allocation 2008 151
Table 68: Selfridges company overview 2009 158
Table 69: Selfridges key operating statistics 2004-2009e 159
Table 70: Selfridges trading record 1999-2009e 161
Table 71: Selfridges store portfolio 1998-2008e 162
Table 72: Selfridges retail proposition 2009 163
Table 73: Selfridges space allocation 2008 164
Table 74: TJ Hughes company overview 2009 169
Table 75: TJ Hughes key operating statistics 2004-2009e 170
Table 76: TJ Hughes trading record 1998-2009e 171
Table 77: TJ Hughes store portfolio 1998-2009 172
Table 78: TJ Hughes retail proposition 2009 173
Table 79: TJ Hughes space allocation 2008 174


LIST OF FIGURES
Figure 1: Department store sales growth incl and ex M&S 2004-2009e 24
Figure 2: Department store sales growth vs total retail sales and non-food retail sales growth 2004-2009e 25
Figure 3: Department store deflation trend 1999-2009e 26
Figure 4: Total department store (including M&S) market shares of retail and non-food sales 2004-2009e 31
Figure 5: Department stores (excluding Marks & Spencer) market share of retail and non-food sales 2004-2009e 32
Figure 6: Department store market shares 2004 and 2009e 34
Figure 7: Winners and losers of department store share 2009e on 2004 34
Figure 8: Department stores year end 2007/08 sales density comparison 36
Figure 9: Department stores operating profit density year end 2007/08 37
Figure 10: Breakdown of department store customers by age 2009 49
Figure 11: Department store customers by socio-economic group 2009 50
Figure 12: Projected % changes in population by age band 2013 on 2008 51
Figure 13: Sectors enjoying positive consumer spending trend 1988-1993 54
Figure 14: Sectors suffering slowdown in consumer spending 1988-1993 55
Figure 15: Sector consumer spending trend forecasts 2008-2012 56
Figure 16: Beales market share 2004-2009e 66
Figure 17: Beales fashion/home space split 2003-2008 71
Figure 18: Beales fashion space allocation 2003-2008 72
Figure 19: Beales home space allocation 2003-2008 73
Figure 20: Debenhams department store market shares 2004-2009e 77
Figure 21: Debenhams space allocation 2003 – 2008 83
Figure 22: Debenhams fashion space allocation 2003-2008 84
Figure : Debenhams home space allocation 2003-2008 84
Figure 23: Fenwick market share 2004-2009e 88
Figure 24: Fenwick home/fashion space split 2003-2008 93
Figure 25: Fenwick fashion space allocation 2003-2008 94
Figure 26: Fenwick home space allocation 2003-2008 94
Figure 27: Harrods department store market shares 2004-2009e 99
Figure 28: Harrods fashion/home split 2003-2008 104
Figure 29: Harrods fashion space allocation 2003-2008 105
Figure 30: Harrods home space allocation 2003-2008 106
Figure 31: Harvey Nichols market share 2004-2009e 110
Figure 32: Harvey Nichols fashion/home space split 2003-2008 115
Figure 33: Harvey Nichols fashion space allocation 2003-2008 116
Figure 34: Harvey Nichols home space allocation 2003-2008 116
Figure 35: House of Fraser market shares 2004-2009e 120
Figure 36: House of Fraser fashion/home space split 2003-2008 127
Figure 37: House of Fraser fashion space allocation 2003-2008 128
Figure 38: House of Fraser home space allocation 2003-2008 128
Figure 39: John Lewis market share 2004-2009e 132
Figure 40: John Lewis home/fashion space split 2003-2008 139
Figure 41: John Lewis fashion space allocation 2003-2008 139
Figure : John Lewis home space allocation 2003-2008 140
Figure 42: Marks & Spencer market share 2004-2009e 145
Figure 43: Marks & Spencer fashion/food/home space split 2003-2008 151
Figure 44: Marks & Spencer fashion space allocation 2003-2008 152
Figure 45: Marks & Spencer home space allocation 2003-2008 152
Figure 46: Selfridges market share 2004-2009e 160
Figure 47: Selfridges fashion/home space split 2003-2008 165
Figure 48: Selfridges fashion space allocation 2003-2008 165
Figure 49: Selfridges home space allocation 2003-2008 166
Figure 50: TJ Hughes market share 2004-2009e 170
Figure 51: TJ Hughes fashion/home space split 2003-2008 174
Figure 52: TJ Hughes fashion space allocation 2003-2008 175
Figure 53: T J Hughes home space allocation 2003-2008 175