BDO Predicting 2015 – Retail trading update January 2015
Christine de Largy attended the BDO Retail Forecast 2015 Conference on Tuesday 27th of January. Here Christine shares her notes from Neil Parker’s presentation, Senior UK economist at RBS, on the need for international rescue.
- Upturn in Euroland hasn’t even started although forecast at 1% increase.
- UK economy may be difficult through 2015- although unemployment will remain below 6% and wage growth is set to grow.
- Monetary policy retrenching rate hike expectations with rate rise expected but not until 2016.
- Weakness is a problem for all but strong growth is expected in the US and a 2.8% slowdown in China.
- Inflation will continue to fall.
- The upcoming general election will be game changing – a Coalition of 2 or more parties is expected. Uncertainty could lead to volatility in FX markets and potentially weak GPD.
- Price wars in supermarkets – Falls in commodity prices have helped announcements of price cuts but glut in crops won’t last, expect rises in 6 months.
- Consumer spending drivers in 2015 will be more resilient than some think. Retail sales solid due to consumer confidence, employment and growth in the US.
- Steven Steadman, head of central London retail at CBRE says property inside the M25 is the busiest it has ever been.
- It used to be that 250 stores covered 50% of the population, however it’s now more like 70 as markets polarise to places like Westfield where nicer environments draw more shoppers.
- Only shopping centres and prime high streets have demand.
- Secondary high streets are on their knees, with online sales it may only be 35 to 30 physical stores retailers actually want.
- 56% of sales online at jlp but through click and collect. That said click and collect customers purchased more whilst in store collecting items bought online.
- Humans are social animals so will always want to interact and shop in physical stores.
- Chris Searle, partner of corporate finance at BDO says the key story of 2014 was the return of retail IPO in retailing – 8 on AIM and 12 in main market.
- Established retailers did well after floating and newer brands like AO World and Boohoo issued profit warnings.
- 30 to 40 retailers looking to float in 2015 but may need to wait until after the election as the market hates uncertainty. Investors are cautious and must see long term growth.
- Greece poses less of a threat today due to the firewall that has been put around it. It represents less than 2% of GPD of Eurozone. they are trying to claim euro to blame and western press claiming catastrophic but this will plunge them straight back into recession and the latest poll shows the Greek population want to stay in euro.
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