The first quarter of 2012 in Christie + Co’s retail markets has been highlighted by the sector’s continuing resilience against the difficult financial environment. Although the reported news of the wider retail marketplace has largely been one of distress and insolvency, the food convenience sector is generally holding its own against the tide, as the Government and other agencies admit the recovery is likely to be much slower than initially thought.
The early part of the year has seen the retail sector well-and-truly thrust into the limelight — measures in the Budget, ‘Pastygate’ and the ‘will they, won’t they’ fuel tanker strike threat which led to panic buying of fuel, saw to that.
Amidst all of this, the economic environment showed no great signs of heartening the mood. Yet, there have been some very positive signs emerging from the convenience retail sector, with even the much-feared rent-quarter-day passing without the threatened level of casualties.
In the c-store sector, relatively few convenience stores reported falls in sales, while many continue to find a safe haven in migrating to symbol brands, as we identified in Business Outlook 2012. Across the country, a change in consumer spending habits is seeing shoppers favouring local stores over the more costly trips to out-of-town supermarkets.
The noises coming from within the sector are also increasingly positive, as a recent survey from the Association of Convenience Stores (ACS) revealed. Over the last three months, the number of retailers considering investing in their existing stores or buying new stores has increased by 36 per cent, the ACS report says. Add to that, increasing sales and the prospect of further increases from the Olympics and Diamond Jubilee, and the optimism is understandable.
This buoyancy of the c-store sector was given a further shot in the arm when it was revealed that for the first time in almost three decades, the UK will see no new shopping centre developments this year. However, the threat from the major multiple retailers is a constant nagging presence.
Likewise, the doubts expressed by the high street convenience store proprietors in the potential threat from the National Planning Policy Framework (NPPF) were eased somewhat by the planning minister Greg Clark, who reassured retailers of the future role of the high street. Mr Clark said the NPPF was unambiguous about the importance of town centres. Referring to the threat of out-of-town supermarket development to local retailers, he said that town centres remained incredibly important and that the NPPF had been revised to emphasise that.
As we also predicted, the restructuring of the post office sector — and the relatively unambiguous Government plans for a privatisation of post offices — has made for a lively first quarter in the transactional market place, with our regional offices able to report on a number of sales to operators keen to take advantage of the sector during this transitional phase.
More importantly, the future landscape promises great opportunities for the convenience retail sector as post office ‘tills’ are likely to be able to be located in any retail environment. While the full earning potential is still to be scoped, those already in the retail sector will be at a distinct advantage.
In the petrol forecourt arena, the Chancellor’s refusal to cancel the forthcoming fuel duty increase will potentially damage sales volumes and pose a threat to independent operators. In the short-term, operators were boosted by the threat of fuel tanker strikes, which saw the public panic-buying petrol and forecourt operators reporting vastly increased revenues.
How the future pans out after the proposed duty increase in August — and with strikes still a possibility — remains open to question.
Encouragingly, the rate of forecourt closures is slowing, according to figures released by Experian Catalist last month. There are now 8,677 open forecourts, compared to 8,765 this time last year, showing that the rate of site closures has slowed slightly, as site numbers fell by 119 the previous year.
Across all retail, there was hope and expectation that debt funding would become more widely available, boosted by the Government’s announcement of a new loan guarantee scheme for smaller and medium-sized businesses. Furthermore, there have been some encouraging recent signs that some of our lending institutions, including those that remain part-state-owned, are coming back to some business sectors — including retail.
The lenders would have it that they never went away in the first place, but the evidence proved contrary! Yet now there appears to be a new pragmatism being displayed by the likes of Lloyds Banking Group, RBS and NatWest in terms of supporting and financing new businesses.
All of which means that the signs for the convenience retail sector are fairly positive — despite all the economic indicators. And that, in turn, means that investment in a convenience retail business remains a positive opportunity.
