A tale of two retailers

 

The FT Lex column focused this week on an apparent difference in corporate real estate strategy between Dixons Carphone and other major retailers – most notably M&S.

Dixons Carphone…deserves credit for having the courage to shutter its weakest stores. Between April of 2014 and October of last year, the company shut a net 105 shops in the UK and Ireland, 8 per cent of the total estate. This goes part of the way to explaining why, in the April quarter trading update on Wednesday, the company reported comparable store sales growth of 6 per cent while most retail chains in the UK are flailing. The company says its estate of big out-of-town stores is about 400 today, and will be down to 323 by the end of the fiscal year that just began.

The main contrast is with M&S who, despite limp fashion and home division sales and a growing online presence accounting for 15% of sales did not lose a square foot of selling space last year seems fairly stark.  

With other retailers such as Argos and Tesco likely to be shedding space too, the implicit message does not augur well for retail rents.

The M&S approach is interesting. They occupy a lot of real estate and seem focussed on using it exclusively for their core business despite a shift to online with its ‘bricks and clicks’ strategy.  I was talking about it yesterday to someone who used to work in the property team of a large supermarket chain.  He speculated that the real estate team in M&S could well be coming up with lots of innovative strategies to sublet space, to ‘carve out’ new units for lease to other retailers on prime frontages etc.  There must be numerous active management opportunities in such a large portfolio in high value locations. However, since the real estate team were essentially regarded as a support function, he speculated that they might be unable to effect any significant changes. Alternatively, the Lex article may be slightly unfair.  The Grocer reported only last year

M&S is closing the stores because they are considered not to be fit for the future and in the wrong locations to serve its customers  

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