‘Whisper it for now, but retail is on the road to recovery’

National news bulletins on Tuesday night led on Greggs’ job cuts warning and the profit declines at Hotel Chocolat, Card Factory and ScS.

Some snippets charting how Ocado’s market capitalisation briefly surged above that of Tesco were used as evidence that physical retail was ailing and technology taking over.

But those headlines do not even begin to paint the full picture – one of an industry that is battling back amid the most challenging of social and economic backdrops.

“Despite the tale that some headlines and column inches tell, retail is tackling the current climate head-on with courage and strategic conviction”

Of course, further headwinds lie ahead for the sector. Current coronavirus restrictions are likely to be tightened further in the coming weeks as the government seeks to reduce the impact of a rapidly brewing second wave.

The crucial Christmas and Black Friday peaks could be subdued for many, particularly for retailers that rely heavily on their in-store experiences to drive sales.

As the furlough scheme winds down and the rent moratorium ends, cost bases will soon be reinflated, leaving leaders facing tough but necessary measures if they are to streamline their businesses to be fit for the future.

But despite the tale that some headlines and column inches tell, retail is tackling that climate head-on with courage and strategic conviction. Many are doing so with levels of success that even they had not dared to predict at the start of the crisis.

Plenty of ground is still to be covered, with many a twist and turn to come, so whisper it for now, but retail is on the road to recovery.

Retailer resilience

Take Greggs, for instance. The previously fast-growing food-to-go specialist’s admission that there is no longer enough demand to keep all of its store staff in full-time employment came as a blow. The business has launched a consultation with workers but hopes to minimise the scale of job losses by reducing peoples’ hours.

But there were plenty of positives in its update to the City. In the four weeks to September 26, like for likes recovered to 76% of 2019 levels – a solid showing considering a sizeable chunk of Greggs’ estate is based in travel locations where footfall has been decimated.

The business has ramped up its digital drive, facing into Covid-19 restrictions by rolling out its click-and-collect and home-delivery propositions at a quicker pace than previously planned.

It revealed that it is to resume its store opening programme, with a net 20 new stores expected in its financial year. The new sites, Greggs said, would be “predominantly in locations accessed by car” – another sign of how it is shifting away from commuter hubs.

Hotel Chocolat is taking a similar tack and is eyeing further opportunities as well. It has crystallised its joint venture partnership with cosmetics and toiletries manufacturer Rabot 1745 to grow its health and beauty offers and also struck a five-year deal with THG Ingenuity, using its tech and logistics expertise to expand its online operations in the US.

Hard yards

Boohoo has been beset by modern slavery allegations at the warehouses of its suppliers in Leicester – something its boss John Lyttle has vowed to put right – but that has not deterred its stunning sales performance.

Revenues surged 45% to £817m in the six months to August 31, while pre-tax profit jumped 51% to £68m – a testament to the manner in which it rapidly adapted its operations and its product to lean more heavily on loungewear.

Its fashion rival H&M returned to profit in its third quarter, the three months to August 31, as its heightened focus on driving full-price sales, creating new collections, renegotiating more favourable rental terms and right-sizing its store estate bore fruit.

“At a time when its back has been firmly against the wall, retail is displaying its ability to adapt, identify new opportunities and grasp them at pace”

The group’s boss Helena Helmersson insists: “Although the challenges are far from over, our assessment is that the worst is behind us and we are well placed to come out of the crisis stronger.”

Plenty of retailers will be starting to feel the same – and rightly so.

There remains no room for complacency, of course, and there will, unfortunately, be more store closures and job losses on the horizon. But at a time when its back has been firmly against the wall, retail is, yet again, displaying its ability to adapt, identify new opportunities and grasp them at pace.

There are some hard yards still to travel, but after a bruising six months, retail is on its road to recovery.