Theo Paphitis: the challenging UK retail scene is facing the perfect storm

Robert Dyas owner Theo Paphitis has warned that ‘retail, especially within bricks and mortar in the UK, is facing the perfect storm’.

His comment was made as The Theo Paphitis Retail Group delivered its results for the Christmas trading period and the financial year end 2016.

The Group comprises lingerie chain Boux Avenue, stationery business Ryman and hardware and housewares chain Robert Dyas.

In the six weeks to December 24, the Group enjoyed positive like-for-like sales and gross profits. Robert Dyas, which operates 95 stores mainly in the south, saw sales increase by 2%.

Theo commented: “Firstly, I’m delighted that each of our individual brands and the Group as a whole were able to deliver growth in like-for-like sales at this crucial time for retail.

“Once again, we observed the further shift of our customers to purchasing online, with growth in this channel across the group being over 50% ahead of last year. Like last year, we saw multiple peaks, with Black Friday being a key event in the UK retail calendar.

“Retail is facing many challenges, particularly with a decline in footfall on many high streets. But at the same time we see opportunities that come with the continued development of technology that makes shopping as convenient for customers as it has ever been.

“We will continue to invest in this area to ensure that our much loved brands interact with customers in ways that suits them best.”

He continued: “I’ve never known a more dynamic time for retail. Working with heritage brands Ryman and Robert Dyas, which have both been around for over a century, the pace of change is more challenging and opportunistic than ever.

“Retail, especially within bricks and mortar in the UK, is facing the perfect storm: changes in consumer habits, the impact of the weaker pound against the dollar and Euro – coupled with increasing labour costs, the apprenticeship levy, and the sucker punch – the lack of an honest and equitable reform of what is an archaic system of business rates.

“With regard to the so-called recent business rates reform, retail has changed dramatically over the years but is faced with a tax that was introduced in a different world.

“The facts are that footfall and activity on our high streets and town centres are in decline. But businesses like ours are about to see an overall increase instead of a decrease in their rates bill in the next 12 months.

“We have invested significantly in the last two years by building and modernising our infrastructure – in particular, commissioning a new warehouse and distribution facility in Hemel Hempstead, and new websites for Ryman and Robert Dyas to meet the changing needs of today’s consumer. Boux Avenue will be moving to a new e-commerce platform this quarter.”

For the year ending March 26 2016, turnover at Robert Dyas decreased 4.4% from £125.5m in 2015 to £120m, with like-for-like sales reducing by 4.7%.Underlying EBITDA reduced from £7m in 2015 to £1.5m.

The year was described as ‘challenging’, with a change of management team, together with continuing investment in commissioning the new warehouse and logistics centre in Hemel Hempstead.

Technology was simultaneously introduced to enable future growth in e-commerce as well as stores. Robert Dyas said that ‘unfortunately, this resulted in disruption to our supply chain and business in general, impacting our financial performance in the short term.

But, ‘the warehouse is now fully settled and costs are running to expectations, which is helping drive strong growth in particularly in e-commerce, as seen over the Christmas trading period’.

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