COVID-19 Service Newsletter Latest updates covering the week to 21 Aug 2020 Key coronavirus updates impacting that you may have missed.

Covid-19 Briefing is a weekly bulletin from Retail Economics. It is designed to accumulate the latest key updates related to the fast-paced coronavirus outbreak and its impact UK retail. Government policy updates Weekly Government updates related to retail

Supply chain fund • The Department for International Development (DFID) has launched the £6.85m vulnerable supply chains facility to protect supply chains and support international workers, in partnership with retailers including Marks & Spencer, , Primark, Sainsbury’s and Tesco. • The fund is comprised of £4.85m in funding from DFID and a further £2m from partner businesses. • The government said the fund aims to “keep vulnerable workers in their supply chains in safe and secure employment” and would “ensure the steady supply of products like vegetables, coffee and clothes”. Lockdown eased further in • More beauty treatments, small wedding receptions and live indoor performances were able to resume in England from 15 August as lockdown rules eased. Bowling alleys, casinos and soft play centres were also allowed to reopen. • The easing has been postponed from 1 August due to concerns about an increase in the number of people testing positive for coronavirus in England. Easing of restrictions in Leicester • Nail bars, outdoor pools, and beauty salons could reopen in Leicester from 19 August, bringing Leicester in line with the national easements introduced on 11 and 13 July. • Rules for gatherings in private homes and gardens will remain in place as the government continues to monitor the rate of infection in the area. Restrictions on household gatherings continue in certain areas • Restrictions on household gatherings are to continue in parts of North West, West Yorkshire, East Lancashire and Leicester. • In these areas, casinos, skating rinks, bowling alleys, exhibition halls, conference centres and indoor play areas will not be permitted to open.

News on the economy Updates from key releases during the week

Overall outlook • News in the past week that Marks & Spencer is to cut up to 7,000 jobs signals just how fast restructuring plans have had to accelerate since the pandemic. • It marks a colossal reduction in the retailer’s workforce at around 10%, as the business attempts to reposition towards a new normal emerging in the sector. • At present, retailers remain in survival mode, looking to preserve cash as they hang on for more sustainable levels of demand to return. • But the way we shop was forced to shift almost overnight during lockdown for many parts of the sector. Since the coronavirus outbreak, Retail Economics data shows that some 45% of people have shopped online for retail products that they previously only purchased in-store. News on the economy Updates from key releases during the week

• The reality is that any hint of normality in how we shop is unlikely to return fast enough for bricks-and- mortar retailers, particularly as actions since lockdown begin to form habits. • This, unfortunately, means further fallout for the sector, and the number of job losses will ramp up as government support is withdrawn. • At the turn of 2020, the industry was already battling with the pace of structural change, but the impact of the pandemic has created a step-change

How are retailers responding? Weekly updates from retailers and consumers

Food & Grocery Fierce competition online • Tesco plans to add free delivery to its Clubcard plus membership scheme, following Amazon’s recent free home deliveries on all Fresh orders over £40. New 'drive-to' format • Hotel Chocolat has launched its first ‘drive-to’ outlet store, as part of its efforts to cut food waste and capitalise on changing consumer habits. The store, located in Cambridgeshire, is twice the size of a regular Hotel Chocolat site at 1,400 sq ft, and has 3,000 sq ft of outside for alfresco seating, as well as 100 car parking spaces. Financial results • Marks & Spencer posted that in the last 13 weeks, total food sales were up by 2.5%.

Clothing & Footwear Online shift continues • M&S reported that online accounts for 41% of its and home sales, and has gained an additional 1.9 million active customers since the beginning of the year. • M&S recorded a 30% year-on-year drop in clothing and home sales in the past eight weeks since its stores reopened – with store sales down by 48%, while online was up 39%. • Sosandar reported a loss before tax of £7.66m in its year to 31 March, despite sales growth of 103% to £9.03m. Losses were attributed to its investment in staff, supply chain and marketing spend, which has positively impacted its first quarter sales during the coronavirus outbreak. • Sportwear brand Gymshark secured unicorn status following a strategic partnership with equity firm General Atlantic, which sees the firm take a 21% stake in the business and values the company at more than £1bn. Advisors appointed • Laura Ashley’s administrators have appointed property advisor Avison Young to market the retailer’s manufacturing and distribution facilities. How are retailers responding? Weekly updates from retailers and consumers

Health & Beauty Retail partnership • Boots is to expand its range of Mothercare products through a 10-year franchise deal to include clothing, home and travel items such as prams. Boots will stock the full Mothercare range from the Autumn/Winter 2020 season both in store and online.

Electricals Online surge continues • Ahead of its annual general meeting, AO.com said UK sales jumped by 58.9% year-on-year to £401.3m in the four months to 31 July.

Furniture & Flooring Product rentals • John Lewis has partnered with rental marketplace Fat Llama to offer a furniture rental service, offerings shoppers John Lewis desks, chairs, dining tables and sofas for three, six or 12 months, with the option to buy them at any time.

Department stores, marketplaces and multi-category

Jobs cull • Marks & Spencer announced that it will be axing 7000 jobs over the next three months across central support centre, across regional management and in stores. This follows the implementation of its Never the Same Again digital strategy triggered by the pandemic, which will see it create new jobs in online fulfilment. ‘Last resort’ • has appointed Hilco in the event that it does need to liquidate stock but has stressed that this move is not imminent and would be a last resort. Circular economy • Selfridges has launched a sustainability initiative which is says will “change the way we shop” over the next five years, promoting a circular economy through repair and resale services. Eyeing rivals • Mike Ashley has reportedly launched a bid of over £30m for sports chain DW Sports, following its collapse into administration earlier in the month. Results • Frasers Group reported pre-tax profit dived 19.9% to £143.5m in the year to 26 April. Group revenues rose by 6.9% to £3.95bn, but declined by 12.6% when excluding newly acquired businesses.

Impact by category Weekly updates from retailers and consumers

Stores • Service stores (such as banks, nail bars, hair salons and estate agents) and food & beverage operators have been capturing an increasing proportion of footfall since the easing of lockdown measures according to Springboard. • Services captured 18% of all footfall post-lockdown, compared to 7.5% pre-lockdown, while food & beverage captured 19.1% in the seven weeks to 26 July, compared with 17.9% pre-lockdown. • By comparison, the share of footfall heading to entertainment & book stores has slumped from 20.3% before lockdown to 9.5% during the seven week period. • Bikes shops are stepping up a gear in prime locations, as consumers have taken to cycling during lockdown. Cycling retailer Start Fitness has inked a deal to open a shop on Newcastle’s , while Electric bike firm Pure Electric has opened a new store in London’s Holborn. Online • Online grocery delivery has continued to step up since the pandemic and hit a new high in terms of total market share at 13.5% in the 12 weeks to 9 August, according to Kantar data. The data shows that following the mandatory wearing of masks and face coverings in English stores, shoppers visited supermarkets two million fewer times than expected during the week after the rule was adopted.

Latest economic indicators Updated 24 April 2020 Latest economic indicators Updated 24 April 2020

The week ahead

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Latest updates covering the week to 21 Aug 2020