High street red in tooth and claw
IT’S simply too tough out there, said the last official tweet from @republicfashion, announcing the company’s fall into administration. With inflation still stubbornly high and the news today of real wages back at 2003 levels, it is certainly a tough market. Republic is just the latest casualty in a post-Christmas cull of the UK high street, itself following in the wake of Comet last year and it doesn’t look likely to be the last company to suffer. As such, the UK’s listed retailers look like risky bets for investors. Yet this is not some indiscriminate, mass-extinction event. Those firms that are failing to tightly control the costs of maintaining a bricks-and-mortar store network while taking advantage of the migration to online shopping are suffering most. It’s tough out there, but it’s also the survival of the fittest.
CABLE TIES
The purchase of Virgin Media by Liberty Global may be kicking off a consolidation trend, with Vodafone now eyeing Germany’s Kabel Deutschland. However, Vodafone’s shares fell on the news, suggesting a dim market reception.
That’s perhaps because it means pouring more money into a Europe stuck in the economic doldrums. Vodafone takes 69 per cent of its revenue from Europe, and the Eurozone crisis has hit it hard, even in a relatively strong market like Germany. More scale and the ability to bundle products would increase revenue but at a price – and in a declining market the returns risk being less than stellar. Vodafone is tied: with so much of its business in Europe it has to make the best of it. But it won’t be cheap or easy.