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UK household spending falls for 3rd month; Gap stores in Australia to close


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UK household spending falls for 3rd month; Gap stores in Australia to close


* Household spending in the U.K. fell 0.8% year over year in July, making it the third monthly drop and the longest-running tumble in more than four years. Consumers are being squeezed by rising prices and stagnant wages, according to data from Visa Inc. Transport and communications saw the biggest slump, falling 6.1% year over year, followed by clothing and footwear, which dropped 5.2%. Spending on food and drink fell 0.5%, while household goods dropped 4%. Spending in hotels, restaurants and bars rose 6% year over year in July, largely due to "an early surge in summer staycations, as the weak pound made holidaying at home more attractive," said Kevin Jenkins, Visa's managing director for the U.K. and Ireland.

* Australian apparel retailer OrotonGroup Ltd., the franchisee for Gap Inc. stores in the country, said it will shut down all of its Gap stores by Jan. 31, 2018, as part of OrtonGroup's ongoing strategic review. The company said the move will allow it to focus on its core brands. The financial impact is yet to be assessed. The Sydney Morning Herald reported that the company operates six Gap stores in Australia that employ about 50 full-time and 150 part-time workers. Oroton reportedly said it would try to absorb the workforce but expected some redundancies.


* Chinese e-commerce giant Alibaba Group Holding Ltd. has launched a dedicated section for premier brands on its business-to-customer site The invite-only "Luxury Pavilion" features brands such as Burberry Group Plc, Hugo Boss AG, La Mer, Maserati and LVMH Moët Hennessy Louis Vuitton SE's Guerlain and Zenith. It offers products ranging from apparel and skincare to watches and luxury cars. Alibaba said the luxury site will eventually offer a complete suite of marketing and omnichannel features, allowing shoppers to use personalized homepages, customized brand pages, product recommendations and exclusive VIP awards. Brands will also be able to use virtual reality and augmented reality to reach customers, Alibaba said.

* Alibaba's foray into Hong Kong may be limited by a lack of consumer confidence in goods made in mainland China and locals' preference for physical stores, according to the Nikkei Asian Review. Hong Kong consumers reportedly prefer to shop at brick-and-mortar stores as the region's high population density enables most to reside within the proximity of a shopping mall. E-commerce also makes up less than 5% of total retail sales in Hong Kong, PwC's Michael Cheng told the Nikkei, adding that the expansion of Alibaba's shopping platform Tmall into Hong Kong will have only a "limited impact on lifestyles and society in the city."


* U.K.-based food retailer J Sainsbury Plc may slash more than 1,000 jobs at its head office as part of a £500 million cost-cutting program, The Telegraph reported. A team from management consulting firm McKinsey & Co. is reportedly working with the company on the staff reductions, and the exact number of jobs to be cut is expected to be announced in September. The Telegraph, citing senior sources, added that the retailer is looking into reductions within its human resources and learning and development teams. A Sainsbury's spokesman told the newspaper that the company does not comment on speculation and would "always" make any job-related announcement to employees first.

* Meal kit maker Blue Apron Inc. is closing a facility in Jersey City, N.J., and some 470 workers may lose their jobs if they decide not to transfer to another facility in the state, according to a report from The Associated Press. By Oct. 6, the company will reportedly cut 1,270 employees based in Jersey City, which is about a quarter of the company's workforce of 5,202, according to filings made with a New Jersey state agency and the SEC. Under New Jersey law, companies must notify the state's Department of Labor and Workforce Development at least 60 days before they plan to make the reduction. About 800 workers have reportedly asked to transfer to the new facility in Linden, N.J., and Blue Apron expects more to do so by the October deadline.


* High street retail sales in the U.K. fell 0.6% year over year in July, compared with break-even growth in July 2016, as rainy weather and school holidays clamped down on fashion sales, according to a monthly report by accounting firm BDO. Like-for-like fashion sales fell 3.5% year over year, compared with a decrease of 0.1% in 2016, to make it the worst July since 2009. The report also found that consumer prices running above real wage growth meant consumers opted to shop for essentials over fashion purchases.

* Moody's said it expects more retail bankruptcies as the sector's largest companies focus on infrastructure and converging e-commerce operations with brick-and-mortar stores in an effort to stay competitive with new online rivals, according to an Aug. 4 report. Among Moody's rated retail and apparel companies, 22 were given ratings of Caa/Ca in June, which Moody's defines as being considered in either "poor standing and subject to very high credit risk" or "likely in, or very near, default with some prospect of recovery of principal and interest." In 2016, 17 companies held that rating, while 13 were given the rating in 2015. Despite defaults in the retail sector, the broader industry remains healthy as the distressed group represents only about 6% of the group covered by Moody's.

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