Good morning and welcome to the Business Breakfast live blog for Thursday, March 21. I’m Jonathon Manning and I’m running the blog this morning.
The business team’s live blog brings you all the breaking news from across the North East, the UK and beyond – basically anything and everything from the world of business.
Retail giant Next has revealed a drop in its profit figures and predicted its results will continue to decline over the year ahead.
The fashion chain said the trading on the high street will remain “challenging” but said ultimately its web business would help boost sale figures.
High street sales fell by 7.9% last year.
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Employers predict pay to increase by 2.5% this year
Employers predict that pay rises will be 2.5% in the coming year, the same as in 2018, according to a new report.
A study by pay analysts XpertHR suggested that uncertainty over Brexit were being balanced by record levels of employment when firms consider wage awards.
A survey of 264 private sector organisations indicated that 2.5% was the “benchmark” pay award for this year, although one in 10 said deals could be worth 4%.
Most workers can expect a pay rise this year, with just 4% of employers predicting a wage freeze, the report added.
Game Digital revenue declines despite boost from Fortnite
Retailer Game Digital saw sales fall in the first half, despite a boost to some categories from popular games like Fortnite.
Revenue dipped 4.7% to £492.9m in the 26 weeks to January 26.
Sales of high-end accessories and licensed merchandise were boosted by Fortnite and other battle royale games, in a phenomenon the group said it anticipates replicating with the recently released Apex Legends.
But the continued downturn in pre-owned games took its toll, while hardware sales were weaker amid tough competition.
The group took the decision to reduce the amount of promotional activity over Black Friday week, resulting in lower sales.
The company said improved profitability was down to better margins and the delivery of £4.9m in cost savings.
Chief executive Martyn Gibbs said:
During the period the UK retail business delivered further efficiency improvements and achieved considerable cost savings across all areas including store operating and fixed costs, distribution and head office costs.
Our flexible lease profile gives us a unique opportunity to work closely with landlords to manage our store portfolio and we continue to deliver, and anticipate ongoing, rent reductions.
The company is working to expand “Belong”, its leisure experience which allows shoppers to play games in store or watch competitions.
Mr Gibbs said the rollout could be aided by good deals with landlords, who are finding themselves short on tenants amid the retail crisis.
Shares in the company were up 5.26% in early trading on Thursday.
Ted Baker profits slump amid extra costs and higher discounting
Ted Baker’s profits slumped last year at the same time as the fashion chain grappled with a scandal that caused its founder to resign.
Proft before tax at the chain was down 26.1% to £50.9m in the year ending January 26 2019. However, group revenue was 4.4% higher at £617.4m because of growing sales across the UK, Europe and North America.
The last 12 months has been challenging for the retailer, which was forced to write off unpaid bills from House of Fraser, after the department store entered administration. Its acquisition of No Ordinary Shoes also increased costs.
Ted Bakers books also contained exceptional items totalling £12.1m, which included the cost of an external investigation into the conduct of former chief executive and founder Ray Kelvin.
Mr Kelvin was accused of enforcing a “hugging” culture at the company. Accusations were made that he massaged employees, kissed their ears and asked some of them to sit in his lap.
He left the company earlier this month, 32 years after founding it.
Executive chairman David Bernstein said:
Performance has been impacted by the very difficult trading conditions throughout the year, including competitive discounting across the retail sector, consumer uncertainty, the well-publicised challenges facing some of our UK trading partners, and the unseasonable weather across our global markets at different points throughout the period.
Despite this challenging backdrop, Ted Baker continues to develop as a global lifestyle brand reflecting the strength of the brand, the design and quality of our collections and the passion and commitment of our talented teams across the world.
Mobile pet washing device devised in Newcastle wins deal with QVC
A Newcastle company that makes a device to clean pets while on the go has struck a $90,000 (£67,932) deal with QVC.
Mud Daddy manufactures a range of portable devices that can be used to clean anything from dirty pets to outdoor equipment, without needing an electricity supply.
The company is now preparing to boost its overseas presence after stroking an exporting deal with US retail giant QVC.
Under the deal, the North East firm will supply QVC with an initial 4,000 units of its Mud Daddy washing brush, with the potential for more orders to come.
Rez Gachcar, director at Mud Daddy, said:
The US market is set to be massive for us, particularly as our product is multi-use and so appeals to a wide range of customer segments – everything from the pet market to sports and beyond.
We started the business in 2017, and our export activity began almost from day one. Our initial strategy was focused on driving UK sales, but we soon found that we were receiving messages on social media from consumers in Europe and the US who were interested in buying our products.
People like our product because it’s innovative. It’s portable, doesn’t require electricity and is almost silent – a real benefit when washing dirty pets.
FTSE and pound update
The FTSE-100 index opened at 7291.01.
The pound at 8am was 1.3179 dollars compared to 1.3186 dollars at the previous close.
The euro at 8am was 0.8655 pounds compared to 0.8595 pounds at the previous close.
Next sees profits slip and warns high street will remain tough
retail giant Next has posted a drop in its annual profits and has predicted a further decline over the year ahead, as it said high street trading will remain “challenging”.
The clothing retailer saw its pre-tax profts fall 0.4% to £722.9m for the year ending January 2019.
High street sales fell by 7.9%, but total brand sales increased by 2.7% over the year. This was largely because of a 14.7% jump in online trade.
The company said that its web business would ultimately boost its sales and profits.
The group said it expects profits to “marginally” decline by around 1.1% to £715m over the new financial year ahead, despite forecasting higher sales thanks to the better online outlook.
Chief executive Lord Simon Wolfson added that while Brexit worries still reign, the group can “see no evidence that this uncertainty is affecting consumer behaviour in our sector”.
Our feeling is that there is a level of fatigue around the subject that leaves consumers numb to the daily swings in the political debate.
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