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Client Update - 8th September 2023

It was interesting to read more this week about another reason for falling profits from retailers – the rise of “shrink”. This is the adopted term for the effect of shoplifting on company profits, with an additional rise in organized crime in times where incomes are stretched.

Dicks Sporting Goods, the largest sports retailer in the US, saw its share price fall by almost 25% after it cut its guidance to the market with a warning that theft and organized crime has become a serious issue. On this side of the Atlantic, Co-Op recently revealed its “highest ever level of retail crime, shoplifting and anti-social behaviour”. In store crime has risen by 35% on last year with 1,000 incidents reported daily across its chain of stores. In a rather cunning move, I see that Waitrose and John Lewis are offering on-duty police officers’ free coffee to deter would be thieves. In a nod to the environment, they do still need to bring their own disposable cups! The British Retail Consortium reported that retailers in the UK have lost £1bn to shoplifting in the last year, an overall increase of 25% on the previous year.

During a trip to a national chain of opticians this week to have an eye test, I asked why the store had changed so much internally, to be told that all the designer brands of glasses had been moved away from the entrance area due to a significant rise in shoplifting in recent months. These losses will undoubtedly contribute to the internal pressure on retailers to keep prices high, although this may become harder to justify as inflationary pressure continue to fall through the year. An interesting one to keep your eye on, so to speak.

In other news this week, one of our key third party platforms that we use to administer client assets, 7IM, has announced that a majority stake in the business has been purchased by the Ontario Teachers Pension Plan (OTPP). The stake is being purchased from the current holder, Caledonia Investments, and we view this as very positive news. Ontario Teachers has a current portfolio of more than $10bn invested in financial services firms, part of the overall assets of $250bn as at 30th June 2023. This acquisition will provide 7IM’s management team with access to longer term capital to help drive its investment in technology and further enhancements to the client offering. Financial strength is a key part of the due diligence we carry out on the platforms that we select for our clients and this long term capital that will be made available to 7IM will help their continued development.

I will leave you now to enjoy the sunshine that has finally arrived and I do hope that you have a lovely weekend. As always if you have any questions, please do not hesitate to be in touch with the team.

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