Good morning and welcome to the Business Breakfast live blog for Thursday, January 4.
I'm Jonathon Manning and I'm running the live blog this week, to bring you updates on all the breaking business news from across the North East and beyond.
This live blog covers the latest big stories from the North East business community as well as national news and FTSE announcements - anything and everything from the world of business basically.
Supermarket Aldi saw its sales hit £10bn for the first time last year after shoppers snapped up luxury products and low cost vegetables.
The German supermarket, which is known for its comparatively low prices, said its December sales were up 15% compared to 2016. Mince pies, Aberdeen Angus beef roasting joints and Irish cream liqueur were among its top-selling products.
However, things have not gone so well for Debenhams which has warned its profits will be down over the year due to "competitive and volatile" trading.
Sergio Bucher, the department store's chief executive said that promotion of some of business' seasonal categories had been challenging. Debenhams is now expected to report full-year profits of between £55m and £65m.
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Key Events
Gateshead's Flame Heating Group will create jobs after opening six stores in 2018
Gateshead’s Flame Heating Group is stepping up its expansion plans and is set to increase its number of branches to 14 during 2018.
The plumbing and heating merchant currently operates from eight sites across the region, but has already confirmed openings north of the border in Glasgow and Ayr.
But the company has also said it plans to open further branches in the North East, and is also mulling launching in Edinburgh and Yorkshire.
Managing director John Savage said:
We enjoyed a successful 2017 buoyed by further branch launches and the strengthening of our workforce. Our Scotland expansion is well under way and will see the first Flame outlets outside of the North East, which will mark an exciting time in our history.
As the company has grown I have continued to set the bar even higher, and I am confident we will be able to extend the Flame brand into new areas and regions, while also supporting our extensive North East network.
He added:
The launch of our bathroom showroom was another highlight for the company as we entered new markets, and we are proud to be the only firm in Durham to offer such an all-round, end-to-end service.
Debenhams warns over profits after festive trading blow
Debenhams has warned over profits after it slashed prices to boost flagging sales over the festive period amid “competitive and volatile” trading.
In a trading update brought forward from next week, the retailer said UK like-for-like sales tumbled 2.6% in the 17 weeks to December 30, with overall group sales down 1.8%.
It said “tactical promotional action” helped group sales improve over the six-week Christmas period, rising by 1.2% on a like-for-like basis, but it saw worse-than-expected trading in the first week of the post-Christmas sales.
Debenhams warned that “should the current competitive and volatile environment continue” into the second half, full-year profit before tax is likely to be in the range of £55m to £65m.
This comes after profits for the year to last September slumped 44% to £59m.
The group said it was ramping up cost savings, with around another £10m earmarked for this financial year under a reorganisation being led by chief executive Sergio Bucher.
Mr Bucher revealed plans in April to close 11 warehouses and put up to 10 stores under review, in a move affecting at least 220 jobs.
Mr Bucher said:
The market has been challenging and particularly promotional in some of our key seasonal categories and we have responded in order to remain competitive for our customers, which has impacted our profit performance.
But he insisted the group was seeing “positive early signs” from his turnaround.
He added:
The market dynamics we have seen have reinforced our view that we need to move even faster to implement the cultural and organisational changes needed to ensure Debenhams is in the best possible shape for today’s fast-changing retail environment.
FTSE and pound update
The FTSE-100 index opened at 7671.11.
The pound at 8am was 1.3518 dollars compared to 1.3519 dollars at the previous close.
The euro at 8am was 0.8897 pounds compared to 0.8896 pounds at the previous close.
34 jobs saved as Gateshead game studio snapped up by indie developer
Dozens of jobs have been saved at a Gateshead video game studio after it was acquired by a growing independent developer.
CCP Games’ North East studio was put up for sale in November after its Icelandic parent company decided to end its development of virtual reality games.
But it has now been revealed that Sheffield’s Sumo Digital has stepped in to buy the studio, saving 34 jobs. All roles will remain in Gateshead and Owen O’Brien has been appointed as studio director.
The acquisition means that Sumo Digital now operates four studios, three in the UK and one in India.
Paul Porter, managing director of Sumo Digital, said:
As we continue to expand this was a great opportunity to bring an experienced, talented and tight-knit team on board.
Sumo has said that it is looking to hire more staff across its four studios in Gateshead, Sheffield, Nottingham, and Prun, India. However, no jobs in the North East have yet been advertised on Sumo Digital’s website.
Sumo Digital has a history of investing in businesses in the North East, after it snapped up Atomhawk design studio in July last year.
Atomhawk provides art and design services to games developers, publishers, film production companies, and advertising firms. Its clients include Marvel, Microsoft, Warner Brothers, Sony, Lego, and Amazon.
Despite both Atomhawk and CCP both being based in Gateshead, a spokesperson for Sumo Digital said the two firms will remain separate businesses and continue to operate independently.
Aldi sales top £10bn after record breaking Christmas
Aldi raked in over £10bn in sales last year for the first time after notching up record sales over Christmas as festive shoppers snapped up luxury products and cut-price vegetables.
The German supermarket said total UK sales were more than 15% higher during December compared to the same month in 2016.
This festive boost pushed Aldi’s total sales in the UK and Ireland during 2017 over the £10bn barrier for the first time.
The budget chain’s “specially selected” premium range saw sales rocket 30%, with mince pies, Aberdeen Angus beef roasting joints and Irish cream liqueur among the top-selling products.
Boss Matthew Barnes said:
This was our busiest-ever Christmas as millions of festive shoppers switched to Aldi from more expensive food retailers.
Although we saw strong growth across all categories, the performance of our premium Specially Selected range in particular surpassed all expectations.
This is a clear sign that shoppers knew they could indulge in Christmas treats and festive essentials at Aldi for a fraction of the price they would pay elsewhere.
Aldi sold more than 6.8 million bottles of wine, champagne and Prosecco during December, or over 200,000 bottles per day.
It also sold over four million mince pies and more than 100 million packs of vegetables, including parsnips, sprouts and carrots.
The grocery chain also announced it will pay all store assistants a minimum hourly rate of £8.85 nationally and £10.20 in London from February 1, which Aldi said makes it the UK’s “highest paying supermarket”.
Aldi also pledged to match the Living Wage Foundation’s recommended rates of £8.75 nationally and £10.20 in London for all of its employees from the same date.
The retailer, which has 762 stores in the UK, reiterated its long-term strategy to have a network of 1,000 by 2022.
Mr Barnes added:
We see significant capacity for further growth as there are still more than 400 towns and cities across the UK without an Aldi store.
Shoppers in these areas consistently tell us they would shop at Aldi if they could, and we are committed to meeting this demand for new Aldi stores.
