Breaking news: Well-known chain set to snap up UGO stores and staff

UGO store, Eston (4 May 2011)

The 20-strong chain of UGO supermarkets is to be snapped up by “a well-known and established brand name”, I understand.

Subject to legals being completed within the next couple of days, all the stores traded by UGO Stores Limited will transfer into the ownership of a new – and as yet unnamed – operator. All store staff will transfer under TUPE to the employment of that operator, though a number of staff at the current UGO head office are expected to lose their positions. It’s not clear whether the UGO brand will be retained, or whether the stores will be rebadged under the new owner’s established fascia.

Signage at UGO store, Eston (4 May 2011)

I understand that UGO’s owner, Arthur Harris, had previously entered discussions, in September, with a national retailer that had expressed an interest in acquiring a major shareholding and substantially investing into the UGO business, in order to secure its future and expansion. However, I’m told that the potential purchaser pulled out of that deal on 11 January – a day ahead of the planned completion date – leaving UGO in what Harris has described as “a very difficult trading position”.

Today’s news comes almost exactly a year since UGO’s press launch, when the fledgling chain’s bosses announced their plans for the tranche of ex-Netto stores that they had acquired. Pledging to be “the icing on the Netto cake”, UGO took over 20 of the 47 sites that Asda was required to divest for competition reasons following its takeover of the Danish hard discounter, including four North East stores at Stanley, Ashington, Eston and Hartlepool.

UGO store, Stanley (2 Dec 2011)

After what Harris admitted were some early “mistakes”, there were signs of improvement instore – in terms of product, offers, price and customer experience – when I visited four of the Hull and Barnsley sites back in November. More recently, however, there has been continued speculation about the business’s prospects, with several Soult’s Retail View readers reporting depleted stock levels at their local stores.

Basket POS at UGO Monk Bretton (11 Oct 2011)

While the ex-Netto stores taken over by Asda and Morrisons seem to have been a big success – taking advantage of those retailers’ existing scale, pricing muscle and familiar brand – UGO, as a small and new operator, has struggled to make a lasting impression, despite doing a good job with its POS materials and local marketing campaigns.

UGO ad in Hull Daily Mail, October 2011

Price, ultimately, seems to have been one of the major factors behind the chain’s struggle to maintain sales: adopting a Netto-style hard-discounter model was always an ambitious idea, yet UGO’s supply arrangements – with 85% of stock sourced from Nisa – just didn’t give it the room it needed to be highly competitive on everyday pricing.

Harris – who will play no future part in the UGO business – believes that the overall economy has also been a factor, however. Speaking to me today, he said:

“I believe there is very strong evidence to show that the sector has worsened dramatically since we embarked on the UGO journey a year or so ago. It was always going to be a challenge but one I feel we would have achieved in normal trading conditions.

“I wish everyone who was part of UGO and gave everything to achieve that challenge all the very best for the future and thank them again for their huge commitment.”