Supermarket bosses have nowhere to hide
Who said there’s blood on the high street? Retail stocks rose well into green territory yesterday, Morrisons up nine per cent and Debenhams a whopping 16 per cent higher, after both reported a jump in like-for-like sales.
Defying City expectations, the pair of troubled FTSE-250 outlets remind us that retail should not be viewed as an inherently bearish industry. There is money to be made, and there is growth to be found. Indeed, consumer confidence surveys have been on the up for some time as Brits enjoy the proceeds of record employment and – finally – rising wages.
It is not an easy sector in which to thrive, admittedly. Prices have been weighed down, partly by intense competition. And costs are set to rise, partly from an elevated minimum wage. But the retail industry is undoubtedly a capitalist success story.
The competition is intense, for sure, and this benefits consumers who are more than happy to shop around; there is little room for complacency, as the sector adapts relatively swiftly to new technology and demographic changes. Shares in modern web-based retailers BooHoo and AO World both ended up yesterday, and while Greggs’ stock tanked due to high expectations, the popular baker still posted a 5.2 per cent rise in sales.
For a chief exec it’s one of the biggest challenges in business. Hence David Potts, the Morrisons boss brought in to replace Dalton Philips, has already boosted his reputation with yesterday’s set of results, while outgoing Debenhams’ chief Michael Sharp may be able to fire a parting shot at his detractors.
Now attention turns to Mike Coupe and Dave Lewis, with the British supermarket giants (Sainsbury’s and Tesco) due to report today and tomorrow. Coupe is after a mega-deal, with Home Retail Group (also reporting today) in his sights, while Lewis has been making a show of chucking out the kitchen sink since he joined Tesco in 2014.
But away from those dramas, what really matters is the bread and butter of sales and profits. Yesterday’s surprises show that it was possible to do well over Christmas, and it is not acceptable for bosses to hide behind the excuse that all retailers are enduring a tough ride.
For both Coupe and Lewis, this period is a crucial test of their strategies and leadership. Game on.