A week is a long time in retail. A stream of significant events, followed by Next’s numbers this morning. As ever, Lord Wolfson’s unvarnished analysis of the likely trading market in 2016 is spot on. It is exactly what I have been forecasting since the middle of last year. The company’s performance needs to be judged in the right context. And that context is the market, not the company’s own historical record. No retail business will be able to match its own past record – the market is far to overcrowded for that.
So Next needs to embrace change and this morning’s statement suggests this is already happening, to a degree. It will still outperform the vast majority of its competitor set – it’s KPIs remain way ahead of the pack. Yesterday’s news on the BHS CVA was positive in my view. The leadership team now needs to start implementing their plan and I very much hope its owners allow it the financial resources it needs. In this market cost management is the easy bit. A non-negotiable pre-requisite of success is investment in the top line – in product, supply chain, customer service and building brand equity. Every retailer out there needs to revisit all of this because none is as good as it needs to be to get through by far the most challenging retail market we have ever seen. As per my last Blog, BHS is far from alone.
Lidl’s launch of an online business in Belgium was another event, largely ignored here but a statement of intent which will impact the UK eventually. Tesco’s launch of an entry level fresh range is another statement of intent, underlining its value credentials. The business has certainly slowed its market share erosion but it will take much more than this to reverse the trend in any sustainable sense. This point is less about Tesco and more about all four majors. And Sainsbury’s won the day with Argos. As I have said many times on this topic, I’m not sure “won” is the right word and am concerned about the deal’s impact on JS as a food retailer.
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