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Retail has always been a highly dynamic industry, intensely competitive and fighting for a share of the wider consumer spending pot. This is an industry used to dealing with a constant diet of change. However, the change we are seeing today is far more profound than anything the past has thrown up. We are now seeing by far the most challenging period in retail history. A reshaping of the industry’s structure and economics is unfolding, and most of the real change is yet to happen.

Richardtalksretail is focused on analysing this change, anticipating the implications, and mapping how the key players across the various sectors are dealing with it. The regular Blogs in this public section of the site are a taster of the much more detailed analysis and forecasts in the premium section, reserved for subscribers.

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Monthly Archives: January 2020

Ticking clocks at JLP

How long does it take to become an outstanding retail leader? John Lewis Partnership desperately needs one. The clock is already ticking for Sharon White, JLP’s incoming Executive Chair, and following yesterday’s news it is ticking much faster.

Yesterday was dramatic to say the least. Poor Christmas trading came as no surprise. JLP announces its weekly sales figures and it was clear where they would be. Warnings on profits and the bonus were inevitable.

Of more significance is the departure of Paula Nickolds, what it symbolises, and the way it was handled. This was all about the new structure. Sir Charlie Mayfield indicated that it had been an iterative process and that he had the support of the senior team. He may well have at the outset. But somewhere along the road of those iterations, Rob Collins (at the time they were announced) and Paula Nickolds (I suspect gradually over the past two months or so) have both voted with feet and resigned. The ambiguity around her departure reflects badly on the business.

Losing your two top leaders in normal times would be bad enough. But with a new Executive Chair about start, it is much more so. Then magnifying the significance many times further is the fact that the incoming leader (by definition the senior executive in the company) has no commercial background at all, let alone a retail one. She would and should have relied on those two leaders to accelerate her learning about the business and the industry.

JLP faces the most challenging moment in its history. Fundamental structural and cultural issues will fill what will be a huge agenda. The new leadership structure she will inherit will make addressing these issues far more difficult. With seven direct reports, it has essentially fragmented the responsibility of the executive directors and magnified responsibility of the Executive Chair, the person with the least retail experience. At the very time the Partnership desperately needs to be far more commercial, more focused and to greatly increase the speed and tempo of everything it does, this structure almost seems designed to go in the opposite direction.

Meanwhile, that clock is ticking. It is clear that in 2020 the market will get tighter and trading economics will be further squeezed. It will not wait for JLP to bed in a new way of working. Far reaching decisions need to be made now and they must be right. Retail is unforgiving. No brand is owed a living. The Partnership needs to up its game, and quick.

** I support retailers and stakeholders with strategic advice. If you think I can help, drop me a line – richard@richardtalksretail.co.uk

Next – the exception not the rule

In keeping with tradition, Next kicks off the Christmas Trading Statements season this morning and as ever, many will assume it is an indicator for the sector. And as ever, it wont be. Next’s figures are excellent given the market background of soft demand and wall to wall discounting across the sector. But far from being an industry bellwether, Next is almost always a significant outperformer.

While the current retail malaise is impacting all sectors of the trade, none is impacted more than the middle market. 2020 will be the defining year for both Debenhams and House of Fraser. M&S will cede further ground and given this competitive landscape, John Lewis should be hoovering up some incremental business but it is struggling. The major beneficiary of middle market weakness is Next, fuelled by its Label brands platform – in my view the most significant strategic development from the company in more than a decade.

In general, Christmas Trading Statements have always been unreliable and misleading. They are unaudited, vary in definitions and timeframes from one company to the next, and there are no agreed criteria or rules. And that’s before online is considered. Most retailers have growing online businesses. Returns peak at Christmas with gift buying and are rarely accounted for because the reporting periods pre-date most if not all. So the headline trading numbers are generally inflated. Some of those impressive-looking sales will be going back to customers as refunds – not great for cash flow.

Things are rarely what they seem. Next’s numbers will still look respectable once returns are in. But for the bulk of the market, returns will put Christmas trading into negative territory.

 

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