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It’s been an unpredictable year so far regarding interim management opportunities in the Retail & Leisure sector. The year started in a more optimistic mood with people glad to see the back of 2009 and looking forward to a more buoyant year. It was widely claimed that despite small economic growth that the retail recovery was on track and all eyes were on which businesses would be investing in change. Then came a series of events that encouraged procrastination; the financial year end came and went, the snow crisis (!), volcanic ash and finally the General Election and the formation of a coalition Government.
The recent emergency budget and the VAT increase to 20% from 2011 hasn’t derailed the recovery. A rise in VAT was widely expected and retailers seem to have prepared accordingly. They now need to decide how much of the VAT rise they pass on to consumers – ASDA has vowed to absorb all of the 2.5% increase but other retailers will struggle to do so having taken as much cost out of their businesses as possible already. The increase is more bad news for the sector, especially as non-food retailers are also being hit by the weakness of the pound against the dollar and rising product costs.
I’ve spent a lot of time out meeting retailers in the past few months and the consensus will come as no surprise to you; trading is tough, cash is king and cost cutting is still top of the agenda. So where are the investment budgets? Well they seem to be there, vastly depleted from what they were even last year but they’re not being spent………..yet. I’m concentrating more on activity than predictions, but I’d like to open this up to our interim management community for discussion on your thoughts on the sector and views on the next few months – it’s time for change but who has the appetite and more importantly the budget or is it going to be a similar run in to Christmas as seen last year? As industry leaders and practitioners many of you will have seen similar conditions before, weathered the storm and come out the other end.
Is retail the football equivalent of the England Football Team – high expectations from the outset, struggles through with a series of disappointing results but ultimately fails to fulfil potential. Fortunately we haven’t been knocked out but as we’re running out for the second half what is our tactic – sit back and defend or take the game to them?
Jonathan Flynn is Head of Retail at Interim Partners
July 6th, 2010 at 2:30 pm
Hi Jonathan. Agree with the post. The rising costs are going to be the interesting point to watch as the political cauldron bubbles away. Margins are so tight right now they will have to pass on VAT surely. I can see the people who will try to absorb them will be those wanting to make a statement or the online businesses without the massive infrastructures.
July 6th, 2010 at 4:07 pm
The economy and the england football team have a lot in common. Beaten easily by competition lying eastwards, fighting amongst ourselves about irrelevant things, good talent left behind, poor talent promoted on reputation, current generation not delivered, next generation abandoned in favour of cheap imports.
Its going to take a long hard slog to get back to a decent level. Companies are facing rising costs, be they government induced or market driven, prices will have to remain subdued as consumers have had their fingers burnt. Employment will remain a real issue – unemployment lags the economic cycle so we are looking at much worse to come. the only people recruiting on any serious scale are the investment banks and they are just taking back the people they shed in 2008.
There is some work out there for interims but its very specific. A few peole working in the sector have told me general recruitment is in a real dive to the bottom of the market – smaller firms undercutting the established ones, quick and dirty tactics are pervasive as the number of available candidates outnumbers jobs by 200 to 1 for management level roles. Companies are not taking risks on talent or transferabble skills only on exact fits. One chap I know – a good solid manager / exec has made 400 applicaitons with not a single response regarding his applications, he has packed up and gone to a decent footballing nation – Spain.
July 8th, 2010 at 4:48 pm
Businesses taking decisions based on the medium and long term will be the winners. Holding your nerve is one of the keys to getting through this challenging period. Many businesses I have been involved in focus on the obvious cost reduction programmes. Not many stand back and say,if I were to start this business today what would our processes and supply chain look like. So often businesses are put together over a long period of time and build in inefficiencies. They need to stand back and take some tough but longer term decisions. Whilst hitting short term targets are important, they could really impact on a businesses ability to compete medium term. At some point you must grow sales. Cutting costs justs gives you the breathing space. Invest for the future. Without this the UK economy will continue to suffer from short termism!!
Finally think outside the box and don’t be afraid to take on the big Boys!! A few years ago I remember asking a Board to diversfy and take on the Big retailers at their own game. It seemed ok for Supermarkets to move in to Non food, but not ok the other way round. Amazon have made the Strategic decision to sell food. Why not, Think positive!!!