Only retail figures count for the City

When Marks & Spencer first fell from grace towards the end of Sir Richard Greenbury’s reign in the late 1990s, the City noticed before the customers.

Poor profits caused the share price to tumble and, because everything else was still going up, there was an avalanche of negative publicity. Staff morale was undermined by the daily updating of share price charts in the staff canteens, which showed the collapsing value of staff options.

Unnerved staff and uneasy customers were a toxic mix on the sales floor. The financial exposure caused management to panic and abandon much of what made M& S unique as well as that which did need to go, thereby making a difficult situation much worse. Internal confidence collapsed and sales plunged again, further cutting profits and the share price. This emphasised how the stock market is now part of everyday life and if financial performance is bad it feeds through to trading.

Other chains exemplify this trend. Next, a strong financial performer, is regularly portrayed as a winner, so people assume it must be worth a visit. House of Fraser, so long a financial dog, comes across, however unfairly, as dowdy. The trend is evident, too, in the near hysteria that greets the Christmas sales figures.

Companies are judged PR winners or losers depending on whether a minute fluctuation in year-on-year sales meets City expectations. That can trigger a wild gyration in the share price, and a fall can damage the chief executive’s reputation to the extent that he or she gets the chop.

All of this reflects the short-term nature of City horizons. When he was chairman of WHSmith, Sir Simon Hornby told me it took years to retrieve the reputation of a retail chain because formats had to be designed, tested and assessed. If they worked, they were rolled out. The City has not got the patience for that. Only the numbers count.

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