High-fliers such as Next have been caught out as badly as those known to be struggling, like Marks & Spencer. Apart from Burberry and a few high-fashion shops it has been gloom all round.
But has it? The fact is that the retailers sold a volume of goods this Christmas which may have been down on last year’s profits but remain, by the standards of the past ten years, reasonable. Unfortunately there is no sense of proportion applied when looking at high-street performance because the sector has got itself on a PR treadmill. Each year and each financial reporting season, like-for-like sales have to be up on the compara-tive period for the previous year. If they are not, the reaction of the City is that the store is in crisis. This treadmill has the potential to do huge damage.
M&S’s current troubles were made much worse by the way management reacted to the first sales setback four years ago. The golden rule should be not to panic, but it did. If it had reacted calmly it could have stabilised the ship and begun to recover. But the pressure from the City and the falling share price meant that it made wrong decisions and made a bad situation much worse. Misplaced financial PROs undermined the operational performance of the whole business. Now so many others are falling into the same trap.
Ironically, the lesson still has not been learned. The City’s reaction to M&S’s poor Christmas performance was to suggest that its new management was failing and its strategy did not work.
It is time the retail industry sorted out its PR and explained that like-for-like sales, while useful in their own narrow context, are a superficial and dangerous measure of consumer loyalty and satisfaction.