Retail Results Woes

By Bob Morrell on October 1, 2018

One of the downsides of being a public company is that the public have access to everything. When times are good, you’re quite happy about that, and when times get tough you wish you were private. Hence Elon Musk’s attempt to take Tesla back into private ownership – sounds easy but once you’re out there, to go back is a pretty tough call.


All year the retail market has been hammered, not just by the individual circumstances of the different brands, but also by the necessity to admit to the world how badly things are going. So, as if having a bad year wasn’t enough, we now have to announce the fact to the world and have your business unpicked and criticised by all and sundry. The culprit of bad news is never the managers of the business – the CEO’s head may roll and the brand may ‘restructure’ - but in a company announcement of results the numbers will always be something trend-based, (beyond our control) weather related, (too hot, too cold, not anyone’s fault) or they’ve simply over-extended, financially (can’t raise any more cash).


The thing I always consider is, at what point in the previous year, did you realise that your targets and forecasts (which you’d announced) were wildly overoptimistic? Oh, you can give people a profit warning, but you must have had some idea before then? And rather than accept that it was going to be less money than you thought, what was your plan at the start of the year, to hit those targets? And what was your plan when the possibility of that suddenly looked far less likely? What did you do to drive sales? To increase conversion? To increase order values to make up a shortfall. Did you do anything? Or did you allow the year to slump away, and hope for better next year?


There is a simple test for management – 3 questions:


  1. When have you managed to lead a successful turnaround against an adverse situation?
  2. Mid-year, what should a listed brand do when trading well down on expectations – and maintain profitability?
  3. In tough times, how much time should managers spend watching the scores, versus playing the actual game?  

Management, surely, is about the ability to adapt, change, try different things and anticipating highs and lows.


When I was a young manager I remember an early lesson which was, if you’re creating an annual target, and you can’t see where at least 50% of it will come from, before you start, then you haven’t got a prayer in reaching it. Plus, if you need to spend much more time than that creating targets you’re wasting your valuable time on meaningless figures. Imagine how much management time was spent 18 months ago on targets that have been hugely missed recently. If you could get rid of targets completely you’d be so much more productive – but shareholders wouldn’t buy shares without them.