The chief executives of some of Britain’s leading retailers are set to come under scrutiny after lacklustre Christmas trading.
Chief executive of Wm Morrison, Dalton Philips, will be under the spotlight amid fears that the supermarket chain may have to warn on profits after growing evidence suggests that it was the big loser among the supermarkets this Christmas.
Philip Clarke, chief executive of supermarket chain Tesco, will want to show that the UK’s biggest retailer has had a better Christmas than last year, which prompted the supermarket chain’s first profit warning in 20 years.
Chief executive Marc Bolland, of Marks and Spencer, may also face questions about his performance after fears that it suffered from poor clothing sales in the key Christmas and new year trading period.
“They are three big guys needing a boost,” says one institutional investor.
Morrisons has in the past been a Christmas winner; however Jefferies, an advisor to the company, predicts a 2.8 per cent drop in sales from properties open at least a year in the six weeks to December 30.
This takes into account an extra day’s trading compared with last year, therefore the final result could turn out to be weaker.
Philip Danmore, Analyst at Panmure Gordon believes a profit warning is possible.
Analyst at Shore Capital, Clive Black, says Morrison will be the “laggard” of the big four supermarkets.
Morrisons refused to comment. Two top 10 shareholders said they remained loyal to Mr Philips; however one noted that he would need to show that he was not losing ground to the so-called hard discounters, such as Lidl and Aldi.
At Tesco, Mr Clarke announced a profit warning after last Christmas, in the wake of the company’s worst trading for years, and will be keen to avert a repeat of this when it reports Christmas trading.
Deutsche Bank, advisor to Tesco, predicts a 0.8 per cent growth in sales from UK stores open at least a year in the six weeks to January 5.
This would be Tesco’s first growth in UK like-for-like sales for three Christmases.
However, it compares with exceptionally poor trading last year, and the company has been running a series of coupon deals.
Mr Clarke has reinforced his position over recent months, with the nascent improvement in the UK, calling time on the group’s expensive push into the US market, and moving closer to naming a UK chief executive.
However one top 20 shareholder said Mr Clarke still needed to deal with some “lingering strategic issues” such as the distribution of capital, and the return this makes.
Investec analyst, Dave McCarthy said: “Tesco still faces major structural issues in the UK and the international business needs a major strategic review.”
Tesco declined to comment, however people aware of the situation suggested that the most vital task was to stabilise the UK. Other headwinds were more to do with global economic pressures.
Mr Bolland will also come under the public eye, when M&S reports its Christmas trading figures.
The general agreement of analysts’ forecasts is for a 1.5 per cent drop in like-for-like sales of clothing, with a 0.5 per cent growth in like-for-like food sales in M&S’s third quarter.
Mr Bolland has said a run of high profile management changes in clothing will not make a considerable difference until the autumn/winter collections hit the shops at the end of the summer.
However Nick Bubb, the independent retail analyst, said: “The clock is ticking. He was brought in to get profits moving, not preside over a fall.”
Elsewhere, chief executive of J Sainsbury, Justin King could face questions about future plans when he reports the company’s third-quarter trading.
Analysts’ consensus estimates are for a 0.9 per cent growth in like-for-like sales at the UK supermarket group, a slowdown from the 1.7 per cent growth achieved in the second quarter. Yet, Sainsbury maintains that “any discussion of succession is totally premature.”
Meanwhile at Asda, chief executive Andy Clarke has a ready-made successor in the form of Judith McKenna, its highly regarded chief operating officer, if there were to be any changes at the Walmart-owned group this year.