ALEX BRUMMER: It’s time to exile the retail gloom

January is often the most hazardous of months for retailers. Rent has to be met for the final quarter of the previous year and if Christmas misfires it can be curtains.

To listen to the doomsayers, the 2022 holiday season was going to be particularly grim, given squeezed household budgets, rail strikes and soaring energy bills for shops.

Upbeat real time data from analysts Springboard, tracking footfall in retail parks and on the High Street, was seen as an aberration not telling the true story.

As data has flooded in from vibrant brands such as Next and German-owned value grocery chain Lidl, as well as local favourites such as Greggs and Boots, the picture has been more upbeat than predicted.

There have been problems. Wilko needed a cash infusion. Supermarket Morrisons is suffering from the impact of a top-of-the-market sale to private equity kingpins Clayton, Dubilier & Rice. 

Plans for dramatically improving margins suffered setbacks amid the surging cost of debt interest.

In the build up to the holidays, the British Retail Consortium (BRC) did not provide great tidings of joy. 

Chief executive Helen Dickinson pronounced in early December ‘the-cost-of-living crisis means many families might dial back their festive plans’.

The latest BRC figures shows retail sales actually climbed by 6.9 per cent in December 2022, more than three times the 2.1 per cent lift a year earlier. 

In heralding the increase, Dickinson managed a negative spin, noting it was a year which saw ‘inflation soar and consumer confidence plummet’.

In spite of the dire predictions, the glass was fuller than the nation was led to believe.

Cost pressures did not stop people spending. Adjusted for inflation, trading volumes were down. But the measure which most counts for retailers is cash sloshing through the tills and tapped on card readers.

How was the uplift possible? Amid the misery, households still wanted a good time. Present giving switched from high value electronic items to fashion and beauty products, but demand was unabated.

The soothsayers underestimated two post-pandemic factors. Big savings balances built-up in Covid-19 have never fully been spent. 

And fewer credit cards had been swiped to their limits than in the past. The BRC warns that because of further rises in the cost of living, retailers face headwinds in 2023.

Maybe, but inflation is forecast to fall dramatically, wholesale gas prices have tumbled and employment remains strong.

All reasons for cheer.

Shaking the tree

Founders with large shareholdings have a habit of flinging grenades from the side lines. Stelios Haji-Ioannou has been a frequent thorn in the side of his successors at Easyjet. 

So Peter Hargreaves’ assault on the board at investment platform Hargreaves Lansdown (HL) is standard fare.

As a 20 per cent investor in his former business, he is entitled to criticise a share price performance which has seen the stock plummet from a 2419p peak in May 2019 to 1399p a year ago and 874.6p yesterday. It is not a great look for a money manager.

Hargreaves says HL has become fat and wants to see staff slashed in half to around 1,000. There is always room for cost cutting, but as Elon Musk learned at Twitter you can go too far.

The founder is well within his rights to criticise bloated board pay with non-executive chairman Deanna Oppenheimer picking up £362,600 of rewards last year.

Departing chief executive Chris Hill saw total remuneration dip by £800,000 in 2022, but still took home £1.9million. 

This in spite of the calamitous 40 per cent fall in the share price during his stewardship. 

It was also on Hill’s watch that Neil Woodford’s investment empire imploded, exposing more than 300,000 clients to losses.

Peter Hargreaves could have kept his criticism within the family through his nominated member of the board, Adrian Collins.

But like Prince Harry, he felt moved to break the silence.

Swinging the axe

An acquaintance at Bank of America Merrill Lynch used to dread January 1.

A message would arrive from HR reminding him that the bonus pot was empty and it was time to clamber back on the bike. 

As rewarding as the good times are at investment banks, certainty is never an option. At Goldman Sachs, 3,200 staff face dismissal this week amid a sharp fall in income in 2022 and a 40 per cent drop in the bonus pot.

Unhappy days.