ALEX BRUMMER: Next boss keeps faith in the High Street despite concerns over spending trends
Next chief exec Lord Simon Wolfson
Next chief executive Lord Wolfson has shown an ability to out-think most retailers over the past couple of decades. So it will take brave investors to dispute his decision to keep putting money into bricks and mortar after a quarter when sales flopped by 8 per cent.
He takes the WH Smith view that, even if same-store sales are falling, outlets in the right places can still generate more cash than the company invests.
Wolfson’s confidence may well be down to the group’s conservatism on capital investment. This contrasts with rival Marks & Spencer – with a reduced, but still beefy, ￡400million spend in 2017.
Next stores are also showrooms and collection points for its online operations. What Next and others cannot control is weather, interest rates or spending trends.
All three are working against the High Street at present. The warm October means that woollies and winter coats didn’t move, credit could start tightening as soon as today and the special treat – dining out or going on hols – is a current preference for consumers who have enough things.
As Next continues to invest in shops, M&S is in the middle of a transformation which is closing or reshaping 60 clothing and home stores.?
Declining fashion sales have been the Achilles heel for M&S for much of the past decade, but there lately have been signs that chief executive Steve Rowe has steadied the ship, and non-foods sales are rising.
Less encouraging is the stiff competition in food, including upmarket items now on the shelves at Lidl and Aldi, which may be taking the shine off Simply Food’s sales.
We are in a period of huge transition for shopping. Fast-moving consumer goods companies, including Unilever and Reckitt Benckiser, are looking to bypass supply chains and sell directly to the customer.
Incomers, such as Amazon, are able to compete from warehouses without the anvil of business rates around their necks. We can never be sure who the winners will be.
But Next remains fleet of foot and its boss has retail nous pumping through his veins.
At the height of the financial crisis, Gordon Brown and his aides turned to Peter Sands, then chief executive of Standard Chartered, for assistance.
So it is paradoxical that StanChart, under the leadership of former JP Morgan banker Bill Winters, is still struggling to put the past, including adventures in casino banking, behind it.
On the face of it, StanChart, with huge exposure to China, the Pacific and Africa, ought to be going great guns, like HSBC.?
But it is still badly bruised from the Sands legacy of dodgy loans, Middle East sanctions-busting and over-distribution of rewards to executives and investors.
All of these are characteristics of bad banking castigated in Brown’s memoir. As it happens, headline profits in the third quarter were above expectations at ￡612million.?
But most of the improvement was the result of a sharp drop in provisions for bad loans, rather than income growth.
Expenses shot up as a result of attempts to kick-start the enterprise through focus on retail banking and wealth management, and higher regulatory costs.?
The bottom line for investors is that the prospect of a dividend restoration is being held back by the bank’s shrunken capital cushion.
A sign of future ambition is the choice of its northern Asia chief, Ben Hung, as global head of the retail bank, with China very much in sight.?
As a more nimble bank, it ought to be a tough competitor for HSBC. But over-reliance on China, when global analysts are warning about the country’s credit bubble and Xi Jinping’s increasingly autocratic rule, may not be prudent.
Can insider-trading allegations derail a takeover even after it has been given the thumbs-up by shareholders?
Of course it can, as Carsten Kengeter and Deutsche Boerse might explain.
Chinese-backed Canyon Bridge may think it has all but captured UK tech champion Imagination Technologies with its ￡550million bid.?
But the discovery that Canyon’s founder Benjamin Chow has been charged with insider trading in the US, over share purchases made by an associate during a blocked bid for Lattice Semiconductor, may be cause for pause.
If British ministers and regulators did not have reason to block the bid before, they sure do now.
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