Ted Baker chief says rising rents and business rates are putting pressure on retailers
“Brexit Britain in high-street boom, as shoppers prove doom-mongers wrong!”
Or “Retailers’ shares hit as sales fall by most since March 2010!”
Lombard offers these two seemingly contradictory headlines not to hedge bets, but to show what you’re missing.
Something similar to the first headline will have appeared in a tabloid newspaper over the past 24 hours — probably accompanied by a chart in which a 1.4 per cent monthly rise in retail sales in February is represented by a 6-inch red, white and blue bar.
Equally, something like the second headline would have featured on a broadsheet newspaper’s economics page, with a dense explanation of why the rolling three-month change in retail sales is a better metric.
On FT.com, all you got was “UK shoppers started spending again in February”. Accurate, but the other news treatments better capture the contradictory market sentiment toward retailers.
Ted Baker, the UK and international clothing brand with only 20-odd full-price high street stores — and faster growing wholesale and ecommerce operations — on Thursday reported a 10 per cent improvement in annual sales and a 12 per cent rise in pre-tax profit. And its shares fell 6 per cent.
Next, the more domestic UK clothing retailer with 540 high street stores and an online operation reliant on dwindling credit customers, reported its first drop in profit for eight years and said it was “legitimate to question” whether its shops were an asset. And its shares leapt 8 per cent.
So has sentiment toward the high street improved? Ted Baker’s chief executive Ray Kelvin suggests the only thing that has changed is the way success is measured, for different sales channels.
If companies position themselves as a brand — as Ted Baker does — and tell shareholders they are not really competing with the high street, they lose the ability to manage expectations against high-street comparatives. Or bar charts. With no expectation that its preferred sales channels might worsen, it becomes harder for Ted Baker to beat forecasts — a fact not lost on staff whose bonus pool fell from £2.7m to zero after falling short of targets.
One analyst even calculated that at the lower end of an ambitious 12-15 per cent compound growth target, the group’s earnings per share would miss current consensus estimates.
If anything, Ted Baker’s problem is being too like its improved distribution system: delivering what it said it would — and no more.
Failure to Crest wave
House builder Crest Nicholson was lucky this time, says Kate Burgess. Nearly 60 per cent of shareholders voted against the remuneration report. But they could have voted down the remuneration policy, too, which would have been binding.
Investors complain the builder cut profit hurdles to which management incentives are fixed. Nobody likes taxi drivers who recalibrate meters to charge more for travelling shorter distances and demand tips as their due.
However, viewed through executives’ eyes, Crest may struggle to achieve as good a performance in the future as it has in the past. Schemes must reflect that or they won’t work as incentives.
Crest and its shareholders could have been talking about different things, and probably were. Incentive schemes are horribly complex and each investor kicks off for different reasons.
In the past shareholders might have been made easier by a quiet word with the chairman of the board. But in post-Brexit vote Britain, executive remuneration sets off magnesium flares of discontent about the widening gap between pay at the top and wages at the bottom. The prime minister has vowed to do something about it. That might mean making all pay votes binding.
Fund managers are nervous of firing live rounds. But they know they must make a stand against over-tipping or be caught on the wrong side of the political divide.
Companies, including BP, are working hard to avoid the pyrotechnic outbursts of last year. However, Crest Nicholson won’t be the last to suffer a big no vote because — despite the best intentions — boards and backers do not understand each other.
Stobart on blind corner
News that Eddie Stobart is to float on Aim will have picture editors cooing over articulated lorries. But it should have business editors calling up archive stories. This is the company formerly spun off by the founder’s son William, leveraged up and involved in complex intercompany transactions, now being sold back to the equity market. It is also a business that once underwent a boardroom coup, a counter-coup, and ejection from the FTSE 250. Nostalgic investors might want to remember the sign often found on unfeasibly long vehicles: Blind Spot — Take Care.
Pay: kate.burgess@ft.com