To the rescue

The UK’s reserve of senior executive talent in retail has dried up. Ailing chains desperate to regain their former dominance are drafting in foreign bosses. Is this merely a sign of a globalised job market, or a reflection of the bleak state o

A shortage of top-quality executives has led some of the UK’s biggest retail chains to parachute in foreign talent to rescue their ailing businesses. Could it be that UK retailers, pampered by the high margins of “rip-off Britain”, are unprepared for the cut and thrust of global competition? For while UK chains look to Europe and the US for hard-nosed grocers and drapers, there is precious little demand for UK retailers over there – it is mostly one-way traffic.

Luc Vandevelde and Carlos Criado-Perez are two of the foreign retailers brought in to rescue failing UK store chains. Vandevelde is the new executive chairman of the struggling Marks & Spencer and Criado-Perez is chief executive of Safeway, the weakest of the big four supermarkets.

Both companies are facing fierce competition, falling margins and ever more powerful consumers. Before the executives’ arrival, each chain had been the subject of takeover speculation and their share prices have collapsed amid stalled sales growth.

The two are by no means the first foreigners to be drafted in to help save UK retailers. Patrick Gournay was called in from France by Anita Roddick when she relinquished day-to-day control of The Body Shop. She has reassumed the ideas role, to which she herself admits she is more suited, in an effort to return the company to its roots and rescue diving sales.

Laura Ashley and Storehouse, two other troubled UK retailers, have also turned to foreign skills to restore success. However, both Ann Iversen at Laura Ashley and David Dworkin at Storehouse returned to their US home, having failed to make an impression on profits and analysts.

It is also only two months since two of the UK’s most-respected companies – Boots and Guinness-to-Burger King giant Diageo – swapped chairmen in a move both are reported to have put down to a lack of suitable candidates.

Even Sainsbury’s, which also appointed a new chief executive this year, was forced to look outside retail and to a former employee in Prudential chairman Peter Davis.

Mike Sommers, former marketing director at Woolworth’s and now a retail consultant, says: “If Peter Davis had not previously worked at Sainsbury’s, it is unlikely he would have wanted to move to a post like that, and the job probably would have gone to someone from outside the UK.”

Observers suggest the influx points to deep-set problems for the UK retail industry. The appointments raise the question of whether British retail businesses face such a bleak future that only experience from abroad, where low prices have been the norm, can provide the key to their survival.

Industry observers say the appointments also prove there is a dearth of retailers in the UK up to the task – an assertion the industry, which accepts it is facing tough times, has rejected vehemently.

Ann Grain, director of external affairs for the British Retail Consortium, says: “I don’t think this is a reflection on the chief executives in place. It shows that retail is an international business. There is talent out there – it is just that people are not moving from the companies they are in at the moment.”

But one senior retail analyst says: “There is no denying there is a lack of talent in UK retail at the moment. The few good retailers there are do not want to leave their posts to take on what might be an impossible task.”

Boardroom exits

The analyst points to a new order in UK retail resulting from widespread ejection of bosses from their posts. M&S chairman Sir Richard Greenbury and joint managing director Keith Oates left last year after profits halved. Sainsbury’s lost chief executive Dino Adriano and last year cut 1,500 jobs, including that of brand director David McNair.

Storehouse, the Mothercare-to-BHS group, kicked out chief executive Keith Edelman and is still trying to replace him.

The roll-call reflects pressure from shareholders to deliver growth amid falling prices, squeezed margins and intense competition – an environment which has prevailed on the Continent and in the US for many years.

The analyst says: “Previously, these companies were able to increase prices – partly because of price inflation – and build up profits. The general level of price inflation is now at such low levels that they have not been able to increase prices for some time.”

Another analyst adds: “Margins have been two or three per cent in France for a long time. In the UK, five or six per cent was the norm. It is something we are not used to.”

Those who have been able to succeed in this new, harsher environment are now at an incredible premium.

Sommers says: “If you want to lift your share price – as M&S does – you need to attract someone with a good record from a successful retailer. But someone like that is unlikely to want to make that kind of move, so you often need to look overseas.”

Asda chief executive Allan Leighton and non-executive chairman Archie Norman, and Tesco chief executive Terry Leahy and marketing director Tim Mason are the four most cited executives on the wanted list of top retail companies.

Leighton has been promoted by Wal-Mart since its takeover of Asda in June and now spearheads the company’s European expansion plans, while Norman remains the darling of the City. When he announced he was to be among four UK executives taking over shell company Knutsford, its shares soared 400 per cent. In a wilderness of quality retailers, Norman’s appearance on any board guarantees a new faith among its investors.

Globalised job market

However, none of these high-flyers has yet been tempted to take on the challenge of one of their struggling rival companies. Few others are believed to be capable of dealing with the emerging global, cut-price retail market.

Head-hunters argue that the new appointments reflect nothing more than a need for businesses to take a more global view.

Martin Kendall, head of retail at Goddard Kay Rogers, says: “There will be more chief executives recruited from overseas as the retail market globalises, because the operation no longer works in a purely UK environment. The decision of M&S to appoint Vandevelde shows how much the market has progressed.”

He adds: “Retail is fundamentally a domestic sector, although it is clearly beginning to globalise. Companies in the already globalised packaged goods sector have a higher proportion of senior executives from overseas.”

Elizabeth Marx, head-hunter at Norman Broadbent International, says: “Businesses are becoming bigger and more complex, and so it is increasingly difficult to find chief executives of the calibre necessary to run them effectively. So it becomes necessary to cast your net globally when recruiting.”

Foreign experience

Both M&S and Safeway admit the appointments of Criado-Perez and Vandevelde were based on their experience in tough foreign sectors.

In his previous job as chairman of French supermarket chain Promodès, the Belgian Vandevelde recently secured a merger with rival Carrefour. The deal creates the world’s second largest retailer after Wal-Mart, and aims to bolster the chains from domination by the other retail giants, including Dutch group Royal Ahold and Wal-Mart itself.

A spokeswoman for M&S says: “We always said we were looking for someone with international experience, who was very operationally-minded and had experience of mixed retailing. It has been a tough job trying to find someone who fitted the bill in the UK.”

Safeway has gained its own protection by securing the services of Argentinian Criado-Perez, formerly a chief in Wal-Mart’s international operations.

Safeway denies he was brought over solely on the basis of his knowledge of the Arkansas giant. However, his experience is unlikely to have been harmed by his time there.

On his appointment as Safeway chief executive in November, he reassured analysts by stating that the UK market is by no means the most competitive he has encountered.

‘The Carlos Effect’

It is these clear-headed statements, accompanied by a focused strategy – particularly from Criado-Perez – that has led to new confidence in the City and highlighted for many the serious problems in UK retail. “The Carlos Effect” has already become part of City parlance.

One analyst says: “Foreign chief executives seem to have a clear-cut approach to business that leads them to focus more effectively on the bottom line. They come from hard-nosed business school backgrounds which have taught them to put a firm strategy in place and execute it. It is the one thing missing from most of our retailers.”

The initial signs for foreign recruitment are good – at least for Criado-Perez. A strategy of devolving decision-making to store managers has helped raise Christmas like-for-like sales – in stores unaffected by expansion – by 6.1 per cent.

Investors in M&S will be hoping for similar miracles from Vandevelde, who is known as a strong operations manager and who is expected to assume a hands-on role. The future for current chief executive Peter Salsbury has become slightly cloudy since his arrival.

However, for investors, there is little room for sentiment. If these new storm-troopers from abroad can succeed in keeping our retailers alive, we could see overseas executives dominating UK high streets and retail parks in the near future.

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Tom Fishburne is founder of Marketoon Studios. Follow his work at marketoonist.com or on Twitter @tomfishburne See more of the Marketoonist here

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