The post-election retail sector is moving into a virtuous circle

A feelgood factor is emerging that, coupled with economic growth which the election has delayed, could lead to a retail boom. By George Pitcher. George Pitcher is chief executive of issue management consultancy Luther Pendragon.

So there we have it. And, as I indicated last week, a jolly good thing it should be for business. That said, Tony Blair and his apparatchiks will now be tempered in the harsh furnace of government – we will have to watch with care that they deliver on the crucial agendas for business: Europe, the economy and regulation.

But enough of politics. It’s time to turn our attention to what is customarily called “the real world” of earning a living in developing markets – not something that politicians necessarily have to face. Their job is to create a climate in which we can prosper, but the prospering is down to us. It is with that in mind that I return to that elusive and much misrepresented phenomenon, the feelgood factor. In particular, there are some encouraging signs that retail markets are shaking themselves from their torpor.

Any recovery in retail sales or the valuations of retailers probably comes too late for poor old Sears, the Selfridges-to-shoes conglomerate. It is not the time to gloat over the corporate demise of its chief executive Liam Strong, any more than over the political demise of John Major. I and many others have been biliously critical of both individuals and, as someone kept saying recently, enough is enough.

But, even here, there is room for encouragement. The exercise in recovery undertaken by Strong at Sears has proved fruitless, but that is not to say there can be no future for its constituent parts in another life. Corporate doctor David James is no coroner – he is not there to ascertain the cause of death, but to deliver new fruit from the aged loins of Sears. Its break-up should be viewed as a beginning rather than an end and it will be fascinating to see who acquires parts of the beleaguered British Shoe Corporation (BSC) and whether they can identify and exploit the demand for shoes that must be out there.

If there does turn out to be seeds of regeneration within Sears, then any feelgood factor born of an improving economy among consumers, postponed by the vicissitudes of the election process, could be expected to further push the economy.

Elsewhere, there are glimpses of this virtuous circle beginning to emerge. Another kind of corporate doctor has pitched up at WH Smith, where former mail-man Bill Cockburn is struggling to put some shine into operations. The arrival of Beverley Hodson as managing director of the core WH Smith chain was deemed sufficiently encouraging to put 9p on the company’s share price of 466p last week.

Hodson, as it happens, is a former managing director of Dolcis, the shoe chain at the heart of BSC’s troubles. So no one need suggest that she comes with a starry-eyed notion of consumer sales. She must also know that the abrupt departure of her predecessor, Peter Bamford, means the job is no cushy number.

Bamford was the ninth director to quit WH Smith since its profits warning two years ago, but progress has been made and Hodson’s role will be one of development rather than treatment. Anecdotal evidence demonstrates that the core shops have started to compete with slicker high street rivals. It will be much to Hodson’s credit if she can consolidate that process. Again, this could contribute to the sort of consumer upturn that feeds off itself, always assuming that the economy continues to hold its solidity.

If the DIY sector is any sort of bellwether of economic solidity, then this kind of scenario is by no means over-optimistic. A buoyant trading statement last week from Wickes, which is emerging from somewhat special difficulties in the shape of “colourful management”, does much to boost retail prospects as a whole.

The sector was as dead as a Scottish Conservative in 1995, but it grew by some six per cent last year and it may be doing even better now. We should not be carried away with any notion that DIY is about to step onto some broad sunlit uplands. B&Q and Sainsbury’s Homebase appear to be doing well, but Do It All and and Texas are still struggling. Wickes will have its work cut out to maintain the standards of last week’s statement.

But the very fact that we can identify any bull points in a retail sector thought incapable a couple of years ago of surviving with the same cast-list demonstrates that the feelgood factor may not prove quite as elusive as the yeti.

There could be much else besides to consider in the retail sector. As ever, the performance of grocery giants such as Sainsbury’s, Tesco and Safeway will be key.

But, if the feelgood factor that should have coat-tailed an improving economy has been postponed until after the general election, then catalytic events at Sears, WH Smith and Wickes could prove pointers to a brighter retail scene.

None of these catalytic events in them selves amount to even a single swallow this spring. But, taken together, they could indicate the sun has just begun to come out at the shops.


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