Comment: Retail stars cannot rest on their laurels

Trading figures from Sainsbury's are likely to provide a reality check for CEO Justin King. Picture: Getty

Trading figures from Sainsbury's are likely to provide a reality check for CEO Justin King. Picture: Getty

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THESE are testing times for the bosses of Britain’s biggest supermarkets. Consumer belt-tightening aligned with fierce competition from discount upstarts has cranked up the pressure on the heads of the big four, placing their fight-back strategies under intense scrutiny.

This week will see the outgoing head of Sainsbury’s – the nation’s number three grocer – take centre stage. Justin King steps down next month after a decade at the controls and having presided over nine years of rising annual profits. It’s an enviable track record but his final set of trading figures are likely to prove a parting reality check.

If City forecasts prove correct, then the chain will have notched up a second quarter of falling sales. It has already warned that the current year’s sales performance will be flat, while analysts expect little cheer from the first set of annual results delivered by King’s successor, commercial director Mike Coupe.

Things appear a little more rosy at Asda, which has done a commendable job of taking on the German discounters Aldi and Lidl with its price roll-back promotions and hard-hitting advertising. Sales crept ahead in the group’s latest trading period. Indeed, Asda is looking like something of a star performer for its US parent Wal-Mart which is battling falling sales and demands from staff for higher wages, better benefits and more full-time jobs.

If Asda’s sales are stabilising and Sainsbury’s can see some light at the end of the tunnel with its latest numbers expected to be “less negative”, there is real pain being felt at the two chains flanking them.

Last week saw Tesco post the steepest quarterly slump in UK sales that boss Phil Clarke had witnessed in his four decades with the group. Britain’s biggest retailer has been forced to rein in its expansion plans, spend vast amounts refurbishing hundreds of stores, hire thousands more shopfloor staff and refresh its product ranges in a bid to retain market share and revive profits. That battle is ongoing and some believe that it may yet cost the scalp of its chief executive.

Morrisons, sitting in fourth place, has also been shedding market share. On Thursday its chief executive, Dalton Philips, was subjected to one of the most humiliating public dressing downs ever witnessed at a shareholder meeting, with former chairman Sir Ken Morrison describing his strategy as “bullshit”.

It is clear that the age of austerity has been a wake-up call for the big boys. Aldi and Lidl, which had already been making steady inroads, have seized on the opportunities presented, adding hundreds of stores and seeing continual double-digit increases in sales. At the same time, more upmarket rivals Waitrose and Marks & Spencer have made steady gains.

The economic downturn has led to similar trends in other industries. Car-buyers have been snapping up Dacias at one end of the market, BMWs at the other, with mid-market players such as Renault feeling the squeeze.

Financial stability is likely to see some consumers return to what they know and the explosive growth of the discounters will moderate. However, the big hitters of the retail world cannot afford to rest on their laurels.

Ferry link to Europe is an idea worth floating

IF THE slowdown in the corporate news flow in recent days is anything to go by, much of the business world has already headed off for sunnier climes. Those remaining will be planning their summer escape.

Jetting off for the annual two weeks of sand, sea and fun has never been easier. Scotland’s airports offer myriad options, whether by charter flight or an increasingly impressive line-up of scheduled connections.

Opt for a motoring holiday to the Continent and you will soon come unstuck. It’s possible to sail from Newcastle to Amsterdam, but that’s hardly the most convenient landing spot for the most popular destination: France. Otherwise it’s the long haul down to England’s southern ports or the Chunnel.

Until a couple of years back there was an alternative. At almost 20 hours, the crossing from Rosyth to Zeebrugge in Belgium may not have held much appeal to landlubbers, but it did eliminate the drudgery associated with 1,000 miles of motorway driving. Those who used the overnight service to get into the heart of Europe will testify to its cost and time-effectiveness. And it clearly ticked the green box.

Operating between 2002 and the end of 2010 for cars and lorries, the route is sadly now a freight-only service, run by Danish giant DFDS.

The challenges of attracting a sufficient level of freight traffic to make the service viable long-term have been well documented. However, there must surely be scope to rethink the axing of the passenger capacity. The infrastructure is there and demand exists among holidaymakers at either end of the route.

So here’s a plea to politicians and transport leaders to bang some heads together and resurrect Scotland’s only direct passenger ferry service to continental Europe. With a bit of will it could be up and running in time for the completion of the neighbouring Queensferry Crossing – providing a twin boost for the nation’s transport network.

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