Blackfriar: Giant flounders while small-scale champion prospers

IT was a tale of two very different retailers at Tesco and Nisa this week.

Retail giant Tesco, the world’s third biggest retailer, suffered the ignominy of key ratings agency Standard & Poor’s placing it on “negative” outlook as a result of shrinking profits and a weakening of its stranglehold on the UK market.

Earlier this year Tesco shocked the market with its first profit warning in 20 years.

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Standard & Poor’s said pressure from its rivals, weak consumer spending and lower profits could trigger a downgrade.

Tesco’s chief executive Philip Clarke has laid out a £1bn plan to improve customer service in UK stores, which was heavily criticised over Christmas as the weekly shop became a truly grim experience for Tesco shoppers.

While this £1bn investment will boost sales in the future, Standard & Poor’s warned that for the time being it will hit trading margins.

It was a very different story at convenience store chain Nisa, which reported record turnover of £1.58bn in the year to April 1.

The Scunthorpe-based group is benefiting from the trend towards daily top-up shops rather than the huge weekly or fortnightly shopping expedition.

Just a few years ago it was acceptable to chuck out any food that had gone past its sell-by date.

In these new austere times when shopping at discounters such as Aldi and Lidl is a fashion statement for the middle classes, this throwaway culture is very much frowned upon.

At the same time rocketing petrol costs mean that people would rather pick up a few items on their way home each day.

Unlike its rivals, Nisa is run as a collective. Cornershop owners can sign up to its goods and benefit from cheaper prices due to the buying power of having nearly 4,000 stores.

Shopkeepers can either keep their own name or opt for the Nisa brand. It’s a powerful proposition.

Nisa was set up 35 years ago to protect the interests of independent retailers against the growth of the big retailers. At a time when people are increasingly worried about the health of their high streets Nisa is helping small retailers that could have gone under during the recession.

Over the years Blackfriar has learned to be very wary of companies that blame the weather for their misfortunes.

There are some exceptions to the rule, for example, Huddersfield-based paving specialist Marshalls which simply can’t operate in the wet weather.

But for retailers and food producers, it’s not a convincing argument. They pay weather forecasters a lot of money to foresee the future and advise on general trends.

Indeed anyone who has lived in Britain for the past five years can give a fairly accurate summer weather forecast – expect rain frequently with the odd dry day and it won’t be very warm.

M&S has been criticised for blaming the weather for some of its recent misfortunes.

Part of its problem is it has such long lead times. Nimbler rivals can change their clothing ranges in a fortnight if the weather takes an unexpected turn. M&S is closer to six weeks.

So posh sausage maker Cranswick is to be congratulated for not blaming lousy barbecue sales on the dismal weather.

The Hull-based group said barbecue sales have been disappointing during some of the wettest weather on record, but it has a focused management team that has changed course as a result.

Sales have been rescued by a range of new non-barbecue products such as premium sausage rolls for Marks & Spencer, a new range of kebabs and new olive and pasta ranges. Indeed the group said sales for the three months to June 30 increased by 7.4 per cent to £209m.

Companies have to be nimble to survive in this historically difficult economic environment. Those that can’t move quickly will be left behind.

IF you thought the banking sector’s reputation could not sink any lower after the credit crunch, the last few weeks have confounded that.

From HSBC’s lax anti money-laundering controls, to Barclays’ manipulation of the London Interbank Offered Rate (LIBOR), to the £9bn banks must pay out for mis-selling payment protection insurance, this is a sector in turmoil.

With a customer-focused ethos, building societies are well-placed to benefit. Skipton Building Society’s chief executive David Cutter says there’s “never been a better opportunity to capitalise on the mistrust of banks”.

Figures from the Building Societies Association show mutuals are moving in the right direction. Gross mortgage lending by mutuals was up 38 per cent to £14.1bn in the first six months. Mortgage approvals by mutuals were up 45 per cent year-on-year.

There is still a long way to go – building societies are behind only one in five mortgages, and hold only 22 per cent of deposits.

But it looks to Blackfriar like the tide is turning.