LONDON BRIEFING: THE OPENING bell sounds this morning in the heavyweight retailers' title fight. In boxing terms it is Wladimir Klitschko versus Alexander Povetkin or – to use a footballing analogy that will chime with Tesco's Merseyside-born chief executive Philip Clarke, Liverpool versus Manchester United, with J Sainsbury wearing United's strip.
The two retailers go head to head on their half-year results with Tesco, after years of high-street dominance, feeling the pain.
The retailer, which has yet to adjust to life without its empire building former chief executive Terry Leahy, is set to report its first fall in profit for nearly 20 years. Meanwhile the old foe Sainsbury’s is poised to grab the plaudits with an expected rise in sales of more than 1 per cent.
Shopping habits have polarised in the recession, sending profits at upmarket stores such as Waitrose and cut-price chains like Aldi soaring. This has left Sainsbury and Tesco fighting it out for UK retail-land’s “squeezed middle” – and the Tesco juggernaut is losing ground.
Tesco’s share of the UK grocery market fell to 30.9 per cent in August from 31 per cent last year. Sainsbury’s meanwhile increased its share by 4.6 per cent, giving it 16.5 per cent of the market.
The retailer’s problems started in its international empire, which includes 138 stores and 15,000 staff in Ireland. The trouble-spots are China, where economic growth is rapidly slowing, and its Californian franchise Fresh and Easy, which has never really cracked the tough US market.
The difficulties, say critics, date back to the dying of days of Leahy when money was funnelled from the established British business to feed growth abroad. Analysts argue that Tesco’s results were massaged to keep the topline looking good, while British stores were starved of cash, sending shop- floor standards plummeting.
Clarke, in recognition of this, is investing £1 billion on refurbishment, new staff and voucher promotions at its UK stores. The pugnacious Tesco boss, who is viewed as slightly unlucky to have been left carrying Leahy’s can, unveiled the plan to journalists at a Tesco store in Hertfordshire last week.
It can’t come soon enough. With 20-minute queues, angry customers and empty shelves, a trip to my local superstore in Hackney feels like a preparation for some apocalypse.
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AN ODD thing happened in London this week; after a summer of anti-banker mania, voters elected a financier to public office, fanning hopes that the vilified race might finally be let out of the stocks.
The tiny but super-powerful City of London borough returned Roger Gifford – the UK manager of Swedish bank SEB - as its lord mayor, the first time in eight years it has selected a banker.
After a summer of financial scandals that claimed the scalp of Barclays boss Bob Diamond and stripped Standard Chartered of its poster-child status, Gifford’s election has prompted optimistic mutterings in London’s banking community that the sans-culottes might be persuaded to put away the guillotine.
That seems unlikely for a number of reasons. First, the mayor of the City is an important job; he or she takes the lead on key borough issues such as the eviction of the St Paul’s “Occupy” protesters and is responsible for selling London abroad as the world’s financial services capital.
In democratic terms, though, the City is a rotten borough, dominated by the votes of the management of its biggest financial services businesses. Gifford’s election can hardly be said to reflect public opinion on bankers, which remains at an all-time low.
Second, Gifford does not represent a return to Wild West style investment banking. Not only does he work for a bank from Sweden – a nation that remains a byword for decency – but he was schooled at Warburgs, the gentleman’s merchant bank that is now a part of Swiss giant UBS. Many old-timers in the City continue to believe the crash would not have happened had the values of the pre-Big Bang era been preserved.
And third, the financial scandals keep on coming. Just outside the City walls at Southwark Crown Court, Kweku Adeboli, a trader from that same Swiss bank, is revealing more each day about the inner workings of London’s investment banks as he is tried for his involvement in rogue trades that lost UBS $2.3 billion. Meanwhile the Financial Services Authority announced this week that Deutsche Bank managing director Martyn Dodgson will be the next banker in the dock, this time over an alleged £3 million insider trading ring.
All in all, there’s plenty to keep Madame Defarges entertained for a while.
