Hubris of harmful deals
Retail never leaves the spotlight at present. the coronavirus always was going to highlight the corporate blunders of the past.
Dixons Carphone is doubtless speaking the truth when it says that its ruthless decision to close all 531 Carphone stores was not virus-related. But one has to ask whether chief executive alex Baldock would have been quite so decisive were it not for the disease.
the current company team cannot be held responsible for a five-year-old £8bn merger between Dixons and Carphone which was illthought-out and went horribly wrong.
as is the case with far too many marriages of supposed equals executives often leave the scene clutching big cheques.
Other stakeholders lose out as the hidden costs of the deal, such as goodwill, come back to haunt earnings and dividends in later years.
One of the architects of the transaction, former Dixons boss Seb James (now running Boots), could barely contain his enthusiasm on the day the deal was sealed.
‘We’re creating an organisation for the future where the products are just beginning,’ James gushed. His quote finished with a flourish about end-to-end connectivity, whatever that may mean. Having put the two enterprises together, the management failed to rationalise by closing shops close to each other. it went through the fiction of having separate Carphone and Dixons teams in the same stores, defeating the whole promise of end-to-end service.
as Dixons Carphone stood still, the main mobile providers opened up their own chains of stores, offering a variety of cell phones at different prices and an array of contracts, rendering Carphone irrelevant in the UK. the main unique selling point, choice and service – from an all-graduate staff pioneered by founder Charles Dunstone – became muddled.
Remarkably, the Dixons side of the enterprise, with its rich variety of electronic and white goods (Currys) has come out the other side in reasonable shape in spite of the online threat, the neverknowingly-undersold model of John lewis, and much else.
it turned the tide by improving service rather than just relying on the more traditional Dixons model of heavy discounting and making the margins count by selling warranties. the timing of the Carphone closures is unfortunate coming as it does as UK plc slams on its brakes in the face of an epidemic.
the closures are a sharp reminder of how hubris in the C-suite drives bad deals. Laura’s lament
HeRitage has long been an important quality for British enterprises. Burberry, cut loose from the ownership of great Universal Stores, proved adept with the help of some brilliant creative leadership at turning an emblematic raincoat into a highfashion brand.
laura ashley, which has fallen into administration, also traded on Britishness. Founded by Bernard ashley and his wife laura in 1953, it came to symbolise all that was best about traditional fabric and clothing designs reaching back to Victorian times. When i was living in Washington DC in the 1970s lady Henderson, spouse of the ambassador Sir Nicko, turned the lutyens treasure of the British ambassador’s residence into an emporium of laura ashley. My own wife tricia, a costumier, designed a range of simply cut wedding dresses for the ashley stores.
after laura’s death in 1985 the company continued to expand under the stewardship of Bernard and went public, overexpanded and struggled. in 1998 it was rescued from receivership by Malaysian investor MUi. the enduring mystery is how, without the creative genius of its founders, it has lingered on for so long.
the success of Cath Kidston, who adopted similar motifs, suggest it was more than the dated floral designs. the new owners and the management simply were unable to capture the flair and update the palette. the coronavirus is a convenient excuse to shut up shop. But ashley has been dead on arrival for an age. Lock-out
ONe of the surprisingly convivial places where the more mature investor can enjoy a cup of tea, some craft beer, a sandwich and even a good row is during the spring annual general meeting season.
Not this year its seems. the Chartered governance institute is advising firms to adapt agMs for the Covid-19 era by delaying (if the notice hasn’t been issued), postponing or adjourning.
it advocates online voting, offering private investors an opportunity for a public hearing later in the year. another setback for shareholder democracy.