Companies in the news ... and how they were assessed
Tesco Bank: current accounts and cucumbers
Investors have treated Tesco’s “online bank robbery” ( see page 23) as “a hiccup that could happen to anyone”, said Nils Pratley in The Guardian. They might want to take a closer look. “The direct cost of reimbursing customers may be merely a rounding error for a company of Tesco’s size”, but the “knock-on effects” could be “severe”. Tesco “intends to be big in banking”, and until this week, one of the main factors in its favour was its status as a brand that enjoyed greater public “trust” than its disgraced older rivals. That is now in jeopardy, said Allister Heath in The Daily Telegraph. “If it wants a future in financial services”, Tesco “needs to make sure that something like this never happens again”. Investors may figure that “cucumbers now matter more to the renascent retailer than current accounts”, but the financial offshoot was “a vital source of unimpaired earnings during Tesco’s darker times”, said Jonathan Guthrie in the FT. For that reason, CEO Dave “Drastic” Lewis is unlikely to sell the bank – but after this lapse he may “put the business on a tighter leash”. For Tesco Bank’s high-rolling boss, Benny Higgins, the days of “wine and roses appear to be over”.
M&S: a “medium radical” plan
Alexa Chung’s latest range for Marks & Spencer hit the shelves last week amid predictable reactions from loyal customers, said The Sunday Times. “Mrs M&S”, the doughty middle-aged shopper identified by CEO Steve Rowe as crucial to the clothing business’s recovery, is unlikely to have been impressed by the “shiny PVC miniskirt” on offer. But Rowe’s latest gambit – a major cull of the clothing business as part of a greater push into food – will probably find more favour with investors. Rowe certainly needs to do something to stop the rot, said Caitlin Morrison on City AM. This week’s half-year figures, showing an 18.6% fall in underlying pre-tax profits to £231.3m, were once again blamed on the “struggling clothing arm”. M&S has now confirmed it will shut 30 stores completely in Britain, while 45 “full-line” stores will be “downsized or replaced” with Simply Food stores. The group also plans to exit ten loss-making international markets, including the French flagship store on the Champs-élysées, marking the second time the retailer has retreated from the continent. Liberum analyst Tom Gadsby described Rowe’s plan as “medium radical”. Time will tell if that is enough.
Sports Direct: spying farce
MPS promised to monitor the progress of Sports Direct, when they slammed it for its “Victorian working practices” earlier this year. And they were as good as their word: a surprise delegation turned up at the retailer’s Shirebrook warehouse earlier this week. However, the visit swiftly “descended into farce”, said Ashley Armstrong in The Daily Telegraph. After “a short stand-off” with staff, the group of six MPS were eventually given access, only to discover that their private discussions were being monitored by a secret camera that had been smuggled into the room with “a tray of sandwiches”. Had the MPS been allowed an unrestricted “brisk trot around the aisles”, they might have declared their work done, said Nils Pratley in The Guardian. But after that kind of treatment, you can bet “they’ll be back”. Sports Direct “doesn’t know when to stop shooting itself in the foot”.