ALEX BRUMMER: It’s time to exile the retail gloom

January is often the most dangerous month for retailers. The rent must be paid for the last quarter of the previous year and if Christmas fails, the curtains can be drawn.

To listen to the doomsayers, the 2022 holiday season was set to be particularly grim given tight household budgets, railroad strikes and skyrocketing retail utility bills.

Cheerful real-time data from analysts Springboard, who tracked footfall in retail parks and the High Street, was seen as an anomaly that didn’t tell the true story.

With data pouring in from vibrant brands such as Next and German value chain Lidl, as well as local favorites such as Greggs and Boots, the picture is more optimistic than predicted.

There have been problems. Wilko needed money. Supermarket Morrisons is impacted by a top-of-the-market sale to private equity kingpins Clayton, Dubilier & Rice.

Plans to dramatically improve margins have met setbacks amid the rising costs of debt interest.

In the run-up to the holidays, the British Retail Consortium (BRC) did not bring good news.

Chief executive Helen Dickinson stated in early December ‘the cost-of-living crisis means many families could reverse their festive plans’.

In fact, the latest BRC figures show that retail sales increased by 6.9 percent in December 2022, more than three times the 2.1 percent increase a year earlier.

In announcing the rise, Dickinson managed to throw a negative spin, noting that it was a year in which “inflation soared and consumer confidence plummeted.”

Despite the gloomy forecasts, the glass was fuller than the nation had led to believe.

Cost pressures did not stop people from spending money. Adjusted for inflation, trading volumes declined. But the measure that counts most for retailers is cash sloshing through the registers and tapped on card readers.

How was the increase possible? Amid the misery, households still wanted a good time. Gift-giving shifted from high-end electronic items to fashion and beauty products, but demand remained unabated.

The fortune tellers underestimate two post-pandemic factors. Large savings accumulated in Covid-19 have never been fully spent.

And there were fewer credit cards swept to the limit than in the past. The BRC warns retailers will face headwinds in 2023 due to further increases in the cost of living.

Perhaps, but inflation is expected to fall dramatically, wholesale gas prices have plummeted and employment remains strong.

All reasons to cheer.

Shake the tree

Founders with large stocks have a habit of throwing grenades from the sidelines. Stelios Haji-Ioannou has often been a thorn in the side of his successors at Easyjet.

So Peter Hargreaves’ attack on the board of investment platform Hargreaves Lansdown (HL) is standard.

As a 20 per cent investor in his former company, he has a right to criticize the performance of the stock price, which caused the stock to fall from a peak of 2419p in May 2019 to 1399p a year ago and 874.6p yesterday. It doesn’t look good for a money manager.

Hargreaves says HL has gotten fat and wants the workforce cut in half to about 1,000. There’s always room for cost cutting, but as Elon Musk learned on Twitter, you can go too far.

The founder is fully within his right to criticize the inflated board salaries, with non-executive chairman Deanna Oppenheimer collecting £362,600 in awards last year.

Outgoing CEO Chris Hill saw total compensation fall by £800,000 in 2022, but still took home £1.9million.

This despite the catastrophic 40 percent drop in share price during his stewardship.

It was also under Hill’s watch that Neil Woodford’s investment empire imploded, exposing more than 300,000 clients to losses.

Through his nominee board member, Adrian Collins, Peter Hargreaves could have kept his criticism within the family.

But like Prince Harry, he felt called to break the silence.

Swing the axe

An acquaintance at Bank of America Merrill Lynch dreaded January 1.

A message would come in from HR reminding him that the bonus pot was empty and it was time to get back on the bike.

As rewarding as the good times are at investment banks, certainty is never an option. Goldman Sachs is laying off 3,200 employees this week amid a sharp drop in income in 2022 and a 40 percent drop in the bonus pool.

Unlucky days.