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M&S: What kind of recovery?

Robert Peston | 09:45 UK time, Wednesday, 7 July 2010

Marks and Spencer's shareholders won't know quite what to make of Stuart Rose's last months in charge - and nor, I suspect, will the chancellor of the exchequer or the governor of the Bank of England.

Woman carrying M&S bagsOn the one hand, a goodish number of investors will embarrass the company at the forthcoming annual general meeting, by voting against the retailer's remuneration practices: they don't like the signing-on package awarded to the new chief executive, Marc Bolland, worth up to £15.1m, and they've been consistently uncomfortable with the magnitude of variable rewards paid to Rose and payable to others in the future.

On the other hand, M&S's sales performance for the past three months looks remarkably good: group sales rose 4.4%; UK sales were 4.8% higher; British general merchandise increased an impressive 7%, or 6% on an underlying, like-for-like basis.

The performance would look better still, by 0.4 of a percentage point in general merchandise, if adjustments were made for the absence of the moveable trading feast, Easter, from this year's figures.

None of which is redolent of an economy in the UK that is in theory only just getting off its knees after the deepest recession since the 1930s.

And according to the latest forecast produced for the chancellor by the Office for Budget Responsibility, household consumption in Britain is supposed to rise by a meagre 0.2% this year.

So is there evidence that consumers are spending more and saving less than the Treasury and Bank of England have been expecting?

M&S believes it is doing better than other retailers - which is characteristic of this venerable company in periods of economic uncertainty - such that its market share of UK clothing sales rose 0.50 of a percentage point to 10.7%. And it would plainly be wrong to read too much into statistics about three months of trading at a single retailer, even one as sizeable in clothing and general merchandise as M&S.

But making allowances for all of that, it's plain that British shoppers are feeling a bit more gung-ho than might have been expected.

As for M&S, it takes the view that one swallow doesn't make for an extended retailing summer, which is why its share prices has fallen this morning. Its statement says:

"We have made a good start to the financial year, but following the recent Budget and the actions proposed to reduce the national deficit, including the increase in VAT, we are cautious about the outlook for consumer confidence and spending and continue to manage the business accordingly."

Here of course is the delicious paradox. Sir Stuart Rose was one of the business leaders who signed a letter before the general election urging any new government to crack down on government waste.

With the coalition government announcing the biggest cuts to public spending in living memory, Rose is certainly getting his wish - though Rose would never have asked Santa for the VAT rise which is coming in January.

In the round, the outlook for retailers over the coming few years still looks pretty daunting.

The gross indebtedness of UK households remains at record levels - more than 100% of GDP - even as we all save a little bit more on average more than we had been doing.

On the assumption that households continue to endeavour over the coming few years to repair their finances by saving a bit more and spending a bit less, then - according to the Office for Budget Responsibility - household consumption will increase at an annual rate of 1.9% over the five years from 2011 to 2015.

That may not look too bad, but is around a quarter less than the annual average growth rate of 2.5% in household consumption during the boom years from 2003 to 2007.

One way of looking at this is to say that for consumer-facing companies, the lower trends to household spending will cost them around £20bn in lost sales every single year by 2015.

So retailers can probably discard any hope of a return to the golden years of the decade before 2007 and it would be sensible to assume that we haven't seen the last retailing bankruptcy of this phase of the cycle.

Nor is that as bad as it could get. If inflation were to rise in a way that looked endemic rather than short term, such that the Bank of England felt obliged to raise interest rates, then there would be a profound squeeze on consumers' spending power - and retailers would be back in the hell of late 2008.

Comments

  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    This is only one piece of evidence that we were slowly coming out of the recession - I use the past tense.

    As the ConDem cuts take billions out the economy, millions of public sector workers stop spending in fear and millions more in the 'private' sector, dependent on state contracts, are made unemployed this is inevitably going back into deep recession.

    Local news is showing sales figures from 3 large local cities. In two of them sales are up from last year, in the third city sales are 18% DOWN. Surprise, surprise - that is the city with the tory council which has already started the scorched earth cuts.

  • Comment number 3.

    Robert,

    Are you struggling towards expressing the view (that we all - well most informed observers, have ) "The Recovery is 'pants'" ?

  • Comment number 4.

    London and the rest of the UK are becoming distinctly separate economic units. London bucks the trend with stronger retail sales growth due to its affluent shopper base and a high proportion of tourists.Extrapolating too much from these figures could well be mistaken.

  • Comment number 5.

    £15.1m for signing on? Joke.

    Another case of shareholders not doing their part. Time for reform of business from top to bottom.

    Once upon a time a man had an idea that he would raise capital by selling shares in his company and that those who bought them could not get their money back from the vendor, but could sell the share(s) on to someone else. And so the stock market was born.

    But... are we stuck with that for all time? Or can we see the problems and do something better?

    Perhaps one shareholder one vote? A bit extreme perhaps but some kind of watering down of the idea that the voting is stitched up by a few people wielding massive voting power and who do nothing with it but say Aye to everything that is proposed. These people are allowing the supposed custodians/stewards of companies to shovel large chunks of the company's cash into their own pockets. One has to wonder what incentives might be on offer to do that.

    One shareholder one vote along the lines of one man one vote in politics may be asking for people who have no business knowledge to have an equal say with those who do, but it seems to me that what we need in shareholders is common sense and a sense of decency much more than anything else. If we are to prevent more troughing by fat-cats and their cronies the whole system is in urgent need of reform in a way that prevents any possibility of tinkering to engineer your own way.

    One shareholder one vote at least does that - you can't realistically bribe everyone who has one share!

    NB I'm not suggesting that this is commonplace, or even that it happens, but it does seem strange to me that fund managers never seem to do anything about these packages being voted through and they must know that it's wrong.

  • Comment number 6.

    #1 Jacques Cartier

    You just have a problem with anyone earning high salaries. Retail/Banking/Anything!!!! You must have enjoyed the last 2 years of down turn as it will make you feel better.

    It will improve and good people will make good money, just deal with it!!

  • Comment number 7.

    Are the M&S results further evidence of a generational divide in our economy?

    Older people, including the 'baby-boomers' are more likely to be higher paid, less likely to have lost their job in the last two years, more likely to be feeling a benefit from low interest rates on their remaining mortgages, more likely to be enjoying or looking forward to enjoying a generous pension, more likely to be enjoying rental income from a second or third property. They are also more likely to be M&S shoppers?

    Can anyone find a retailer currently performing as well who's target demograhic are the young? (and that arn't budget retailers)

  • Comment number 8.

    @ 4. At 10:40am on 07 Jul 2010, shireblogger wrote:

    > London and the rest of the UK are becoming distinctly separate
    > economic units. London bucks the trend with stronger retail sales
    > growth due to its affluent shopper base ...

    The less space they have in London, the more stuff they try to cram into it. Weird....

  • Comment number 9.

    " As for M&S, it takes the view that one swallow doesn't make for an extended retailing summer, which is why its share prices has fallen this morning."


    vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvrooooooooooooooooooooom

    So,the M&S store beaters are no longer on their knees waiting for the first swallow,they are now horizontally inklined waiting for retail therrapy from their up and coming shareholders with a rose in their buttonhole... they can go up the aisle together in the langeree dept for all Ikea.

  • Comment number 10.

    It's ONLY base rate at 0.5% that is keeping the patient alive. Some disposeable income is going into raising the level of housing equity, through higher rates of debt repayment. But not all disposeable income is going this way, some is finding its way into retailing.

    If shopkeepers want to do maximum damage to their livelihoods all they need do is to try and raise their prices, cause inflation, resulting in higher base rates, (in theory to mop up any perceived excess disposeable income not going into debt reduction.) Shoppers too should mind what they spend and give retailers a hard time with price rises, particularly on any imported goods.

  • Comment number 11.

    Knickers Robert - it's all about the knickers.

  • Comment number 12.

    6. At 11:10am on 07 Jul 2010, windchrisleeds wrote:

    "#1 Jacques Cartier
    You just have a problem with anyone earning high salaries. Retail/Banking/Anything!!!! You must have enjoyed the last 2 years of down turn as it will make you feel better. "

    Meanwhile....back in the windchrisleeds world his dustman is paid a whopping £2m bonus even though 2 years later, after he leaves it's discovered he was dumping the rubbish in the river. Now the council have to spend windchrisleeds's taxes cleaning it up.

    Of course this could never happen - it's only in the fantasy 'profit making world' can this be possible. People with real jobs need not apply.

    There is no problem with high earnings - there is a problem with high salaries.
    If any CEO cen demonstrate how he 'earnt' his wage then he should be allowed to keep it. However as they can only really prove how they extracted it from consumers using their market position - then they are no better than any other exploiter.

    Of course market 'law' says the consumer can go elsewhere - but doesn't market 'law' also drive larger and larger companies holding more and more market share, thereby restricting competition?

    Soon you run out of places to 'go elsewhere' - but by the time the consumer works that out it will be far too late. Meanwhile the plebians of Britain assume that high wages = high productivity.

    ....if only they knew...

  • Comment number 13.

    "5. At 10:53am on 07 Jul 2010, chris911t wrote:

    Once upon a time a man had an idea that he would raise capital by selling shares in his company and that those who bought them could not get their money back from the vendor, but could sell the share(s) on to someone else. And so the stock market was born"

    hang on, wasn't it "that those who bought them were buying part ownership of the company, to risk the lot if the company went under, but share the fruits of success if the company did well"? I guess it's up the individual share purchaser whether they buy shares because they believe in the company (fundamentals) and thereby derive value as much from dividends as growth or alternatively are looking for a quick play which obviously relies on selling the things (speculation? all kinds of terms for this - although it's not my style, I don't think it's necessarily a bad thing as it keeps the share-market ultra-liquid and snouts out inefficiencies ruthlessly).

    "One shareholder one vote along the lines of one man one vote in politics may be asking for people who have no business knowledge to have an equal say with those who do, but it seems to me that what we need in shareholders is common sense and a sense of decency much more than anything else."

    This is reasonable on the basis that the existing system of one share one vote means that the majority of power ends up with pension funds etc that don't seem interested in calling the company to account for things like signing up a CEO for £15 million in a subdued economic climate.
    But on the other hand, this could have undesirable outcomes like certain people, with zero interest in actually investing in the company, buying one share each en masse and dictating things that don't necessarily make things any better for the company or the shareholders!

  • Comment number 14.

    It just does not make any kind of sense. Bank lending is near to nothing. Unemployment up. Job cuts up. Public spendig slashed. Housing (outside London) dead. But strangely the metal markets are on the up. Liqidity must be astronomical to keep this picture from exploding. I understand that our economy has its own momentum, but how long will that last? Will it be a smoth parabular or like a cartoon bunny character running over a clife? All of a sudden the runninng bunny stops in mid air and imediately drops like a stone. Mow that to me has the right feel to it.

  • Comment number 15.

    @ 6. At 11:10am on 07 Jul 2010, windchrisleeds wrote:

    > You just have a problem with anyone earning high salaries.

    Of course. High wages cause inflation - look at the 70's. I don't care you want inflation to eat your wealth (if you have any), but I want to keep hold of all mine!

    Cheers, Jacques

  • Comment number 16.

    If M&S get their stock from China then they happy days may be over. China looks to be heading for a housing bubble collapse. If this happens then the normal effects will follow and being global will have a knock on to its exports. Stock up on undies and keep the chill away.

  • Comment number 17.

    @ 6. At 11:10am on 07 Jul 2010, windchrisleeds wrote:

    > It will improve and good people will make good money, just deal with it!!

    Dear windchrisleeds,

    All you do is hiss negatively from the sidelines. Let's try to be
    more positive about how to exploit business for everyone's benefit.

    Cheers,

    Jacques

  • Comment number 18.

    NOT mentioned, is the uptake of market share from those companies which are no longer with us, which is a SIGNIFICANT factor in M&S growth, hence is more than likely NOT just down to efficient executive managment.

    Like many of the top businesses in UK including banks, renumeration has been shuffled around so that from a HUGE LOW, any growth back towards normality is advertised as a miricle of managerial excellence and so worthy of even greater excessive bonuses and renumeration packages.

    MUCH of it is a con, a deceit, false, a lie, and basically fraud.

    As people naturally slowly/gradually return to spending growth is pretty much an automatic reality in many companys. The reality is though, is that many businesses will actually end up paying more in execiutive renumeration for less wealth production/growth than they were achieving 3 years ago.

    Hence it is a deceitful and FALSE economy of profitability and growth.

  • Comment number 19.

    M&S sp is where it was 5 years ago. Big mover? No way. It will be interesting to see what happens when the bannks really take a hit after the stress tests and begging bowls are seen again. Can governments afford a failed stress test or even to bail out a bank that fails one? M&S like all busnesses need lots of debt to finance future debt. Where are they in that cycle? It does'nt matter. The wheels have come off that particular cycle!

  • Comment number 20.

    M&S are just another conduit for Chinese goods. It is many years since they were keen to tell us how most of their products were British made.
    They are just another retailer that deserves no respect from the people.

  • Comment number 21.

    5. Chris911t,

    "NB I'm not suggesting that this is commonplace, or even that it happens, but it does seem strange to me that fund managers never seem to do anything about these packages being voted through and they must know that it's wrong."

    I have commented elsewhere on fund managers' frequent practice of leaving standing instructions with custodians always to "vote with management". Few fund managers engage with management at even the most rudimentary level, though there are also examples of those that do.

    There are many reasons why asset managers behave this way, ranging from sheer impracticality (a typical risk-constrained equity fund may hold 80-120 individual stocks within it), through to corporate and asset managers' policies to minimise the risk of breaching insider dealing/market manipulation rules, through to just not seeing engagement as something that adds value to their funds.

    To answer your question, do asset managers see things like the M&S pay policy as wrong? Some do, some don't. Those that do can either engage and make the company aware of their concerns (privately or by declining to vote in favour at the AGM). The easier solution, though, is to underweight (versus their funds' benchmark), or even not take a position at all if they feel the remuneration policy is likely to diminish shareholder value. Asset managers see themselves as being paid to deliver capital gains and/or income to their clients, nothing more. Government over recent years (Vince Cable really has not invented shareholder activism in the last 2 months, trust me) has sought to encourage/force shareholders (de facto asset managers) to be more activist. It isn't as simple as they make it sound, though. There are lots of conflicting interests involved and, as I suggest, it's often easier just to underweight holdings of stocks where an asset manager may not like the remuneration policy (or any other). Where asset managers do this, and the stock in question underperforms the fund's benchmark, then the asset manager looks good, because they produce performance in excess of benchmark which is how they themselves are judged in terms of success/failure.

    This is one of the conflicts, if you like. An asset manager can do nothing, incur no costs, and look good. Doing what you imply is the right thing costs the asset manager (it requires internal resource), they'll probably pass the cost onto you via higher fees, and the performance of the fund you own may be poorer in the short term as a result of holding more shares in the affected company and the fees referred to above.

    Put it this way, if I ran a typical risk-constrained fund, would I think corporate activism was worthwhile? No. Would I spend time/money on it? No. I'd do the bare minimum to meet my regulatory obligation. Would I avoid companies whose remuneration policies looked suspect? Definitely.

    In practice, institutional assets (pension funds etc) are now more activist. They do consider all contentious votes and normally employ specialist firms to advise them (in practice the asset managers they use) how to vote. Retail-centric funds, however, do not as far as I know pay anything like as much attention to shareholder voting.

  • Comment number 22.

    Rising consumption is bad news. What we need is rising production and rising exports.

    But then of course that requires investment and what is the UK worse at then all other so called industrialised countries? Yes you got it.

  • Comment number 23.

    3. At 10:36am on 07 Jul 2010, John_from_Hendon wrote:
    Robert,

    Are you struggling towards expressing the view (that we all - well most informed observers, have ) "The Recovery is 'pants'" ?



    oooooooooooooooooooooooooooooooooooooooooooooooooooooo


    Mawe like pAAAntaloons with hot pokerr dots ,remember its the AAAking copulation that has the money locked up in their housing ponzi and with the help of Braaansons space voyeurgism they can carry on pickling their gherkins after they release their equity, without slipping a disc or dropping their nhs choppers in the 20 miles high club.

  • Comment number 24.

    Robert, I suspect these are increases on an extremely week base i seem to recall last year we were talking of M&S's performance as dire. M&S seem to be only recovering from poor business decisions, the two 20% of days which completely devalued the brand and arogance over the quality of the product.

    Is this a recovery for the economy?, possibly a little but i suspect it is a more of a continuation of the big retails getting more and more powerful at the expense of the high street

  • Comment number 25.

    13. At 12:28pm on 07 Jul 2010, HaslemereBoy wrote:

    "hang on, wasn't it "that those who bought them were buying part ownership of the company, to risk the lot if the company went under, but share the fruits of success if the company did well"?"

    No hang on again - why would you sell a share in something that was going to - or was doing well?
    Surely the 'natural instinct' for the owner is to keep all the wealth for himself?
    Oh dear, a contradiction - you can't be self interested in order to make the market work - and then selfless when you need to keep it working....

    "I guess it's up the individual share purchaser whether they buy shares because they believe in the company (fundamentals) and thereby derive value as much from dividends as growth or alternatively are looking for a quick play which obviously relies on selling the things"

    Is that why millions invest in shares through their pension schemes? Well it seems to me this is not the case. The reason people invest in stocks through their pensions is because you need the growth of your investment to keep a pace with inflation. If you keep it all in a bank account earning interest you will be losing out - especially as our Government alters the tax law to encourage you to do so.

    I'll check with my local pensioners tonight, but I can assure you none of them know about the fundamentals of any company they're invested in.

    Don't confuse the optional speculative investor with the forced institutional one. Your description is of one and not the other - which shows you have difficulty seeing anyone else's point of view on this matter - hence your incorrect conclusion about investors and their liabilities.

  • Comment number 26.

    #17. Jacques Cartier wrote:

    "Dear windchrisleeds,

    All you do is hiss negatively from the sidelines. Let's try to be
    more positive about how to exploit business for everyone's benefit."

    There are many regular contributors to this forum who do nothing but "hiss negatively from the sidelines", but windchrisleeds isn't one of them.

    Have you or WOTW ever written anything positive or constructive?

  • Comment number 27.

    The banks are never satisfied that they have stolen enough and continue to trumpet the call for higher interest rates. There will be no justification but that does not matter has we have learned they are very good at making things appear different than they actually are. The idea that some retailers are doing well is very nice but the real issue is the overall economy, which has a different picture. An exception does not make a rule.

  • Comment number 28.

    This recovery is welcome. However, it does not and cannot justify the corporate greed and clear insensititiy to the wider governance issues that the Directors of M&S are party too.

    The incoming CEO with no track record in M&S is getting a very full salary package at a a time when this is wholly inappropriate. When did a "new boy" joining a company get such rewards?

    The corporate pay policy of M&S is an outrage to the shareholders and staff. Greed is not good and these corporate "billy bunters" need to be exposed and their contracts ended without compensation. One has to say that £8million:yr is enough compensation for anyone.

  • Comment number 29.

    Perhaps it would be a good idea if we could get used to the idea that the 2000-2007 years were fiction, rather than the basis of how well we should be doing.

    We really should be expecting very low growth from every major retailer forever if we want a sustainable recovery.

    Do not look for magic growth figures where there should be none.

  • Comment number 30.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 31.

    Whilst retailers may benefit from a offer led pre VAT induced spree this side of jan 2011 and M&S will welcome the exemption of the 20% hike on childrens clothes, even though VAT rates are among the lowest in EU, nonetheless as you point out "gross indebtedness of UK households remains at record levels.." this is still very much the crux of the matter. In fact far more people are in debt now albeit owing less, as explained on the debt blog of ClearDebt insolvency specialists. Personal debt rates are a notoriously laggy indicator of the economic health of the consumerism. I think the statement that it´s safe to assume "we have not seen the last retailing bankruptcy of this phase of the cycle" is equally applicable to the overindebted individuals who are lulled into a false sense of security
    this side of the VAT hike.

  • Comment number 32.

    Strip back The m&ssirs and all you will find is frilly stuff holding up a gagantyuan sillycon valley and now that they've thrown their mold ease away their final check will bounce them into the wild blue yonder.

  • Comment number 33.

    The 'improvement' in M&S figures could be related to the decision of Stuart Rose last year, to introduce 'famous brands' to M&S foods which may have led to increase in profit margins?

    Now if we knew how the final accounts were audited between all M&S products and various 'non-traditional' outlets, there may be an answer to that? All in all, many retail companies are operating and collaborating with different 'franchisees' in innovative ways in UK and overseas?

    Naturally the M&S expansion into major centres in China and India, for example is welcome news for that population and the shareholders in the short/medium term as the consumer 'spending power' is much higher for a respected retailer?

    There is no obvious financial reason why the M&S share price should fall at all unless they are attempting to offset expansion - which, when compared to income - is unfounded and has to be justified in plain language?

  • Comment number 34.

    @ 26. At 1:49pm on 07 Jul 2010, rbs_temp wrote:

    > Have you or WOTW ever written anything positive or constructive?

    At least we are writing something good for our country, unlike your unhelpful remarks. Look, rbs_temp, we can't have lick-spittles on high wages because it causes inflation for the rest of us.

  • Comment number 35.

    26. At 1:49pm on 07 Jul 2010, rbs_temp wrote:

    "Have you or WOTW ever written anything positive or constructive?"

    If the choice is between kidding myself and accepting the harsh reality - then no.
    What are you worried about - this is only a recession (albeit a very long one, which has prompted the harshest cuts in 70 years and has created the biggest worker unrest in decades etc.)

    Don't forget I told you this would happen - you didn't want to listen then, and you don't want to listen now - you might find comfort in fantasy but it will only hurt more in the long run.

    I don't know, perhaps your M&S's biggest shareholder which gives you something to cheer about - but I find no joy in hearing another business has found it can still extract wealth from people even in the harshest times.

  • Comment number 36.

    4. At 10:40am on 07 Jul 2010, shireblogger wrote:

    London and the rest of the UK are becoming distinctly separate economic units. London bucks the trend with stronger retail sales growth due to its affluent shopper base


    I noticed that nearly 30 years ago! Can't say I noticed in change the last time I visited either.

  • Comment number 37.

    22. At 1:31pm on 07 Jul 2010, Wee-Scamp wrote:

    "Rising consumption is bad news. What we need is rising production and rising exports.

    But then of course that requires investment and what is the UK worse at then all other so called industrialised countries? Yes you got it."

    GDP = C + Inv + G + (x-i)

    So C was already reduced and unsutainable, you're saying Inv is the worst thing we do, x is historically poor (although we export high worth items we don't export many of them) - and Georgey Pordgey pudding and pie has all but removed G.

    So what's left?

    Answer (-i)

    Our recovery is based on negative imports - problem solved, we just need to send all that stuff back to where it came from!

  • Comment number 38.

    Robert,

    Are you hinting at a repeat of 1928 syndrome?

    If the lessons of the past two years are (paraphrased) that market forces no longer operate at real time, would it not be astute to conclude that these results remain premature relative to the current economic conditions? *Especially* as M&S depend on fluidity from the same customer base expected to be most hit by this "deprecession"...

    Or put another way: is the M&S business model solid enough to bypass the impacts of the current/forthcoming economic conditions?

    Fluidity must come from somewhere to sustain this!

    --

  • Comment number 39.

    If this doesn't get you all worried then I don't know what will...

    http://news.bbc.co.uk/sport1/hi/football/europe/8797183.stm

    Oh dear, it would seem that those 'liquidity problems' are everywhere these days - maybe it's a structural problem. Just like all the other zombies wandering around the world.

    Like M&S - one day you're 'champions of the world' - the next day you're having to borrow to stay afloat. How quickly things can change.....

    You can snap up all the players from the bankrupt clubs on the cheap (like M&S took their absent rivals market share) - but when the overall market demand is in decline it's only a matter of time before things start to turn.

    Shock, horror, keep that look on your face because you're going to need to use it a lot soon.

  • Comment number 40.

    1:Pay awards linked to share price?? ...............Rewards speculation.
    Why isn't it linked to the earnings per share of the company ?
    2.
    BP coming in for good support today. Hope you bought the 2nd part of a 1/3 tranche of shares advised in the correction(10/20% fall).
    3.
    I think these figures show shoe consumers are completely addicted.
    It will be interesting how debt figures ('of UK households') trend.
    I just ask my female friends if they are still buying shoes.

  • Comment number 41.

    Robert

    Don't you know the economies of kickers? When people are tightening their belt and putting a little away for a rainy day but need some underwear you go to trusty M&S to get knickers that will last a while.

    When you are feeling rich and there is no need to worry about tomorrow, knickers that won't last until the winter are fine 'cos you can always buy more.

    When you are totally broke you make do with what you've got.

    Food! When you want posh and are feeling rich, a restaurant selling steak etc will do nicely. Markies shopping impresses the neighbours on a Saturday. When you want posh and are saving, Markies two for a tenner does the job and some other supermarket gets a visit on Saturday for the weekly shop. When you are broke, a tin of spam with some beans is what you are getting or pasta with yet another tomato sauce this time with chili for a change. When you are bored with that, then back comes the student favourite of cheese beano!

    With the growth in pound stores, second hand shops all over the country does anyone really think the economy is doing well? My mum and her sister have been touring around with the granny bus pass and counting empty shops since Northern Rock went bang! The reports coming in are amazing! 'That used to be a shoe shop, now it's another charity shop full of furniture. Over-priced rubbish. If you're looking for a new sofa you'll do better for nearly the same price in Argos. That road used to have three shoe shops. It changed to just the cheap shoe shop, no good for decent fitting kids shoes and the shop selling shoes to ancient ladies. Well now the cheap shoe shop has gone as well.'

    Never mind Rose et al. Think about how many people earn below the median wage. Think about how far that wage goes. Think about how many people are out of work and forced to live on £65 a week. The cheap shoe shop has gone because the median wage of £65 a week doesn't put new shoes on your feet any more.

    We're in trouble.

  • Comment number 42.

    Robert,

    One more thought: will M&S (and Britain) survive a prolonged recession?

    Again, if their constraint (as is most of ours) is the fluidity pool available in/to the general UK populace, then, given the special constraints of this pool (overleveraging), aren't we going to see at least another downturn?

    Specifically: Upon commencement of the project "services-only" many years back, spending power has now been eroded, traditional economic tangibles (such as items we build) have been sold offshore, roles within profitable business have been outsourced (the subcontinent being a welcome recipient of many), and now we are on a collision course to have this already scarce fluidity taxed further?

    It's as if economic principles (paraphrased: political behaviour) assumes infinite capital in the UK economy...

    If only...

    --

  • Comment number 43.

    34. At 3:08pm on 07 Jul 2010, Jacques Cartier wrote:
    we can't have lick-spittles on high wages because it causes inflation for the rest of us.

    ......................................................

    Not quite true Jacques, we can pay them huge salaries, and bonus just as long as we bring in a supertax of 95% for income over £180k.

  • Comment number 44.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 45.

    Hmm, no I'm sorry there isn't a recovery happening.

    Today I have counted five boarded up Shopfronts, that two years ago were trading and employing businesses.

    The fact that some customers have been consolidated into one Shop from the many they used to be able to choose between, does not a recovery make !

    Obvious really.

  • Comment number 46.

    Here's a tip!

    Ignore numbers (especially percentages) - they are easily manipulated and their provenance is unknown.

    If you want to get a handle on the recovery, just take a look around and form your own opinion.

    Trust your own judgement - nobody knows better than you what's happening.

  • Comment number 47.

    Unfortunately, we have an adaptive statistical system.

    Unemployed people, and failed businesses fall out of the various Indexes.

    For example, the Nationalisation of Bradford and Bingley no longer weighs on the FTSE 250, because by definition of its failure it is removed.

    However, the Economy itself has shrunk thru its loss.

    Very Shameful indeed is Mr Clokey's decision not to compensate the long term Shareholders of Bradford and Bingley.

    I can understand their desire to punish the Hedgefunds and punters who were benefiting from the artificially lowered (shortsold) Share price.

    There really should be a proper public enquiry into the Gov'ts reason for giving away B&B so extremely cheaply to Santander.

    Very dodgy dealings in my opinion.

    And now of course in Santander's accounts they boast how much profit they are extracting from B&B andf Alliance and leicester.

    British Shareholders shafted again by the establishment.

  • Comment number 48.

    If you folks get bored of reading the Party line (neothatcherite stuff) why not try a change of pace by googling Survive 2012.

    A fascinating compilation of Doomsday Scenarios for the end of the Mayan Long count calender.

    Personally, the way the Politicians are continuing with their grand plan to make Britain and Europe into copies of the American Aristocracy, rather than leaving them as Democracies is really quite depressing, and enough to make fantasy's about Asteroid collisions quite attractive.

    Just think, in a few years they could have their 21st Century Pseudo Victorian Age, with all the terrible things (low pay no pensions or healthcare that implies).

    Hmm, Asteroids !

    Though Mr Bast's 2012 website did not mention Zombies as an option.

    Zombies would be cool.

    Zombies !!!!

    In some big cities would any one really notice ?

    Must look into the possibilities of a Zombie Apocalyse !

  • Comment number 49.

    #39 WOTW,

    I think your FC Barca - M&S analogy is a bit stretched to be honest, but the the Barca story itself is an interesting one.

    You may not know it, but Barca is a member-owned club, a quasi co-operative. Last year, when Portsmouth FC went bust, loads of people banged on about how "fan involvement" was the way to go, and pointed to Barca as evidence of this. In fact, if you look at Barca it is hugely leveraged. Not surprising really. Its only "equity" participation is members subs. Everything else is debt of one form or another, be it overdrafts, loans collateralised on (now hugely overvalued) land and property assets, or deferred transfer fee payments.

    Barca's plight just highlights the risks associated with gearing, whether that gearing has been taken on to boost returns to shareholders (Man U is a good football comparator), or simply because the business structure makes it a necessity in order to compete at a given level (Barca, Real, most of Italian football).

    The real story here is that nothing and nobody is safe if their borrowing levels were marginal in the good times. They will be overborrowed now, and being pressed to deleverage. Limited companies, co-operatives/members' clubs, governments are all facing the same pressure. In terms of the M&S story and consumer spending generally, the Barca story and what it represents in terms of ongoing deleveraging, very strongly supports those people who suggest that a sustained increease in consumer spending is very unlikely to emerge in the near future. I'm not of the "double dip recession" persuasion, but nor do I think 2.5%+ GDP growth is anything other than wishful thinking. It's not that long ago that 2% growth was seen as high. I think we'll return to that mindset over the next few years.

  • Comment number 50.

    Hey, Jacques Cartier - come down from your mountain hideaway and (re) join the big party in the City! It doesn't have to be this way - we can all be friends!!!

  • Comment number 51.

    41. At 4:18pm on 07 Jul 2010, copperDolomite wrote: and made some really good points.

    Mr Peston, I think you will find that better figures, of late, for M&S come on the back of price increases, some of them quite substantial.

    Did you ask about that?

  • Comment number 52.

    51. At 7:04pm on 07 Jul 2010, Up2snuff

    Thanks.

    And I should have asked. Are Markies selling a lot of T-shirts for a fiver (imagine them doing that 25 years ago!) or a lot of jumpers at 60 pounds? There was an enormous queue for bras and knickers when they had that pre-Christmas sale to drum up business, remember. Note women do not normally buy themselves sturdy white bras as a christmas present for they hubbies.

  • Comment number 53.

    25. At 1:40pm on 07 Jul 2010, writingsonthewall wrote:
    "13. At 12:28pm on 07 Jul 2010, HaslemereBoy wrote:

    "hang on, wasn't it "that those who bought them were buying part ownership of the company, to risk the lot if the company went under, but share the fruits of success if the company did well"?"

    No hang on again - why would you sell a share in something that was going to - or was doing well?"

    I did state that I placed as much value on dividends as growth. There's only so much detail you go into on a page like this, but my philosophy is that you buy what you understand and believe in. Before you accuse me of plagiarising, I freely admit this isn't a philosophy I created, far from it. The short answer to your question is that I am personally loath to sell shares.


    "Surely the 'natural instinct' for the owner is to keep all the wealth for himself?
    Oh dear, a contradiction - you can't be self interested in order to make the market work - and then selfless when you need to keep it working...."


    Yes you can be self-interested to make the market work, and in fact the market relies on it. I recommend Adam Smith's The Wealth of Nations to you.


    ""I guess it's up the individual share purchaser whether they buy shares because they believe in the company (fundamentals) and thereby derive value as much from dividends as growth or alternatively are looking for a quick play which obviously relies on selling the things"

    Is that why millions invest in shares through their pension schemes? Well it seems to me this is not the case. The reason people invest in stocks through their pensions is because you need the growth of your investment to keep a pace with inflation. If you keep it all in a bank account earning interest you will be losing out - especially as our Government alters the tax law to encourage you to do so.

    I'll check with my local pensioners tonight, but I can assure you none of them know about the fundamentals of any company they're invested in.

    Don't confuse the optional speculative investor with the forced institutional one. Your description is of one and not the other - which shows you have difficulty seeing anyone else's point of view on this matter - hence your incorrect conclusion about investors and their liabilities".

    Fair points regarding the difference between the individual investor and the member of a pension fund, and regarding the different motivations of each.
    My point regarding individual investor remains perfectly valid, just you have highlighted the second type (which nothing I've said actually betrays a misunderstanding about, just I was clearly referring to the individual).

  • Comment number 54.

    re #51 #52

    They could also be repositioning themselves slightly towards the quality end of the market. I have been surprised at the height of some of BHS prices (in furnishings mostly) and in the past would have assumed a pecking order of Woolies below BHS below M&S in the bottom half or three fifths of the High Street. Other players plus the food supermarkets have come in to tread on all their toes, so stepping away up market could be a wise strategy.

    Impressive to be able to do it in a recession.

  • Comment number 55.

    I'm just a shopper not an economist but I can say from my own experience that this year I have spent money on new clothes, outdoor furniture etc because the hot weather, following years of poor summer weather, meant I had no summer items. It won't mean a repeat for me. A one off and now I won't be buying anything new until this lot wears out. Certainly a few years. These kind of intangibles always affect sales of goods. I don't think we can read much into this last period. It was an unusual one all round as we peered into our knicker drawers and found there was nothing 'light and airy'.

  • Comment number 56.

    What new policies does the Gov't actually have for creating wealth ?

    All they have spoken of so far is cutting.

    Cancelling projects, pensions, and peoples lives, seem to be all they are good for.

    Where are the new industries, exports or public projects that are going to bring Britain out of recession ?

    Answer; they are doing nothing but tread water, waiting for someone else, some mythical private sector saviour, to come along with new ideas for exports and trade.

    I've looked at a few Company Accounts now, the public domain information, just for fun you understand, and it struck me the only sales growth was abroad. UK liek for like sales were down between 1 and 4 percent across those firms. One firm had increased sales in the scandinavian zone by about 15 percent, pulling up group sales.

    One thing they all had in common was near static or falling sales in the UK.

    It is nice MS is bucking this trend, but are they taking the remaining business that used to go to Shops since closed ?

    DVD sales are an interesting example. Total UK DVD sales are well down by volume and total value. Zavvi is gone , Woolworths is gone etc.
    But individual firms sales of DVDs may be up (because they are the last place to buy !)

    Anyhow, you just have to look round your high street, and check your own wallet, to see the real picture.

  • Comment number 57.

    55: I never try to be fashionable, and for the last three years have bought nothing new.
    I lie, I bought some cotton thread two years ago, of a more or less matching colour to darn up a hole in a jacket.

    Personally, I shan't be buying anything new (except getting some shoes resoled) for the forseeable future.

  • Comment number 58.

    53. At 9:21pm on 07 Jul 2010, HaslemereBoy wrote:

    "Yes you can be self-interested to make the market work, and in fact the market relies on it. I recommend Adam Smith's The Wealth of Nations to you."

    If you had read this book yourself rather than assuming I hadn't then you would be well aware that Marx used the writings of Smith to demonstrate surplus value theory and understanding that would mean you wouldn't bother to support a system doomed to fail- which you seem to readily do.

  • Comment number 59.

    It is interesting how the market makers have marked everything up,on low trade volumes ?

    Best time to buy is at the bottom of the market and it isn't there yet !

  • Comment number 60.

    It wasn't that long ago that M&S used to boast that over 90% of its goods were made in Britain. Today it's more like 30% and part of the reason that the British Textile industry was decimated and many thousands lost their jobs. They have also outsourced their call centres and almost all of their IT Support to India, again creating massive job losses in the UK. Ask the company to produce the results of its internal staff survey and you will see that huge numbers of staff feel that bullying and harrassment is tolerated by management and staff morale is very low. Add to that a new CEO that can earn £15m a year and a grossly unjust discretionary bonus scheme that penalizes the low paid at the expense of the higher paid and it's quite amazing that M&S is still in business at all.
    Still Plan A seems to be going well :)

  • Comment number 61.

    re #56
    It was interesting that Stuart Rose was 'bullish' on Any Questions? a week ago. Whistling in the dark?

  • Comment number 62.

    "... they don't like the signing-on package awarded to the new chief executive, Marc Bolland, worth up to £15.1m ..."

    Neither do I. How anyone can justify earning up to a 400% bonus when he already earns a million a year is beyond me. Do the ordinary workers have the opportunity to earn up to 400% bonus?

    No more M&S knickers and pork pies for my family. Having supported M&S for over half a century, I hope they go right off the rails.

  • Comment number 63.

    re #62
    Agreed. It is greed. Impure and simple.

 

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