Magazine article Marketing

Amanda Aldridge on Retail: Retailers Opt for Freedom over City Funding

Magazine article Marketing

Amanda Aldridge on Retail: Retailers Opt for Freedom over City Funding

Article excerpt

Summertime, and even here in the UK, as the temperature rises, our thoughts often turn to getting out of the city. We're not the only ones. Workers may want to head for more relaxed locations but major businesses have also demonstrated that they are not averse to fleeing, albeit from the city with a capital C.

What got me thinking about this has been the press coverage given to Lord Kirkham's desire to take DFS back into private ownership. At the time of writing, the waters have been muddied by talk of his requirement to plug a pounds 6m gap in his bid. However, the key point here is that another major retailer is looking to leave the stock market behind.

Lord Kirkham has already made his reasoning quite clear. He sees the constant need to keep the City happy and informed as an unnecessary burden and one which impacts on the profitable running of the business.

Businesses such as Marks & Spencer and Next have increased competition in the furniture sector and Kirkham believes that DFS would be much better placed to fight these off if it wasn't obliged to keep providing what he sees as short-term fixes to please the Square Mile.

But what of the counter-argument? Well, the argument for being a publicly quoted company has always been in the access to capital. Private companies have to gear themselves up to raise finance and their borrowings become exposed to interest fluctuations.

But is this enough? The City's obsession with demanding growth and seeing healthy like-for-like sales from retail businesses is diminishing the attractiveness of a public listing. Focusing on sales growth is one thing, but it is quite another when that focus is at the expense of margins and overheads.

The John Lewis Partnership demonstrates the benefits of remaining private.

It persevered with Waitrose and spent large sums on its Peter Jones stores.

The result was two strong brands, yet you can't imagine that the City would have been happy with its actions.

It is conceivable that we will end up with a small group of very large businesses that have done well from their stock market listings; businesses such as Tesco and Morrisons, which have no reason to leave and are too big to be taken private by somebody else (hence the interest in Philip Green's bid to do that with M&S). …

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