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For the good of the long term strategy

When profits are falling you could be forgiven for looking for quick fixes. But taking your eye off the long term strategy is where trouble lies. Step forward Next and John Lewis.

Yes, Next and John Lewis have reported weakening profits making headlines in retail press, and shaking city prices, their figures a barometer for general merchandise retailing, a guide to consumer confidence and an indicator of what a post-Brexit economy could look like. However while many frown at he short term outlook, we smile at the long-term growth potential.

After a profit impaired 6 months of trading Next outline plans to accelerate store opening plans; counter-intuitive as Lord Wolfson admits himself. John Lewis profits have also been hit but they too are looking longer term, investing in price, customer service and staff pay.

Both businesses are positioning themselves for when current economic pressures are lifted, positioning themselves for growth.

It’s tough out there and when it gets tough, most businesses’ outlook shortens and you look to the financial year end and not too much further.  Price cuts to increase volume and revenue, job losses to reduce costs, and then what? There is only so much fat to trim before you start cutting into muscle.

Next are talking about price increases to protect margin, their numbers indicating a drop in volume from higher prices is better for profit than a margin cut. John Lewis are talking about fewer partners, but ones who contribute more to the business. Both strategies indicative of a ‘more from less’ approach, be clever about how you use our assets.

While much noise is made about falling profits, it is refreshing for us to see the confidence these businesses have in their strategy and the purposeful way it is communicated. While markets may rock in the short term, long term is where the returns lie.


For advice about your long term strategy and how Retail Remedy can help you plan in the short term for long term growth, please get in touch.

 

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