A tough four months to Christmas lie ahead

It’s the time of year when the holiday season comes to an end, and the focus across retail turns to Christmas. Unusually there’s been no shortage of retail news in August this year. The problem is it’s mostly been bad.

Ask the chief executives of retailers for reasons to be optimistic about the remainder of this year and they are thin on the ground. Christmas will happen, but it happens every year. Trade is at best volatile, which at least means there are some good weeks among the bad. But overall, it’s pretty nasty.

The problem is that consumers are anxious about their financial situation. With the hugely uncertain economic outlook, they’re right to be. They’re shopping intelligently and cutting back on anything non-essential.

What’s particularly worrying is the pace at which the market is worsening. Look at Topps Tiles, a well-run business that has performed robustly. In its third quarter it kept its like-for-like decline to a respectable 1.9%. But in the first seven weeks of its fourth quarter they fell 10.4%.

Every year there will be one analyst or consultant who says it will be the worst Christmas since the Roman invasion. It generally doesn’t come to pass. But the next four months are going to be very tough, and this time the food retailers are as affected as the generalists. With unhelpful structural changes being accelerated by the trading conditions, it is going to be a punishing autumn.

Tesco right to quit Japan

One of the challenges of running a big business is that you can waste a lot of time fixing the weakest parts of your empire that could have been better spent making more money from the most successful components.

That’s why Philip Clarke’s decision to sell Tesco’s Japanese business is the right one. Since taking the reins in March he has made no secret of his view that the business is sub-scale and that the road to profitability would have been a long one.

The decision to quit Japan will inevitably prompt questions about the loss-making US operation Fresh & Easy. But the two are very different businesses. While there remains a lot to do Fresh & Easy is, unlike Japan, moving in the right direction, and still targeted to break even next year. So if the US goes to plan, it has a bright future. But if it doesn’t, his decision on Japan shows Clarke won’t be afraid to take tough action.