‘How can you plan three years ahead in today’s topsy-turvy retail world?’

I met with a PE firm recently that decided to pass on an acquisition as they “couldn’t see the exit”.

That got me thinking – how can anyone plan three to five years ahead in today’s topsy-turvy retail world? 

The industry was grappling with seismic changes even before Covid and now all the fallout factors, plus war in Ukraine, are creating an environment of unprecedented uncertainty fuelled by double-digit inflation, impending recession, skills and raw material shortages, supply chain disruption and massive freight costs.

Tech-driven stocks that were hot before and during the pandemic now most certainly are not, and making a profit is back in fashion with investors.

The FAANGs [Meta (formerly known as Facebook), Amazon, Apple, Netflix and Alphabet (formerly known as Google)] have lost their teeth and, closer to home, the online fast-fashion players’ share prices have tanked by 50% to 60%. (Five years ago, Asos’ market cap topped M&S, today the rejuvenated omnichannel player is valued at three times its online rival).

“Making a profit is back in fashion with investors”

So how are today’s retail leaders preparing their three-year plans and will they be worth the spreadsheets they are written on?

I started by asking a key spokesperson for the industry, Tony DeNunzio, chair of BRC and of Evri (previously Hermes logistics) and deputy chair of Currys. His view is that boards have to prepare a number of scenarios and be ready to pivot according to market forces: “There should also be a laser-like focus on cash, costs and stock commitments. The key is to control the controllables and maintain flexibility.” 

Card Factory chief executive Darcy Willson-Rymer agrees that many factors are outside of our control, “but you can control the response”. 

He believes that those fastest to react will reap the benefits and that leaders will have to work much harder to keep on top of market activity: “Prepare well and act with agility. Empower people and devolve decision-making.”

He says: “You’ve got to know your destination, so the three-year plan is still a vital tool, but we review it more frequently and course correct as necessary.”

He also explains that in times of great uncertainty, the temptation for a chief executive is to get more into the detail, but he tries to spend his time at enterprise level “looking over the horizon from 50,000 feet. You have to build a good team and then trust them”.

Although sales are up 80% on pre-pandemic levels, Made.com has been hit by negative investor sentiment in light of supply chain challenges and rocketing freight costs. 

Chief executive Nicola Thompson comments: “Despite ongoing volatility in the supply chain, our strategic focus remains delivering an exceptional customer experience and a key part of this is improving delivery times. 

“We’re carefully balancing the demands on our working capital and building up supply chain resilience through investing in logistics, including expanding our warehouse capacity, which has cut our average lead time to three to four weeks, compared with seven to eight during the pandemic, and we’re pleased to see customers reacting positively.”

Reiss has performed really well, with sales up 40% since 2019, so chief executive Christos Angelides is planning a conservative approach going forward. 

He comments: “By developing great relationships with suppliers, we are able to hold stock of fabric and yarn and make commitments later in the cycle, ramping up production in response to sales in season.” Nearshoring production is also improving flexibility.

Simon Roberts, chief executive of Sainsbury’s, thinks the past two years have equipped the supermarket to respond much better to volatility. 

He says: “There is no playbook for the world we’re living through today, but we have learnt to stay really close to customers, so that we can adapt and change with speed and agility.  

“We are collaborating even more closely with our suppliers and these critical partnerships are enabling us to deliver great value, availability and outstanding quality, whatever new challenges we have to navigate. 

“We’re also resetting our organisation to be even more connected so we can develop deep insight, think ahead and anticipate future trends – and we’re keeping our focus on the big picture.” 

“There is no playbook for the world we’re living through today”

Simon Roberts, Sainsbury’s

Majestic chief executive John Colley agrees it is not easy to forecast with any degree of accuracy right now, but believes we can learn from previous economic downturns.

“Even if your business wasn’t operating in that time window, others were, and you can analyse the impact they saw and gain insight and learnings on demand changes, frequency of visits, basket analysis, etc. 

“It won’t give you all the answers and, as we know, any forecast is wrong the moment you finish it – it’s just what level of wrong. As long as you’re agile and cautious with cash and cost levers, if the outcome is worse than expected you will have the flexibility to adapt.”

The three-year plan may not be as concrete or reliable going forward, but it provides a roadmap in an era of continuing uncertainty. 

Retailers have emerged from Covid leaner, fitter and better informed. They are now able to respond rapidly and with more confidence to volatility – from a data-driven perspective, rather than a knee-jerk reaction – and that’s got to be good news, if only for the short term. 

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