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The Financial Ironmonger Blog No 37/2017

The Financial Ironmonger Blog No 37/2017

Every week our guest blogger, David Oakes of Mosaic Money Management (aka The Financial Ironmonger), shares with us his take on some of the major UK and overseas macro and political events that shaped the previous week.

Please be reminded the value of investments, and the income from them, may fall or rise. The views expressed in this article are those of the author at the date of publication and not necessarily those of Chelverton Asset Management Limited or Mosaic Money Management. The contents of this article are not intended as investment or tax advice and will not be updated after publication unless otherwise stated.


The John Lewis Partnership reported its six month figures, to the end of July, during the week, which showed that pre-tax profit had fallen 99% to just £1.2mn, despite ringing up sales of £5.5bn during the period. It is a slightly curious beast consisting of the John Lewis department store chain, and a supermarket operation called Waitrose, both of which inhabit the premium end of their markets, and had seemed impervious to the storms raging through both sectors.

Waitrose managed to increase sales by 2.6%, but profits fell by 12.2% to £94.6mn, which is a pretty credible result, so the other part of the group must be loss making. If you look at the same reporting period going back six years, the results have been quite similar,  indicating that the department store part has deep-seated problems, in line with other ones such as House of Fraser, and Debenhams; the former went bust, whilst the later is significantly challenged.

The truth is that no one would now start one from scratch, since young people want a highly focused offering, rather than a jumble of different brands sheltering under a common roof, as concessionaires. The John Lewis stores have eschewed that model, keeping an integrated proposition, but it is also different in one other way, in that it is a partnership, or a co-operative, “owned” by the 85,000 staff. In reality, it is neither, since in a partnership, you are liable for any losses incurred, whilst a co-operative shares the benefits across staff, customers, and in some cases, the wider community.

Their model was to reward “partners” with annual bonuses, and back in the glory days, these could amount to as much as 20% of salary. That has all gone, together with a whole raft of middle management, judged to have been passed the sell by date. Whilst customer experience is a somewhat nebulous concept, the staff no longer seem to be helpful and smiling, as they were previously. Perhaps the biggest surprise is that they have managed to stay relatively unaffected by the storm that rips through the High Street, for so long.

The Chairman, seeking to explain events, listed five different factors, best summed up as margin pressure, but then strayed in to Brexit country. The pound is 13% lower against the euro since the vote, making imports more expensive, and the general uncertainty has stalled the housing market, but it is the same for all retail companies. It will, however, become the standard excuse for underperforming companies in the months and years ahead.

The Government has managed to persuade Mark Carney, the Governor of the Bank of England, to add another seven months to his tenure, which will now end in January, 2020. He promptly predicted that house prices could fall by a third in the event of no deal being reached on Brexit, before rowing back to say that it was not a prediction, but just one of the scenarios the Bank was modelling.

Notwithstanding that a lot of people aged less than 35 would welcome a reset of prices, it is grossly irresponsible to throw these sort of figures about, without any supporting evidence, bar a spreadsheet knocked up by an intern. The UK desperately needs some decent management.


David joined Manchester stockbroker Henry Cooke, Lumsden in 1977 and after becoming a member of the London Stock Exchange in 1984 held a number of senior positions within the firm including Managing Director of the in-house fund management company and member of the Executive Committee.

After senior appointments at Cazenove Fund Management and latterly Mercater Capital Management, David joined Mosaic Money Management in 2013. He has successfully managed private client and fund portfolios for over thirty years and has particular expertise in providing a multi manager service to his loyal client base.

The Financial Ironmonger is a hat-tip to Ironmonger Lane, the location of Chelverton’s London office.