The chief executive’s statement that accompanies a listed company's annual results is often so laced with corporate spin and disingenuousness that it's as good as useless. The document is increasingly being used to puff (embellish) the past year's performance, to present a distinctly rose-tinted vision of the future, and of course to shy away from telling investors anything about the true risks and challenges the business and its sector face. Examples which I would suggest are worth revisiting include the almost laughably misleading 2007 annual reports of banks including RBS, HBOS, Northern Rock, Landsbanki, Glitnir and Kaupthing.
It is therefore refreshing that the UK-based retailer Next has produced a 2010 final results statement that is admirably free of the usual spin and jargon. Written by the retailer's chief executive, Lord Wolfson, the document provides a clear-eyed assessment of the group’s performance in 2010 and its prospects for 2011. What is most striking, however, is that Wolfson does not shy away from providing his readers with hard facts, even when these are likely to be negative for Next and its sector. Here are some excerpts:
"The year ahead will be yet another challenging year for retailers and, if anything, things are likely to get worse before they get better. Retailing will feel like walking up the down escalator - we will have to work hard to stand still! ..."
"Retail in the UK is going to be different over the next few years. The consumer environment is likely to be dominated by the challenges of global inflation, public sector cuts and limited growth in consumer credit. These factors mean that retailers cannot plan for never-ending growth in like for like sales that many have enjoyed over the last fifteen years ..."
"In the year ahead we expect the consumer environment to be somewhat more challenging than it was in 2010. It seems likely that recent worldwide inflation in fuel, food and other essential commodities will further add to the financial pressure on the consumer. We believe inflation is exerting a greater burden on our customers' finances than government cuts or lack of credit."
Wow - that is amazing. It may not work wonders for the Next share price, but at least it provides investors with reliable information on which they can act. It’s worth pointing out, also, that Wolfson also explains how Next…
