Retail finance directors have kept the tills ringing

With consumers terrified into paying off their debts rather than spending, one would think the retail sector would be all doom and gloom. In fact, while life has been tough for many in the sector, retail also boasts some outstanding success stories – and finance directors across the sector have been presented with a real chance to demonstrate just how much value add the finance function can bring
to an organisation.

Keith Richardson, a relationship director at Lloyds Banking Group looking after retail clients with an excess of £500m, believes retail at that level is doing well.
“There is a real difference between organisations that have a very clear strategy, as opposed to those that had a good story for the good times, but have been found wanting in the downturn,” Richardson says.

Richardson spent 28 years with Tesco before joining Lloyds, so knows the industry well. For him, the big change for finance directors through the recession has been the way working capital has moved to centre stage.

“In the past, while working capital was important, there were always another five things that had a higher claim on the finance director’s attention,” he says. “Now it is at the top of most people’s lists and the retailers doing well are those who are focused on this, and on managing their cash and stock more efficiently than they might have done in the boom times.”

What differentiates retail from any other sector is the speed of innovation.

“Retailers challenge themselves constantly,” says Richardson. “What works today is not going to work tomorrow. This is an industry in constant change.”

Kingfisher, the DIY specialist and owner of B&Q, has managed to turn in a reasonable profit in extremely flat trading conditions. And the finance function under group finance director Kevin O’Byrne has played a leading role.

Before joining Kingfisher in October 2008, O’Byrne was FD of Dixons and has been European FD at Quaker Oats, so he is no stranger to high-pressure retailing and tight margins, and brings a range of experience to compare and contrast against the demands and challenges of retail.

For O’Byrne, retail – more than any other sector – lives and dies on its margins and cost control, with one of the prime metrics being the amount of revenue generated per square metre of store space. This sounds straightforward enough until you factor in the international dimension.

Kingfisher operates more than 800 sites in nine countries, including Russia and China. The company has more than £1.7bn of stock across all its locations and the finance function also leads on risk management in the broadest sense, taking charge of the health and safety of its 80,000-plus employees around the world.

Delegation and communication
So what processes does O’Byrne have in place to enable the finance function to keep a tight grip on the levers across such a sprawling structure? The two keys, he says, are delegation and communication.

Long before Sarbanes-Oxley became law in the US, O’Byrne had a system going back to his Quaker Oats days of insisting that people take ownership and responsibility for the numbers under their control.

“This really is about cascading responsibility down the line, right down to store level,” O’Byrne says. “It focuses people’s minds when they have to personally sign off on the key numbers and know that they will be held accountable for errors.”