Carphone Warehouse shares hit a five and a half year low on Monday as controversy raged over co-founder David Ross’s treatment of shares.
The hullabaloo was great for the media, which devoted pages to the tale of Ross’s rise and fall, accompanied by pics of glamorous girlfriends, his Leicestershire manor house and similar. But what are the implications of the commotion for Carphone Warehouse? Probably a big fat nothing.
There is no suggestion that Carphone Warehouse, or any of its other directors, has behaved inappropriately. Carphone’s business prospects do not change one iota as a result of the Ross brouhaha.
Carphone’s shares had been under pressure because, like other retailers, it faces the harshest high street conditions in memory. That, combined with the near saturation of the broadband market, has made formerly bullish brokers cautious. Although there’s the possibility of a demerger or sale of Talk Talk, low asset values may put the kibosh on that.
But there are grounds for confidence that when Carphone emerges from the other side of the downturn it will remain a leading company. Its joint venture with US giant Best Buy is one of the most exciting enterprises under way in European retail and, recession or no recession, is likely to change the retail landscape. Dunstone launched Carphone in 1989, so he has experience of trading through recession.
The one danger of the Ross row is that he may offload his near-20 per cent stake in Carphone and that a distress sale would hit the price. Ross will try to “facilitate an orderly market” should he unload shares. That might be easier said than done but, ultimately, is unlikely to pose any real threat to Carphone. Like the storm that enveloped Ross’s namesake Jonathan, this one will blow its course.
A ray of hope
Another gloomy BRC sales update; a forecast from Verdict that retailers will not grow again until 2014: should everyone pack up and go home?
Maybe not. Panmure Gordon has become the latest broker to make bullish noises and thinks “we can see the first rays of sunlight piercing the horizon”. The broker’s note comes with all the usual caveats about there still being plenty of risk on the downside, but identifies survivors.
The bright sunlit uplands haven’t yet hove into view, but it’s good to think they might actually exist.
George MacDonald is deputy editor of Retail Week