Who are your stakeholders?
Each stakeholder must be managed carefully throughout the economic cycle. Firstly, you will need to prepare for intense scrutiny by the banks. Retail is currently perceived as high risk, so you will need to be able to allay fears of defaulting on debt.
Manage your pension trustees – trustees of any defined benefit pension scheme are under pressure to take a stronger stance with employers whose covenants are perceived to be weakening. Starting from October 2012, employers will also need to enrol all their eligible employees in a qualifying pension scheme or the government’s National Employment Savings Trust. This could lead to a significant cost for the retail sector where large numbers of employers are often not members of a pension arrangement. Pension salary sacrifice can attract substantial tax savings for both the company and its employees.
Ensure you take HMRC requirements into consideration. Retailers often pay too much customs duty – there is usually an opportunity to review and reclaim overpaid duty, delivering significant tax benefits. There are also many easy-win cash flow ideas with an opportunity to claim for overpaid VAT.
The 2011 Budget changed rules on claims for Capital Allowances in respect of fixed plant and machinery. These apply to all retailers including owner-occupiers and businesses that lease property, plus anyone involved in buying, selling or leasing property containing fixtures that qualify for plant and machinery allowances. So not only do you need to understand where tax savings could be made, you also need to understand the strength of the covenant and develop fallback, compromise and exit options for underperforming stores and onerous leases.
Invest in your employees: core retail skills are key to your survival. You’ll need to consider current capability, as well as new skills that may be required should you change strategy or add additional channels to market. How loyal are your employees? Are they committed to your success? Tax efficient incentive plans could be considered.
Ensure adequate commitment/cover from management: a proven track record in retail does not necessarily translate into the time commitment necessary to drive a retail turnaround.
Supply chain management: monitor your position with your suppliers closely. Are your suppliers able to deliver on time? Do you have a contingency plan should a supplier fail? Credit insurance may be a key factor.
Keep you shareholders in mind with everything you do – recent transactional history might lead to an inflated view of value today. Mismanage anything, and shareholders will seek answers.
Your most important stakeholder is, of course, your customer. There is fierce competition in the market place; to ensure future earnings, you will need to work on customer loyalty by maintaining a strong brand and sustainable pricing policy.
How KPMG can help
KPMG has a team of expert to help you through the challenges of managing multiple stakeholders. Our People team has worked with many companies to implement reward schemes that not only encourage performance, but help to make savings in tax payments. Our management consulting team has helped a wide range of retailers and other corporates to maximise value from their supply chain and shared services, while our debt advisory and corporate finance teams have helped retailers manage turnaround strategies, renegotiate debt and negotiate favourable financing and refinancing terms and conditions.
