Beware the curse of the World Cup profit warning

Apart from betting on England’s exit in the quarter-finals on penalties, you should be careful about relying on the predictive power of past World Cups. But the 2006 tournament can teach us one thing: beware companies that blame poor trading on the side-effects of a football frenzy.

As the Financial Times’s analysis on Saturday suggests, the likely corporate winners in 2010 are pretty easy to select. They’ll be similar to the champions four years ago, when makers and sellers of kit, both wearable (Umbro, Sports Direct, JJB Sports) and watchable (Sony, DSG International), claimed a World Cup boost. Supermarkets – Wm Morrison, J Sainsbury – and pizza emporia (Domino’s) reported surges in sales of beer and ready meals for the couch potatoes. The more energetic fans waddled down to the pub to help underpin sales by the likes of Greene King. Carlsberg and Scottish & Newcastle benefited either way. With a few exceptions, most of these companies are as strong, or stronger, four years on, and ready to take to the field again this year.

But take a look at the listed companies that took a corporate reporting dive in the penalty area. Woolworths – which, to be fair to its hapless management, declined to use the World Cup effect as an excuse for poor performance – got a red card and slipped into administration in late 2008. La Tasca, the restaurant group, was taken over by Robert Tchenguiz, only to fall into the hands of its lenders last year. Luminar, the nightclubs operator, has limped on but has issued three more profit warnings in the past 12 months. Rank, vulnerable to an outflow of football-loving punters from its bingo clubs, only returned to profit in February.

Lest you think this is just a UK phenomenon, look at two flagships of the then host nation, Germany: the parent of Karstadt, the stores group, filed for insolvency in 2009, and Opel, an unsuccessful supplicant for federal aid, is still running sore for General Motors.

Now I can’t claim whingeing about the last World Cup was the critical factor in the decline or fall of these companies. The ensuing financial crisis and global recession played their part. Others – HMV, the record and book store, and Topps Tiles – gave footie-related warnings in 2006 but have survived relatively unscathed as listed entities. MyTravel – hit by Brits’ deferral of their 2006 holiday plans – ended up in a merger with Thomas Cook that left both companies stronger.

But remember: if a company issues a warning, it may have deeper problems than over-exposure to football-mad customers. So when, come the end of the summer, a chief executive announces post-Cup results with the corporate equivalent of “we wuz robbed”, think of those bosses that complained after being booked, sent off or invalided out of the 2006 finals. They didn’t think it was all over. It is now.

Losses at the FSA

When it comes to ensuring financial stability, it’s still not obvious how the Con-Lib coalition intends to answer the crucial question: “Who’s in charge?” As of Friday, however, one point is clear: it won’t be Sally Dewar. The announcement of her resignation as the Financial Services Authority’s head of risk is a surprise. It is also a blow to financial supervision, whatever blue-print George Osborne unfurls at the Mansion House next Wednesday.

The coalition programme seemed to offer the FSA a reprieve – at least compared with Mr Osborne’s original plan, as shadow chancellor, to hack apart the regulator and recreate it as a fief of the Bank of England. But weeks have passed and it’s no clearer what it would mean to give the Bank “control” of macro-prudential regulation and “oversight” of the micro-prudential. At the FSA’s headquarters, an informal ban on chicken-counting now seems to be in place.

Ms Dewar, only 41, was a front-runner to take over as chief executive from Hector Sants, whose departure was announced in February. Her plan to step down next May leaves fellow board member Jon Pain, managing director of supervision, as the leading internal candidate.

Ms Dewar has behaved with characteristic good sense by not waiting until after the chancellor’s speech next week to rule herself out as chief executive – although her decision to leave must have been influenced by the uncertainty sown 11 months ago by Mr Osborne. But the removal of her knowledge and experience will leave a hole in any future regulatory organigram.

If the chancellor decides to let the FSA survive, the watchdog’s board will now have the challenge of adding competitive tension to the internal race for a new boss. If he dismantles the FSA, then the Bank of England will surely miss Ms Dewar’s reassuring management style at a time of wrenching and disruptive change.

andrew.hill@ft.com

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