Outlook: Menzies bites the bullet

What a topsy turvy world we seem to live in these days. Things are tough on the high street, admittedly, but for a household name to throw in the towel and quit retailing altogether is always going to be a story. When it happens to be the venerable Menzies family of Edinburgh, which opened its first store on Princes Street in 1833, then it's an even bigger one. Menzies is finding that even baggage handling and delivering newspapers are more profitable enterprises than running newsagents-cum sweet shops.

The story is a familiar one. Caught between the ever-expanding supermarkets on one hand and the specialist books, music and greeting card shops on the other, Menzies has been struggling to find a formula capable of attracting customers in the numbers required. The new owners will have their work cut out to improve the position, even if they do look like getting the chain on the cheap.

Menzies' problems should be no surprise, as we have seen this all before with WH Smith. Similar products, similar sized stores and similar locations. The only difference was that it had an even weaker brand name.

There are other parallels, too. WH Smith was, until recently, a bumbling business run by a family of old Etonians and Guards officers. Not that there is anything wrong with being an old Etonian, but the old school tie was what counted. Menzies has not been noticeably different. The Menzies family control more than half the shares and until 1996, its chairman was John Maxwell Menzies (Eton, Grenadier Guards), the great grandson of the original founder. Two other directors, including one non-executive, are married to the Menzies family. Major General C A Ramsay, another non- executive and major shareholder, is a cousin of John Maxwell Menzies.

David Mackay, the newish chief executive, deserves credit for biting the bullet on retailing but even he can hardly be described as a new broom; he's been with the company for more than 30 years.

The sale of the Menzies chain seems to be virtually in the bag but off- loading the Early Learning Centres may prove a harder nut to crack. Widescale closures look likely and it is all too possible that Menzies could suffer a Sears-like fate, where the shops have effectively to be given away, leaving Menzies with hefty exceptional charges. There's a lesson here. Don't invest in fourth generation family-run companies.

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