Outlook: Rose throws out the kitchen sink

JUST WHEN everyone thinks it can't possibly get any worse at Booker, it does. Never a company to let a month drift by without a profits warning, the hapless cash-and-carry group treated the market to a corker of a stock exchange announcement yesterday. It had just about everything.

There was the scrapping of the dividend, the pointed remarks about "overoptimistic expectations" by previous management, a boardroom departure, the threat of job cuts and even the possible breach of its banking covenants. It was a full "kitchen sink" job.

And perhaps this is the point. Stuart Rose has only been Booker's chief executive for about six weeks. Like a new manager at a football club, he has the opportunity to size everything up, decide what he doesn't like and justifiably throw it overboard while blaming it all on his predecessors. Coming this early in his tenure, Mr Rose cannot be held responsible for a further plunge in profits.

Even so, the scale of it is quite breathtaking and questions must be asked about why the market was not alerted before. It is only a matter of weeks since Jonathan Taylor, the erstwhile Booker chairman, was insisting that there was no black hole in Booker's accounts and that the company was not in danger of breaching its banking covenants. He was speaking after first Somerfield and then Budgens had run away from the idea of merging with Booker. Neither company said exactly why it had taken fright, but the implication in at least one case was that something nasty had been found in the woodshed.

Trading has undoubtedly got tougher in the last few weeks, as retailers such as Marks & Spencer and Boots have said, but surely not by this scale of magnitude.

All of this leaves Booker in a pretty sorry state. It has just two executive directors, and a business that seems to be heading south at a rate of knots. Mr Rose is faced with the task of exiting a number of businesses while trying to revitalise the core chain. After this long in the doldrums and dogged by takeover and merger speculation, divisional management must be completely demoralised.

But as this column has argued before, Mr Rose ought to be able to do something with a business with sales of more than pounds 5bn. The previous management invested heavily in the business in their final years, and barring a collapse in consumer spending, that should start to pay off. But it will be a long road back and if there are any upsets from now on, Mr Rose will have no one else to blame.

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