Poor Supplier Performance Hurts UK Retailer's Share Price

If you're interested in a real-life example about how supplier performance can directly impact a company's stock price, check out this story from the UK which describes how "shares in photography retailer Jessops plummeted almost 15% after it warned that 2007 results would be the same as last year due to supplier problems that hurt the recent Christmas season." According to the article, the retailer could not meet demand for SLR cameras due to supply shortages from two manufacturers. What were the problems you ask? Further down the supply chain, Canon blamed a "general glitch in the factory run up to Christmas" and Nikon had more specific challenges in the production of lenses, causing their failure to meet Jessops' fill and quality requirements.

Certainly supply performance problems such as this are far more common than retailers let on. But in this particular case, given the smaller size of Jessup relative to a Tesco or Wal-Mart, two individual performance issues materially impacted the overall performance of the company. And as a result both customers and shareholders were the ones left holding the bag. But for Canon and Nikon, it's a good thing that Jessop was not a big box store. And that's because Wal-Mart and others often charge back suppliers for their lost profit on items which they're not able to sell because of supplier performance, qualty, or on-time delivery issues.

Jason Busch

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