Chairman Archie Norman and CEO Steve Rowe post M&S’s last quarter results tomorrow and the runes in the sand, if accurate, suggest they make not make very pretty reading – merchandise sales down 1.1% and food down 0.2%. Steve Rowe has been ‘in situ’ as CEO since April 2016 – just over 2 years since he took over from the loquaciously smooth Marc Bolland, who achieved very little in his tenure. At the time Mr Rowe assumed the reins of command M&S’S share price stood at 444p. Today it stands at 300p – down 32%.


M&S has posted a £1 billion profit just twice – in 1997 under Sir Richard Greenbury and in 1997 under Lord Stuart Rose, who picked up the challenge after fending off Sir Philip Green’s bid to buy the company for £4 a share in 2004. In May 2007 M&S shares stood at the lofty and frothy level of 731p! Since 2007 M&S’S annual profit has never got close to £1 billion.  This year £600 million may be nearer the mark.


M&S seemed to lose their way under the chairmanship of Robert Swannell and the highly regarded Marc Bolland, who came with a terrific reputation from Morrison and before that at Heineken. He succeeded Stuart Rose in 2009. The company rather lost its way. The stores were badly laid out and the board forgot that the key word was fashion. The food was good, but it now faces challenges from the war games being played out by Tesco, Morrison, Aldi, Lidl and most recently by the proposed merger between Sainsbury’s and ASDA. So, for M&S to keep its market share of food, let alone increase it, that would be a great achievement, as competition will get fiercer by the day. Though M&S’s on-line operation shows signs of improving, it was very slow getting out of the traps.


In terms of general merchandising, M&S have spent most of the last decade surrendering ground to the likes of Primark, Boohoo, H&M, Inditex (Zara) and even NEXT. M&S’S fashions are desperately dowdy and have little appeal to the young, who are very savvy and price conscious. Retail does look dire in the UK, but I believe it is the dynamics that have changed. The consumer is looking for much more of a bang for his/her buck. Sartorial elegance is no longer a key component. Suits are out – it seems that T-shirts, shorts, bobby socks, sandals and trainers are the order of the day, with razors and combs now very much endangered species. People now spend their leisure money on a big night out and on copious holidays. Therefore, if M&S wants to capture lost market share, which will be very difficult, then the right fashions at the right price and in the right quantities on the shelves, must be the order of the day.


I am quite surprised that it has taken so long for the penny to drop. Maybe Kate Bostock outstayed her welcome and Belinda Earl, who came from Debenhams, has yet to make a real impression. Jill McDonald has been brought in to shake up merchandising from Halfords. This is a tough assignment as the horse seems to have bolted.


People in retail have the utmost respect for Archie Norman and his achievements at ASDA and more recently at ITV. If anyone is going to lead a renaissance it will be Mr Norman. The appointment of Steve Rowe was a surprise as he was head of merchandising. The current share price suggests he has yet to deliver. The appointment of Katie Bickerstaffe of Dixons as a non-exec to help provide balance with Alison Brittain of Whitbread is a positive mood but will hardly guaranty an especially exuberant turnaround in M&S’S fortunes.


M&S shares popped by 3% yesterday. Was that part of a general bull market or will tomorrow’s figures be better than expected? The market is expecting between 60-100 stores to be closed, as part of a necessary cost cutting exercise. Personally speaking, I would like to see a merger between M&S and an operation that was synergistic with the UK’S favourite retailer. Maybe NEXT would be complimentary – Directory is a great business. A merger of that type would enable many properties to be sold thus cutting the cost base.  I suspect my suggestion is ‘pie in the sky’, but at least it is an idea. I just cannot see a rabbit being pulled out of the hat under the current business plan. We shall see!


David Buik

Core Spreads

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