WILL THAT FABULOUS ST MICHAEL’S BRAND EVER BE REKINDLED? – LITTLE SIGN FROM M&S’S TRADING STATEMENT

 I shudder to think what proportion of my disposable income I have spent at M&S over the last 40 years.  It would be very significant. I would hazard a guess that it might be as high as about 8% and probably more than that 30 years ago, when I was not pear-shaped and at a time when M&S’S fashions were great and affordable. Mrs BUIK is my very reliable retail advisor and therapist and sad to say that apart from undergarments and sweaters she skips through general merchandising to the food halls with indecent haste.  In her measured opinion the fashions are dowdy and unattractive to any girl under the age of 40! Kate Bostock was for many years responsible for fashion and she outstayed her welcome and bringing in Belinda Earl from Debenhams was hardly inspired.  From the peripheries George Smith and others attempted to lift the spirits of its retail consumers.

 

Sadly, there has been no momentum or sustained enthusiasm for M&S’s clothes. To pour salt in the wound, M&S’s clothes are expensive. Jill McDonald was brought in from Halfords in May 2017 to head up General Merchandise, but one feels that the horse has boulted and market share has been surrendered and will be difficult to regain. M&S has only made £1 billion profit in a year twice in 1997 and 2007. Since the halcyon days of Lord Stuart Rose, when the share price hit the dizzy heights of 731p in May 2007, it has been downhill all the way. Many will recall that Lord Rose was brought in to fight off Sir Philip Green’s bid to buy M&S in 2004. The profit for this year won’t be much more than £500 million. Post the Rose dynasty there was a modest resurgence under Marc Bolland. However, M&S is a little different than Morrisons. Retail shopping’s culture changed dramatically and Bolland seemed asleep at the wheel.

 

Marc Bolland left his post as CEO in June 2017, following in the footsteps of Robert Swannell who passed on the Chairman’s baton to Archie Norman. This appointment was felt by many to be inspired. If anyone could resurrect the fortunes of M&S it was Norman, with a great track record at ASDA and ITV. The appointment of Steve Rowe as CEO was a bit of a surprise. He was overseeing general merchandising, which had caused all the problems.  At that time M&S shares had drifted down 360p from 569p in May 2015, when Bolland was at his most effective.

 

Since then trading in the M&S emporium has been a real struggle. Remedial action has been taken.  Branches have been closed, fashions have changed without obvious success. On-line trading has been very disappointing. Figures will say it has improved and maybe it has from a very low base. The business has frankly been downsized.

 

M&S stopped posting trading statements to try and stabilize the operation; So, today’s half year numbers are key. M&S shares had drifted down to 242p at Christmas. Since then they have rallied to 277p – up about 14%. This is either clever damage limitation management or a real improvement was expected.

  

So here we are – today’s 3rd quarter numbers! Frankly they are not ‘fanfare’ numbers in isolation. Do they justify the recent 13% increase in the share price? – ‘like-for-like’ food sales down 2.1%, Clothing ‘like-for-like’ down 2.4% overall clothing for the quarter -4.8%. Revenue was down 3.9% - not that worrying as branches are being closed and it’s all about profitability. Despite the insistence from the senior management that there is light at the end of the tunnel, many of us are sitting in darkness. The clothing just does not tick enough boxes and is expensive as is the food regardless of its quality. Will this hugely respected brand ever really recover market share? I would love to see a merger with someone like NEXT – sell surplus property with clothes, online sales and food all catered for! It won’t happen, but it would be a sensible strategic plan. Maybe some sort of relationship with Ocado might help. It would certainly sort out the on-line solution. Shares at the open up 1.04% to the good at 277p – clearly the market was satisfied.

 

 David Buik  

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