New chief will aim to overhaul food business and regain Marks & Spencer's position as middle England's favourite retailer
Marc Bolland will walk into his new job as chief executive of Marks and Spencer tomorrow knowing two things: he has bagged the highest profile job on the high street – and one of the toughest.
He is starting at a difficult time. The new government will have to slash spending and increase taxes and that will hit consumer spending.
The former Morrisons boss has bridges to rebuild with City shareholders who have run out of patience with M&S, or, more accurately, its cavalier attitude to good corporate governance. And he has to fill the very large boots of his predecessor, Sir Stuart Rose, a founder member of the glamorous fashion retail rat pack and a man utterly at home with the high media profile that accompanies the M&S job.
At the same time Marks & Spencer has its own array of problems. They range from ageing customers and increasingly tough competition on style and price in clothing from rivals such as Next, Primark and H&M to a food business that has lost its premium position to Waitrose.
The firm needs to decide how to expand overseas and how to improve its internet offer, plus deal with its mounting pension fund deficit, which is being revalued and likely to top £1bn. Some analysts think an £800m rights issue is required.
Bolland is being paid handsomely – a £15m pay package – so he must deliver big to justify his generous deal. According to Greg Lawless at Collins Stewart, Bolland must re-establish M&S as a leader, rather than a follower, because it is John Lewis that is now setting the pace for middle England shoppers: "John Lewis has eclipsed M&S over the last two decades. Whether we look at department stores, food stores, financial services or multi-channel, M&S has been left behind by its rival."
Profits were down nearly 40% last year to £700m and are expected to slide further this year. The shares are half their level of three years ago, while Next is down just 3% and Tesco off 6% for the same period. This year M&S has lost 9%.
If Bolland follows the pattern he used during his successful stint at Morrisons, he will take six months to conduct a thorough business review – he is already too late to have an impact on winter clothing ranges and stock levels anyway – and unveil his strategy at the time of the retailer's half-year results in November. At Morrisons a turnaround plan put together by the finance director Richard Pennycook was in place when Bolland arrived. The Dutchman adopted the plan, sprinkled on some of his marketing expertise and boosted the pace of change.
A similar initiative is underway at M&S – again masterminded by the group's finance director, Ian Dyson. The project, called "20-20", was handed to Dyson a year ago and is supposed to "deliver a step change", by focusing on the balance between stores and the internet, driving international growth and expanding the M&S brand. As at Morrisons, the finance director's work could provide the basis of Bolland's new vision.Some analysts think Bolland needs to make some swift changes to show he means business. "Bolland should hit the ground running with 30-day and 100-day plans, to make an early impact on the business," says Lawless.
The new M&S boss will also get the old one's advice. Rose and Bolland will overlap for three months before Rose moves to the chairman's office and the outgoing chief executive recently said he thought M&S needed radical and rapid change. His idea – which he did not deliver in his six year tenure – is that M&S should become an "umbrella brand", selling non-M&S goods and services and new products such as branded cosmetics and telecoms: "If I was 35 years of age and came into the brand and had 10-15 years at it, that's what I'd be shooting for," he said.
The Guardian: Julia Finch. Monday 3 May 2010
Copyright The Guardian. Original article here.
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