Marks & Spencer bat­tles to stay in fash­ion on a chang­ing high street

China Daily (Hong Kong) - - Q&A WITH CEO -

Marks & Spencer is go­ing through a cru­cial pe­riod of tran­si­tion after an­nounc­ing it would close its 10 stores in ma­jor Chi­nese cities.

The de­ci­sion last year was part of the plan to turn around the fa­mous United King­dom­based re­tail gi­ant.

M&S is al­ready mov­ing its en­tire busi­ness here on­line through Tmall, the e-com­merce plat­form rolled out by Alibaba Group Hold­ing Ltd, and JD.com Inc.

Neil Wang, China re­gional pres­i­dent of con­sul­tancy Frost & Sul­li­van, felt that Marks & Spencer had failed to cre­ate a clear brand im­age for con­sumers here.

“Grow­ing on­line shops is con­sid­ered a cru­cial step for Marks & Spencer, but the most crit­i­cal prob­lem is not about on­line or off­line,” he said.

“The re­tailer needs to re­vi­tal­ize its busi­ness model, mar­ket po­si­tion­ing, sup­ply chains and the de­signs of clothes,” Wang added.

The over­all out­look for the com­pany is un­cer­tain as Archie Nor­man, the new chair­man of Marks & Spencer Group Plc, stamps his author­ity on the high street chain.

This comes after a slow­down in Marks & Spencer’s food busi­ness, a ma­jor driver of sales growth.

“The busi­ness has been drift­ing, not for five years, not 10 years but 15 years and maybe be­yond,” he told the me­dia. “We’ve got a lot of work to do.”

Al­ready He­len Weir, chief fi­nan­cial of­fi­cer at M&S, has an­nounced she will leave the com­pany, while store clo­sures will ac­cel­er­ate in the UK.

On Wed­nes­day, the com­pany re­ported an­other de­cline in profit. Cus­tomers, squeezed by stag­nant wage growth and in­fla­tion, are be­ing cau­tious in their spend­ing, Marks & Spencer stated. Its shares fell as much as 3.6 per­cent, re­vers­ing early gains in Lon­don.

“The most strik­ing fea­ture of this up­date is M&S ac­knowl­edg­ing that it has prob­lems in its food di­vi­sion,” said Ge­off Rud­dell, an an­a­lyst at Mor­gan Stan­ley.

Weir’s de­par­ture re­flects in­creased ur­gency at the top since Nor­man’s ar­rival two months ago.

Many in­vestors felt CEO Steve Rowe’s ini­tial plans for the re­tailer were too ten­ta­tive.

Nor­man has gained a rep­u­ta­tion as a cor­po­rate turn­around spe­cial­ist after steer­ing gro­cer Asda away from bank­ruptcy and even­tu­ally sell­ing the chain to Wal­Mart Stores Inc in 1999.

“Archie Nor­man’s ap­point­ment is bound to have upped the pres­sure on Steve Rowe,” said Tony Shiret, an an­a­lyst at Whit­man Howard.

“To­day’s an­nounce­ments are more ex­ten­sive than we had thought and maybe point to a more un­sta­ble po­si­tion in the food busi­ness than any­one con­sid­ered likely,” he added.

M&S will speed up plans to close 30 stores in the UK and re­lo­cate, or shrink, 45 oth­ers dur­ing the next five years. This re­flects the shift to more on­line ap­parel spend­ing.

In food, where the com­pany has re­cently stum­bled after re­ly­ing on its gro­cery busi­ness for prof­its, it is also scal­ing back plans to open 250 new out­lets dur­ing the next two and a half years.

Weir, who joined as CFO from ri­val John Lewis in 2014, will step back from day-to-day ex­ec­u­tive du­ties and seek board po­si­tions else­where. M&S has be­gun search­ing for a re­place­ment.

The man­age­ment up­date came as the com­pany re­ported that ad­justed pre­tax profit fell 5.3 per­cent to 219.1 mil­lion pounds ($288 mil­lion) in the six months end­ing Sept 30.

Still, those num­bers beat an­a­lysts’ es­ti­mates of 201 mil­lion pounds.

The fig­ures were fu­eled by bet­ter-than-ex­pected data from its cloth­ing busi­ness, where sales fell 0.1 per­cent in the sec­ond quar­ter. Again, this sur­passed an­a­lysts’ es­ti­mates for a 2 per­cent de­cline.

Rowe’s ef­forts to sim­plify ranges and cut prices on ba­sic lines are help­ing stem a fiveyear slump in sales, while M&S is plan­ning to open 80 Sim­ply Food stores.

But M&S has not de­cided on the scale of the cut­backs needed to its core busi­ness.

The 133-year-old M&S is bat­tling to re­vive its for­tunes after fall­ing out of fash­ion dur­ing the last decade.

“The busi­ness still has many struc­tural is­sues to tackle,” said Rowe.

The busi­ness has been drift­ing, not for five years, not 10 years but 15 years and maybe be­yond. We’ve got a lot of work to do.”

Archie Nor­man,

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