Challenging task to save iconic British retailer
Marks & Spencer chairman Archie Norman broke with convention when he arrived at the UK retailer’s London headquarters last year, turning down a private office and positioning his desk prominently out in the open.
From his perch in the engine room of a once-proud British institution that’s fallen on hard times, Norman quickly started asking questions.
If anyone doubted Norman’s determination to get to the bottom of the food-and-clothing chain’s woes, the chairman set them straight this week when the company disclosed £514 million (NZ$986m) of write-offs for past mistakes.
“Our middle name is ‘false dawn’,” Norman, 64, said. “Our board has been a glitterati of the British business establishment, but the company hasn’t changed. The organisation and culture has made it very hard.”
M&S turned to Norman, an outsider known for his brutally effective turnaround of grocer Asda, to force down the tough medicine he says it needs. The retailer plans to close at least one-third of its 300 largest British stores after its dowdy clothing sections were abandoned in favour of e-commerce emporiums like Amazon.com Inc. Even its trendier grocery aisles that used to drive growth lost momentum.
It’s an unusual role for the non- executive chairman of a UK company — often a hands-off ambassadorial post. Yet at M&S results presentations since he has taken over, Norman has been seated alongside chief executive officer Steve Rowe, a lifelong M&S employee who started his career as a teenager on the shop floor.
With Norman serving as the iconoclast, Rowe tries to preserve the peace inside a company reeling from multiple turnaround plans, each one more expansive and less successful than the last.
There’s plenty for both men to hash out.
The rise of Amazon and fastfashion chains like Zara and Primark upended M&S’s business model. The company lagged behind rivals in buying apparel from lower-cost countries and adopting e-commerce, which accounts for 18 per cent of UK retail sales. M&S plans to build a new online distribution centre after a disastrous £200m investment into an automated warehouse that still can’t match rivals’ delivery speeds.
M&S’s clothing sales have been falling for seven years.
Food sales, which remained a source of growth for most of that time, have begun to slump. If the latest turnaround plan fails, M&S could become a target.
“M&S makes perfect sense for Amazon,” said Steve Dresser, director of consultancy Grocery Insight. “Their heritage, innovation in food and the quality of the brand would entice them.”
While Norman has immersed himself in turning around M&S, he relies on the more affable Rowe to implement his measures.
But there’s little doubt over who’s calling the shots.
M&S’s chief financial officer, as well as the heads of food, marketing, womenswear and menswear, have all left. Many were replaced with
Norman’s proteges.
Norman has said
M&S’s turn
around plan has a five-year horizon, but tumult in the UK’s retail industry is escalating — and Amazon and others are prowling.
“Archie is a great strategist, like a chess player,” independent analyst Richard Hyman said. “He’ll want to engineer some sort of deal because nobody has got five years in this market.”
Our board has been a glitterati of the British business establishment, but the company hasn’t changed. Archie Norman