Not just a turnaround, a ruthless M&S one
High street giant set to reveal 1.4pc drop in sales, as chief executive plans retail estate revamp
MARKS & Spencer boss Steve Rowe is turbo-charging his overhaul of the high street giant, accelerating the expansion of its food empire and taking a more ruthless approach to struggling clothing stores.
The arrival of turnaround specialist Archie Norman as chairman is under- stood to have triggered a forensic review of the M&S store estate and emboldened Mr Rowe to take more radical action.
It is understood that rising business rates are prompting Rowe to demand rent reductions from landlords or face shop closures.
Marks & Spencer surprised the property market last month by pulling out of its 20,000 sq ft Covent Garden store after failing to bag a rent reduction, which has served as a warning to other property landlords.
M&S currently has 959 shops in the UK, 615 of which only sell food.
Marks & Spencer has already announced that it will close around 30 of its larger UK stores and convert a further 45 shops into Simply Food stores as well as shutting 53 of its loss-making international stores, such as its expensive Champs Elysee property in Paris. Analysts originally had hoped that Mr Rowe would offload double the number of stores as Marks & Spencer reels from the high street slowdown.
Clive Black at Shore Capital said: “We see Mr Norman and Mr Rowe as an interesting and potentially exciting combination for M&S’S shareholders, particularly given Mr Rowe’s strategic restructuring of the business in the UK and abroad allied to Mr Norman’s track record of transforming businesses such Asda, Kingfisher and Energis.”
Mr Rowe will tell the City he is redoubling his efforts alongside an expected 12pc fall in half year underlying profits to £201m. Analyst consensus is for Marks & Spencer to reveal a 1.4pc slip in like-for-like clothing and home sales next week as the business tries to restore growth by improving its ranges and wean itself off discounting. Last year the business reported a deeper 5.9pc dive.
Along with the rest of its fashion peers, Marks & Spencer has been boosted by a colder September, which lifted demand for autumn clothes.
Last month Jo Jenkins, director of clothing, quit to take the helm of White Stuff just weeks after former Halfords boss Jill Mcdonald joined to take control of the wider division. Analysts are predicting a 0.3pc slip in like-for-like food sales as the division comes under pressure from rival grocers investing in their premium ranges.
In September the retailer started trials for online grocery deliveries but Marks & Spencer has not taken a decision about a wider roll-out.
Sources close to the company said that Marks & Spencer’s turnaround remains in the early days with Mr Rowe believing that the business is only halfway through the first phase of his “fix, recover and grow” strategy.
Steve Rowe, the Marks & Spencer chief is expected to take a more radical approach to restructuring