Rowe must be ruthless
MOST people approach shopping for clothing at Marks & Spencer with the same sort of dread as a visit to the dentist; certainly the under-30s and nearly all men.
You have to drag and coax them there; with the promise that the pain won’t be that bad. The stores even look as downbeat as a dentist’s waiting room crossed with a motorway service station; the overhead neon lights are too bright while the aisles are filled with too many pick’n mix ranges.
So it’s a huge relief to hear that Steve Rowe, the new boss of Marks & Spencer, has the analgesics to put us out of our misery. More importantly, Rowe claims to have cracked the identity of the core M&S customer. Every single CEO has said the same thing every few years over the last few decades so let’s pray to St Michael that the new boy is on the side of the angels. His mystery customer is hardly a surprise – it’s Mrs M&S.
And despite the Twitter outrage, he is right because it is mainly married women of a certain age who do the lion’s share of food and clothing shopping for their children and men. What’s more, Rowe wants to cherish and celebrate her and provide her with ‘wearable, contemporary and unbeatable wardrobe essentials’ which are well-fitted, good value and are not high fashion. Phew.
I think most of us have been suggesting this for years; he only has to look at competitor Uniqlo to see what he should be doing more of and better. It sounds pretty basic but most Mrs M&Ss I know want somewhere where they can find classic good quality wool sweaters, shirts or basic T-shirts in every colour and style; whatever age. Men too.
Rowe seems to get this. But junking the high fashion strategy of his predecessor, Marc Bolland, who went too starry-eyed bringing in minor celebrities like Alexa Chung, comes at a cost, which is why the shares fell like a stone on the results even though the drop in pre-tax profit was less than forecast.
As usual, it was a picture of two halves: the food stores saw decent growth but clothing and homeware sales are still struggling.
To claw back customers, Rowe is going for ‘everyday’ pieces rather than Chung style £200 designer skirts and the prices are going to come down. This sounds sensible; clothing has never been more cut-throat.
If M&S is to hold on to market share, which has slipped to 8pc from 20pc, over the last few decades, then it must also compete on price and quality.
Its biggest competitors are not high-fashion chains like Zara which everybody keeps suggesting but Asda and Next; both known for good price points. M&S must decide whether it is a department store like John Lewis with many brands or an M&S branded clothing store; a simple but vital decision.
On the store front, it looks as though there will be cuts to the 900 shops which is also the right thing to do, especially as the online presence grows. But Rowe doesn’t need a complete revamp of the rest; much could be achieved with basic alterations in lighting, textures and making the different areas of the store more distinct. He needs to borrow the concepts used in the spanking new Brussels store on Avenue de la Toison d’Or, which I visited recently and which is a breath of fresh air. Whoever designed that should be asked to help with the rest of the stores.
Rowe has cleverly taken advantage of being the new boy to do some kitchen-sinking, get some bad news out of the way with the pension, restructuring costs and warning about lower profits. So the outlook can only get better. The City is likely to give him another year to show he knows his customer. But he has to be brave in chucking out the old, and ruthless on brands and stores.
At 409p, the shares look worth a pull.
An awkward mistake
Quelle horreur! Legal & General says the chief executive Nigel Wilson’s pay is a squidge more than previously stated; £800,000 higher. Wilson earned £5.5m last year and not the £4.7m announced in March.
The reason L&G made the mistake is because Wilson was given extra shares under the firm’s long-term bonus plan when he was promoted from chief financial officer to chief executive. He didn’t cash the shares in until January this year and they should have still been included in last year’s salary and therefore included in the annual report published in March. But the bonus got missed.
There’s no suggestion any rules were broken but the mistake shows how complex executive pay schemes have become if such a big chunk can go astray.
Strange indeed, especially when it was announced only 24 hours ahead of its annual meeting. It’s particularly embarrassing as L& G is one of the big campaigners against fat cat pay and played a big part in this spring’s ‘shareholder’ revolt which saw big institutions vote against pay deals.L&G voted against the boards of nearly a fifth of all UK listed companies.
Wilson is one of the more interesting fund managers around with provocative ideas on house-building to spreading wealth.