M&S results Rose-y, gloom deepens at Debenhams

Better than expected Q4 results from Marks and Sparks should let beleaguered boss Rose off the hook.

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Last Updated: 06 Nov 2012

Although like-for-like sales fell by 4.2%, overall group sales were up 1.9%, thanks to new store openings and a 20% hike in online business (admittedly from a lowish base). And that like-for-like fall was substantially less than both the previous quarter’s 7.1% figure and the City-predicted drop of between 6.5% and 7.5%. In the current economic climate, not-as-bad-as-expected is the new good - M&S shares rose nearly 10% on the announcement.

It must all come as a huge relief to executive chairman Sir Stuart Rose, who could have expected to hear the sound of knives sharpening behind his back had the figures been disappointing. He has been coming under increasing pressure from leading shareholders for ignoring corporate governance best practice and combining the roles of chairman and chief executive. A group including the Local Authority Pension Funds Forum (a collection of over 40 pension funds) has called for the appointment of an independent chairman to clip Rose’s wings sooner rather than later. But of course, while he is still seen to be doing a great job, he can expect to get away with such organisational liberties.

It’s good news for retail in general, too, that a Bellwether such as M&S is bearing up to everything the recession has thrown at it so far. Albeit not without casualties – in January M&S announced 1,200 job cuts and 27 store closures. And he’s not out of the woods yet, as he himself admitted. ‘It’s fair to say it hasn’t got any worse, but it hasn’t got any better either,’ said Rose, of the market conditions. ‘While the outlook remains uncertain, we are confident we are doing the right things for our customers and our business.’

Down the High Street at Debenhams, things are looking a good deal gloomier. The troubled retailer suffered another blow this morning as bankrupt Icelandic retail group Baugur offloaded its stake in the company. Debenhams shares were off nearly 12% after HSBC placed all of Baugur’s 13% stake in the market.

But the real issues facing Debenhams is the £100m debt repayment due in May. While the firm is expected to be able to meet this payment, shareholders are increasingly concerned that doing so may lead it perilously close to breaching its banking covenants further down the line, especially if trading conditions continue to deteriorate. Watch this space…

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