Marks & Spencer profits jump 17% as Bolland begins overhaul

New M&S boss Marc Bolland promises 'evolution, not revolution' - but he's planning some pretty big changes...

by James Taylor
Last Updated: 19 Aug 2013
Marc Bolland is clearly making his presence felt at Marks & Spencer: the retailer said today that first half pre-tax profits were up 17% on last year, while UK like-for-likes rose 4.4%. What's more, Bolland has now completed his strategic review; and although he's been careful not to criticise his predecessor Sir Stuart Rose, he clearly has his own ideas about how to bring back the glory days. These include slashing the number of non-M&S branded goods in store, and investing up to £900m in the UK, online and overseas over the next three years - in the hope of adding an extra £3bn to the top line. Now he just has to hope he doesn't lose this momentum in the second half of the year...

Bolland has been in situ at M&S around six months now, and it looks as though he's done a pretty good job of continuing the turnaround Rose started before handing over the reins. These are pretty good numbers in a tough environment, particularly since that increase in UK like-for-likes included a 2.6% jump in food, where it's had problems lately (in fact it's managed to boost market share in both clothing and food). Total sales were up 5.4% to £4.6bn - and with profits up, debt down, cost-cutting targets increased and a higher dividend in the pipeline, shareholders will be happy enough.

So what's next for M&S? Well, Bolland warned that things could get 'a bit more difficult' in the second half, as the Coalition cuts bite. But in the longer term, he insists there are 'clear opportunities' - and thanks to that strategic review, he's finally in a position to say what he thinks they are.

The first priority (slightly to the suprise of some in the City) will be the UK business. Two thirds of that £900m investment will go on sprucing up new and existing stores at home. He also plans to bolster own-brand sales: as well as some positioning stuff, this will include getting rid of 300 of the 400 external brands introduced by Rose, and replacing them with products exclusive to M&S. But he insists this isn't a slap in the face for his predecessor - it's just about focusing on the most successful sellers, he says.

And there's more. Around £150m will be spend improving its online arm (which saw another big jump in sales last half), and a further £150m on opening stores/ franchises overseas in places like India and China. M&S hasn't always had the greatest success away from its home turf (it pulled out of Europe completely a decade ago), but Bolland (sensibly) wants to reduce its dependency on the UK economic cycle.

All in all, he hope this will push revenues up from the current level of about £9.5bn to as much as £12.5bn by 2013/14. That's a pretty ambitious growth target, especially given that up to half of that revenue is expected to come from the UK. Time will tell whether he can pull it off - but so far, so good.

Can M&S really grow this much in three years? Or will the UK retail environment hold it back? Let us know what you think below.

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