Things are starting to look desperate for the high street stalwart today, after it reported a 6% drop in pre-tax profits to £665.2m in the year to the end of March. This means it has come in well short of City forecasts around the £710m mark. The firm says that most of this decline in profits was caused by a 4.1% drop in sales of general merchandise, which is mainly clothing. The racks of apple-catchers are obviously still not shifting…
The food business saw sales rise 1.7% however, and the international business grew by 4.5%, suggesting the firm is making progress in some areas. Sorting out its image for fashion-conscious Brits however, is the central task now. Chief executive Marc Bolland said: ‘We are working hard to get the General Merchandise performance back on track. We have already made progress in our operational execution, and our new autumn/winter ranges have received a positive reaction.’
Bolland sounds a bit like a broken record with lines like this. It’s almost exactly the same wording he used last month when Q1 sales had risen just 0.6%. If you don’t believe us, check our previous coverage. Unfortunately, Bolland also had to use the statement to announce the departure of Stephen Sharp, the firm’s head of marketing. He will retire in February 2014, and be replaced by Patrick Bousquet-Chavanne, who came aboard from Estee Lauder last September.
So profits falling, and a marketing director leaving just when M&S could do with a reputation boost, can the chain get out of this bind? Well, getting someone with some high-end experience like Bousquet-Chavanne through the door is a good move. Other recent hires include former Debenhams and Jaeger big shot Belinda Earl, and Victoria Secret’s Janie Schaffer as head of lingerie, so the calibre of bosses is improving. Goodness knows they need someone with something more than the visual equivalent of a tin-ear for fashion (Bolland).
Bolland’s right hand man, John Dixon, (previously head of the food business) has plans to get more online sales, refurbish every store, and open more overseas outlets. And Bolland himself has a good track record of Morrisons and Heineken experience behind him, meaning that the food business should be in safe hands.
With all of that in mind, it’s fair to say the top table now features a lot of accomplished talent. But still, a lot rests on Earl here. When the KPIs show that clothing is the spanner in the works, improving its fortunes is a buck that stops with her. Investors are obviously pleased with the broad picture, however precarious it looks: the price of shares was up 4.52% in morning trading.
Ultimately, the proof will be in the pudding. This autumn/winter collection needs to do well, or shareholders' thoughts may turn to a 'board reshuffle'...