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Bolland has much to prove after steady start at M&S

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At the start of May Marc Bolland will be celebrating a year in full day-to-day control of high street mainstay Marks & Spencer (M&S), one of the most high profile positions in UK retail.

Anyone taking over the reins from Sir Stuart Rose was never going to find it easy living up to the reputation of the man who resurrected the retailer in the second half of the last century.

Even before Bolland took over the role of CEO at M&S, the UK retail boss was already coming under criticism for the size of his remuneration.

If M&S meets consensus market expectations for its full-year, when results are released near the end of May, then Bolland could earn himself almost £15 million this year alone once bonus and a company share plan are factored in.

A rumoured rebellion over pay at last year’s AGM did not materialise however and six months later its fourth quarter results, published this week, suggest that shareholders may have been right to keep the faith.

“Bolland has followed Sir Stuart Rose’s tradition of coming out with much better figures than the market was predicting,” Maureen Hinton, Practice Leader at Verdict Research, commented.

Once the extra five days from the previous year were taken into account, underlying group sales grew by a healthy 4.2 per cent year-on-year.

Following the results, however, Bolland admitted that consumer confidence had “hit the wall” over the last few months and that the retail environment would remain “absolutely challenging” over the coming year.

Hinton continued: “M&S is in a stronger position that many others on the high street in that its middle market positioning and its core customer base places it in just the right spot in the current retail and economic climate.”

It is fair to say that Bolland’s first six months in charge have not been overly spectacular, as the Dutchman has followed a strategy of evolution rather than revolution.

In its Q4 statement fairly gentle targets were set domestically with just a two per cent rise in UK retail space expected in the next year, with the priority being to grow margins with costs expected to grow five per cent in the period.

Retail analyst for chartered accountants BDO Jamie Talmage argues that Bolland is quite sensibly continuing down the path previous boss Rose laid for the company.

“Not being radical and trusting the existing approach is exactly the right strategy given the current difficult market conditions,” Talmage said.

“In the longer term he will have to come up with some new ideas, but at the moment focusing on operational excellence is paying dividends.”

One of the few major announcements Bolland has made in the last 12 months is the retailer’s re-entry into France with a new store on the Champs-Elysées in the heart of Paris later this year.

General consensus agrees that the exit of M&S from France and other European countries in 2001 had more to do with domestic struggles than performance in those regions.

Even so it will take all of Bolland’s experience of continental markets to adapt the M&S model to guarantee success in these markets.

Sam Hart, analyst at Charles Stanley, commented: “Since 2001 M&S has raised its game in terms of the quality of its offering, in general merchandise and in food. Its distribution network is also much stronger which makes it well set up well international expansion.

“Question marks remain however over whether its products mix is suited to differing continental taste, in particular with food where Europeans tend to be less keen on convenience food than the British.”

Possibly Sir Stuart’s greatest achievement was to revive the retailer’s fashion department and there are some who believe that the vibrancy and quality of the retailer’s clothes offering will need to be looked at again.

Veteran market analyst for BGC Partners David Buik is full of praise for the advertising campaign that features such models as Lisa Snowdon, Jamie Redknapp and Twiggy, but thinks a major revamp of its clothing range is desperately needed.

“Frankly, to take M&S forward Bolland needs to deal with the fashion,” Buik argued.

“It is currently dowdy in the extreme and has little empathy with ladies aged between 18 and 50 years of age. They are the fashion conscious members of society. Heads must roll, probably starting with Executive Director of General Merchandise Kate Bostock.

“The advertising and models are fabulous- such a pity about the dreadful clothes. The clothing market is so competitive. Just look at what Next, Topshop and Primark bring to the party.”

Hart disagrees however arguing that M&S caters well to the older woman, and points to an aging population who are spending more on clothes than their parents did in old age, as proof M&S is following the right strategy.

“Too many retailers seem to be clamouring for the youth market, whereas it seems the trends M&S have been following seem to be strengthening,” Hart added.

Whatever this week’s results showed, it is clearly too soon to judge Bolland on the performance of M&S but we can assess him on his ambitions.

A ten per cent increase in international markets this year, solidifying the domestic market and cutting costs are all sensible measures in the current trading environment.

The economy will recover though and M&S will need at least a little stardust to remain in the nation’s hearts long term and this is likely to be Bolland’s biggest challenge.

Published on Wednesday 13 April by Editorial Assistant

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