Will Marks & Spencer's new boss Steve Rowe "kitchen sink" the retailer?

 
Catherine Neilan
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Will Steve Rowe admit the failings of his predecessors? (Source: Getty)

Marks & Spencer's new boss Steve Rowe picked up the reins from Marc Bolland on Friday - just days before the troubled retailer is due to reveal its fourth quarter figures.

If M&S' most recent set of results is anything to go by, investors can probably expect another set of declines - particularly within general merchandise, which has registered declines for 17 out of 18 quarters.

Indeed, analysts at Peel Hunt believe the figures will be "grim" - forecasting like-for-like declines of four per cent in GM - but there is one potential for M&S' share price to receive a boost: if Rowe effectively "kitchen sinks" the business.

Read more: Everything you need to know about Steve Rowe

We've seen this sort of behaviour before, most notably with Dave Lewis who famously kitchen sinked Tesco in his first days when he took over from Philip Clarke, when a £250m profits black hole was discovered.

While no one is expecting anything nearing that level of disclosure from M&S, Peel Hunt believes this week offers Rowe the opportunity to acknowledge how bad the past five years have been, downgrade numbers for between 2016 and 2018 and usher in a new strategy for the struggling business.

Marks & Spencer Marks & Spencer | mobile image

Marks & Spencer's share price has fallen more than 25 per cent in the last year...

The benefits of admitting the failings of his predecessors are clear: it will allow him to draw a line under past performance - which has driven clothing customers away and allowed smaller rival Next to overtake it on an annual profits basis, even though revenue is far smaller - and give him a blank page from which to push his own strategy. Crucially it will buy him much-needed time to turn the business' clothing arm around.

But he has been a loyal M&S lifer, who has shied away from criticising Bolland in the past.

Either way, Peel Hunt believes there must be some acknowledgement that his former boss' approach hasn't been working and it's time for a new strategy.

"We expect him to set out a pathway to recovery: 2010-2015 was profoundly disappointing," Peel Hunt's analysts said in a note out this morning.

They expect cash from margins to be reinvested to improve product quality and value for money, for staff densities to be addressed and in-store merchandising to be "galvanised".

Read more: Nowhere to hide for shop floor boy turned chief exec

"Steve Rowe is expected to reveal a comprehensive plan to turn M&S’ fortunes around at the prelims... Our guess is that Rowe will bring short-term numbers back on 25 May, with the promise of sustainable and strong growth from 2018 onwards."

"Short-term pain is required if M&S is to return to past earnings levels in a sustainable manner," the broker said.

"While we have seen false dawns in the past, we believe the new management team will come across well to investors... We think that momentum is about to change at M&S."

Update: Whatever the changes that are coming, one of them will not be a change in management of M&S' general merchandise arm.

Rowe has told staff he will continue to lead the troubled arm "for the foreseeable future".

An M&S spokesperson said: “He sees GM as the number one priority for M&S and is personally committed to getting it right.

"As a result, all the GM business unit directors will continue to report into Steve as they work together to move the business forward.”

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