THIS Wednesday’s full year results from Marks & Spencer will be a milestone for CEO Steve Rowe as they cover his first year in charge at the iconic but troubled retailer.
After the 2016 festive quarter saw M&S enjoy its first underlying growth in nearly two years, hopes were high that Rowe had finally come up with a winning formula for the 133-year old retailer whose clothing arm has lost its lustre. But the recovery is now looking short-lived.
In the first three months of 2017, clothing and homeware sales are forecast to have tumbled more than 3 per cent. The food business is also expected to post a dip in underlying sales.
That would be a big blow for Rowe. Made CEO in April 2016, he initially concentrated on running fewer promotions in clothing while promising female shoppers more wearable fashions. Then he unveiled a five-year plan to reduce the amount of trading space devoted to clothing by 10 per cent while expanding the upmarket food halls.
Some analysts have argued that Rowe’s plans are not radical enough as sales are lost to the internet and nimbler rivals such as Zara and Primark. Meanwhile, rising living costs are forcing Britons to tighten their belts at a time when a weaker sterling means the cost of imported goods for retailers is increasing.
M&S recently drafted in some big guns to assist Rowe as the pressures mount, most notably retail turnaround king Archie Norman who is to succeed chairman Robert Swannell later this year.
They will have their work cut out: M&S has been left playing catch up in a difficult mid-market position. Veteran retail analyst Nick Bubb pulls no punches, saying the M&S clothing business is “in long-term structural decline” due to heightened competition. He believes that any evidence to the contrary is just a blip and wants further cuts to clothing space; other analysts say more stores need to go.
Investors eventually lost patience with Rowe's predecessor Marc Bolland who left the retailer with its current dichotomy of high end food and non-premium clothing. With the share price down 11.6 per cent year-on-year, M&S lifer Rowe will need to pull out the stops to avoid the same fate.