Marks & Spencer boss Sir Stuart Rose faces the battle of his life next week as he explains to shareholders, already angry about his cavalier approach to corporate governance, the reasons for its rapid sales decline.
M&S shares crashed more than 24 per cent as stunned City analysts slashed their forecasts after the retailer said food and clothing sales had deteriorated dramatically as shoppers reigned in their spending.
Shareholders will vote on Rose’s decision to become both executive chairman and chief executive at the annual meeting next Wednesday. Corporate governance groups, concerned about Rose’s concentration of power have urged shareholders to vote against the move.
The Association of British Insurers said shareholders “need to make a careful judgement” on the issue. The surprise ousting of the food director Steve Esom reiterates the need for an independent chairman, it said.
“It certainly raises questions about the power of a joint executive chairman and chief executive,” added Charles Stanley retail analyst Sam Hart, “It certainly won’t make it any easier for Rose (at the AGM).”
There’s speculation Esom and Rose disagreed over the company’s food strategy. Pali International analyst Nick Bubb questioned his departure when clothing did worse than food.
M&S said it was undecided whether Esom would keep his £500,000 recruitment bonus.
City Views: What will be the long-term implications of yesterday’s disastrous sales figures from M&S?
Durham Evans (Smith & Williamson): “The economic conditions right now affect everything. I’m not shopping as much as usual, and I’m sure other people aren’t, either. “I think Marks & Spencer will recover, though. In general, things will get better – it always does. It’s up and down.”
Lewis Wicks (Lloyd’s of London): “Marks & Spencer may be making less than last year, but they’re still doing all right. “They’re big enough – they’ll recover. It’s just that people aren’t sure of what’s coming in the future, or of what’s happening right now. They’re probably scared about shopping and spending money.”
Tina Gale (Willis): “Marks & Spencer tends to be less flexible than other stores with their prices, so that may cause people to shop elsewhere, especially now. It’s clear that people are cutting back. The sales are going on in almost every store, but the products still aren’t selling.