LONDON — Shareholders in Marks & Spencer, Britain’s largest clothing retailer, said they will seek a new M&S to emerge in the next 12 to 18 months, with rising sales and a share price above the $7.40, or 4 pounds at current exchange, that retail tycoon Philip Green had promised them before giving up his fight Wednesday to take over the ailing chain, financial experts said.

“Green did M&S shareholders a huge favor in providing the catalyst for management change,” said David Cumming, head of U.K. equities at Standard Life Investments, which holds a little more than 2 percent of M&S shares. “It is now up to [chief executive] Stuart Rose to deliver the recovery.”

Green, who walked away from the takeover attempt after the M&S board refused to provide financial information to him, vowed to fight back with better products at his stores, which include Topshop and Dorothy Perkins.

“We’ll battle it out on the high streets,” said Green, the billionaire businessman known for his sourcing and merchandising skills and hands-on involvement. “The customers will be the winner. We are going to be a contender. The customers will be doing the voting, and they haven’t been voting for Marks & Spencer lately.”

Rose’s job isn’t getting any easier: On Thursday, M&S shares fell 5.22 percent, closing at $6.38, or 3.45 pounds, as short-term M&S investors and hedge funds jumped ship the day after Green renounced his seven-week pursuit of the iconic retailer.

Richard Ratner, head of equities research at Seymour Pierce in London, said Rose has a good strategy. “But talk is cheap. Now, he’s got to deliver.” Ratner said he believes the M&S share price will climb to $6.29, or 3.40 pounds, in the short term. “And if everything goes right with the new strategy, we could see the price rise to 4 pounds in 12 months’ time. If it doesn’t, then Philip Green could be back again in 12 to 15 months.”

Green said Wednesday his firm, Revival Acquisitions Ltd., reserved the right to come back with an offer within six months — the cooling-off period set out by U.K. stock market regulators.

This story first appeared in the July 16, 2004 issue of WWD. Subscribe Today.

Industry experts said they did not expect other bidders to soon emerge for M&S. “If anyone else was going to come forward with a bid, they would have done so already,” an analyst said.

M&S chairman Paul Myners said in a statement Thursday the board is “focused on improving the performance of Marks & Spencer and delivering long-term value.”

However, Green made three bid proposals in six weeks, the last of which was an all-cash offer of $7.44, or 4 pounds, a share, or $6.23, or 3.35 pounds, a share and a 30 percent equity stake in a new M&S business. M&S rejected all of them, saying they undervalued the group and its prospects significantly.

Rose, who has resumed his meetings with M&S’ institutional investors, told the store’s private shareholders during the annual general meeting Wednesday that he expected to see sales growth beginning with the 2005-2006 fiscal year. “We are very conscious of the need to get this business moving,” he said.

Rose wants to turn M&S into a stylish — and well-oiled — machine. At his first major news conference Monday, Rose said he expects to save $462.5 million, or 250 million pounds, in the 2005-’06 fiscal year, and a further $592 million, or 320 million pounds, the following year because of more favorable deals with suppliers, a more efficient supply chain, clothing markdowns and lower food waste.

He also wants to win back the 35- to 55-year-old age group with a better, more focused clothing offer. “M&S should stand for stylish clothes that are beautifully made and offer fantastic value,” Rose said Wednesday.

Rose also pledged a cash return of $4.25 billion, or 2.3 billion pounds, to shareholders, which will be enacted via a tender offer equivalent to $1.85, or 1 pound, a share in September.

Rupert Trotter, an analyst with Isis Asset Management, which is an M&S shareholder, said, “We need to give Rose at least 12 months to improve top-line growth. Retail is a business with long cycles, and I don’t think we’ll start seeing any changes until spring 2005 at the earliest.”

Earlier this week, after listening to Rose’s strategy plans, Trotter calculated that Rose could boost M&S shares to $7.77, or 4.2 pounds, to $7.95, or 4.3 pounds. However, he is waiting for more details from M&S before adjusting those numbers.

In the 2003-2004 fiscal year ending April 3, M&S’ share of the clothing market declined 0.2 percentage points to 11 percent. Clothing sales rose just 1.4 percent to $7.45 billion, or 4.03 billion pounds, from $7.36 billion, or 3.98 billion pounds, in the 53 weeks. Overall sales rose 3.52 percent to $15.35 billion, or 8.3 billion pounds, from $14.84 billion, or 8.02 billion pounds.