LONDON — Marks & Spencer plc, which for years has been struggling with a shrinking clothing business, is hoping that Steve Rowe, its new chief executive officer and the man who ramped up the retailer’s food division, can lend his touch to its beleaguered apparel offering.
On Thursday, M&S said its 56-year-old ceo Marc Bolland had decided to “retire” after six years at the helm, and that Rowe, a 26-year veteran of the store, would succeed him at the start of the new fiscal year in April.
M&S shares on the London Stock Exchange were flat in midday trading following the announcement, and later edged up 0.1 percent to close at 4.39 pounds, or $6.43 at current exchange.
On the back of his success as executive director, food — where he stuffed the stores’ fridges and shelves with gourmet ready meals and healthy takeaways; organic and fair trade products, and a host of M&S branded holiday gift items — Rowe was promoted last July to executive director, general merchandise.
In that role, Rowe succeeded John Dixon, who became ceo of the Australian department store David Jones.
Sales of general merchandise in the third quarter fell short of analysts’ expectations, tumbling 5 percent in the three months ended Dec. 26 due to “unseasonal conditions and availability,” M&S said Thursday. The store has consistently been blaming the weather for its underperformance in clothing.
By contrast, M&S said it had its “best ever Christmas” with regard to food, with sales up 3.7 percent and record sales growth of 17 percent in the key Christmas week.
Group sales in the quarter were flat against last year.
Rowe previously worked in a range of senior positions across the business, including director of retail and e-commerce, and in various positions in general merchandise.
In 2012 he was named executive director of food and led that business to produce 12 consecutive quarters of like-for-like growth, grew its margin, and all its key performance metrics, and set out a path for further profitable growth, according to the store.
But industry observers said while Rowe may be a safe pair of hands, he’s not the person to restore M&S to its glory days — if that is even possible.
“Rowe, an M&S ‘lifer,’ has significant experience across the whole business…and his appointment is likely to be well received in our view,” said retail analyst Kate Calvert of Investec in a report following the announcement Thursday.
Jamie Merriman of Bernstein Research said in her report: “The key question is whether and how Rowe’s leadership and strategy for M&S may differ from Bolland’s, and what he can do to stem the tide of share losses and negative like-for-like sales in clothing.”
George Wallace, ceo of the London-based consultancy MHE Retail, said it’s time for people to recalibrate their vision and expectations of M&S. He said the store’s fundamental problems were already there before Bolland arrived, and that it’s unrealistic to think Rowe can restore the retailer to its gloried past.
“Steve Rowe is probably the best of the bunch at M&S. He’s a good guy with a steady pair of hands, but like Bolland he doesn’t have a fashion background,” Wallace said.
Fashion and clothing have been troublesome for M&S, which has failed to compete with Primark on price or with the high street giants — Zara, Hennes & Mauritz, Next and Topshop — on a compelling style offer.
“Whatever changes may have been made at M&S under Marc Bolland, the customer still does not see them. What the customer sees is virtually unchanged — good food and a moribund fashion offer,” added Wallace. “M&S clothing is not cheap, not expensive, not old, not young. There are a few good pieces in a sea of mediocrity.”
He said the best solution going forward would be for M&S to accept that its business is in decline and to manage that decline profitably. “There is still value in the brand, but it is in decline.”
Indeed, M&S has begun taking steps in that direction with trials planned for certain stores to expand their food areas and cut back on the square footage devoted to clothing. Over the past five years — nearly all of Bolland’s tenure — the store has notched just one quarterly increase in clothing sales.
Philip Benton, senior analyst at Euromonitor International, believes there is still hope for a more profitable clothing business.
“Steve Rowe’s first objective must be to decide on a clear strategy for its women’s wear collection. M&S should create a streamlined source strategy that enables the company to capitalize on successful best-selling lines and reduce orders/stock of poor sellers in order to actively compete with fast fashion while providing core products that its loyal consumers know and love,” Benton said.
He said women’s wear has been an Achilles’ heel for the store because in its attempts to compete with fast fashion and the high street, M&S has alienated its loyal, middle England customer base.
“To make matters worse, due to a lack of efficiency in their supply chain, they have failed to fulfill demand when they have had success. New kids on the block are able to design and launch fast-fashion pieces in a matter of weeks, something that M&S are unable to compete with,” he said.
During the conference call to reveal both the third-quarter results and the management change, Bolland said the general merchandise margin was up “significantly” in the quarter although the store “recognizes that we have more to do to drive the general merchandise performance, and a new team is focused on three priorities: availability, ranging and design. We continue to be affected by the macros.”
Bolland, a Dutch national, was headhunted by M&S after turning around the U.K. supermarket chain Morrisons. He joined M&S in May 2010, replacing Stuart Rose, who had served simultaneously — and unconventionally — as chairman and ceo.
Bolland will remain in his role and as a member of the board until the end of the current financial year on April 2, when he will hand over to Rowe. He will also assist in the transition until June 30.
During the conference call early Thursday, M&S group chairman Robert Swannell said categorically there was “no pressure” from shareholders or the board for Bolland to step down, and that succession planning had been robust ever since he and Bolland took up their roles in 2010.
During the call, Bolland said his term at M&S “rounds off 10 years in U.K. retail. I’ve worked 20 years for Heineken and this year, I’m 10 years in retail in U.K., and I’m probably the longest-serving ceo in the U.K. For myself, it’s a nice rounding off. You’re never completely finished, you’re never completely ready, but on the other hand, it’s a fantastic milestone for me after 10 years, and a chance to do something else.”