M&S strategy under fire in wake of sales slump

City Editor

Wednesday 11 July 2012

MARKS & Spencer chief executive Marc Bolland was accused of being the "Bob Diamond of retail" as he faced investors having published its worst sales figures for years and announced the departure of its clothing head Kate Bostock.

UNDER PRESSURE: M&S chief executive Mark Bolland said the last quarter had been tough for the company. Picture: Adrian Brooke/Imagewise

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TIM SHARP CITY EDITOR

The analogy with the Barclays chief executive, who resigned last week, came from one of a number of small shareholders who criticised its strategy at the annual investor meeting in London.

M&S said like-for-like sales at UK stores fell 2.8% in the 13 weeks to June 30, the firm's worst quarterly drop since the third quarter of the 2008/09 financial year.

Demand for its clothing was particularly subdued, with sales at its general merchandise business down 6.8%, although its food arm eked out a 0.6% sales rise.M&S's chairman Robert Swannell said: "We are working in difficult conditions but I am certain we are building a better and more valuable business."He insisted that M&S would not change course.He said: "All too often businesses can be tempted into shifting strategy for short-term developments. We have tested and re-tested our strategy and we firmly believe it is the right way forward."He added: "There is no doubt this year will be tough. But we are clear we are doing what needs to be done to shape the business here and internationally for growth."M&S, which has 67 stores in Scotland and 730 UK-wide, was not helped by the wettest April and June since records began."It was a tough quarter for us," said Mr Bolland. "General merchandise is under pressure."He added that the retail sector is "very promotional and very price-driven." M&S was hurt by a shortage of key items earlier in the year.Mr Bolland also bemoaned the weather. The main drag on trade was reduced sales of seasonal items, such as casual tops and linen, where M&S has a high market share.M&S's lacklustre performance comes at a time when disposable incomes are being squeezed by muted wage growth. In May, Mr Bolland cut targets for his three-year sales drive. Yet key rivals such as John Lewis and Debenhams are continuing to add sales.This isn't lost on M&S's investors. Shareholder John Farmer, complaining of a dip in profits last year, said: "When and how will Marks & Spencer stop losing shareholders' money?"He added that the chief executive "is the Bob Diamond of retail", to surprised gasps from other investors.John Bailes, a shareholder from Leeds said: "On price, we are competing head-to-head with the major food supermarkets. "It doesn't seem to me to add up to a clear corporate strategy for UK retail."Others were more concerned about their shopping experiences, with complaints about loud music, the "madness" of its bra-fitting booking service and excessive amounts of peacock-blue and purple in its ranges.The annual grumble about a dearth of sleeved dresses received an airing.However, Mr Swannell was well-briefed. The number of sleeveless dresses on offer was down 43% on last year at 173. Meanwhile, the sleeved numbers were up more than 20%, he told the audience in the Royal Festival Hall.The retailer said executive director of general merchandise Kate Bostock would leave the company on October 1 by "mutual consent." Ms Bostock has been linked to a senior role at online retailer ASOS. She attended the meeting, where Mr Swannell praised her "significant contribution" to the business.She will be succeeded by M&S veteran John Dixon, who has succeeded in turning around the company's food division over the past four years. Mr Dixon will be assisted by Belinda Earl, a former chief executive of Debenhams, Jaeger and Aquascutum, who has been appointed in a part-time role as style director from September 1. Darren Shirley, analyst at Shore Capital, said: "The announcement brings to an end a period of uncertainty and possible tension at a board level, which is probably the best for all concerned."Some investors criticised pay practices at the retailer after it proposed a package that could land chief executive Marc Bolland with £6 million including bonuses and long-term incentives. But its remuneration report passed with 96.3% support.M&S's shares closed up 6.8p or 2.1% at 327.8p.

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M&S strategy under fire in wake of sales slump

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