Marks & Spencer’s fourth-quarter results revealed falling general merchandise sales and a flat performance in food. Here’s the City’s reaction.

“We have a good feeling about Rowe; he has spent time in stores, has delivered food success and has started his first week in the best possible place – in stores with colleagues and customers.

“A review of the M&S target customer is overdue, the customer that visits the food hall, has disposable income, is already frequently visiting stores and can easily and inexpensively be acquired and converted with the right ranges.

“It would be refreshing for the availability of the marketing success fashion pieces to be translated into sales.

“Translate the quality of food sourcing into fashion – superior quality fabrics from sustainable sources, knits that don’t pill, buttons that stay attached to fashionable ranges – and M&S has an inherent value positioning that they can get back to.

“We can expect Steve Rowe to ‘kitchen sink’ the M&S full-year results in May leaving him with a clean sheet with which to start his tenure as chief executive. Rowe has an opportunity to blame previous leadership but we doubt he will. Instead he will be tenacious in his forward thinking: you cannot change the past, just learn from it.” – Retail Remedy, Alison Pike

“That general merchandise performance against a reasonably tough comparative for a division that has sustainably struggled to build same-store sales must be the key priority for new chief executive, Steve Rowe, to address to our minds.

“How he plans to do so will be the subject of much market interest for all stakeholders as the outcome of his plans will ultimately determine the success or otherwise of M&S’s share price performance for the immediate future.

“The performance of the food division should not be overlooked. Whilst the market will understandably concentrate upon the general merchandise performance it is important to retain a sense of perspective to the extent that M&S, aided by new space, is demonstrably and sustainably outperforming the UK grocery market.

“As such, to our minds, we now enter a period of moderate uncertainty with respect to M&S from a forecast – and so investment thesis perspective – until we establish what Rowe plans to do with the business.

“We see Rowe as a force for good in the business, one that can build upon a lot of heavy lifting undertaken by his predecessor, Marc Bolland, in terms of business infrastructure and process”

Clive Black, Shore Capital

“In making this point we see Rowe as a force for good in the business, one that can build upon a lot of heavy lifting undertaken by his predecessor, Marc Bolland, in terms of business infrastructure and process.

“Given his nature, dynamic, active and to the point, we do anticipate that M&S will enter a period of further change albeit second-guessing the nature and extent of the change under Rowe is difficult.

“Whilst he has been in the ‘designate’ seat for a few months, a fuller update is to be provided, as many reasonably expected, at the group’s preliminary results on May 25.

“We do, however, expect the prime focus of attention to be on the front-end delivery, particularly of UK general merchandise, so the ranges, the merchandising, the website and store estate.

“Whilst not necessarily insurmountable, fixing M&S’s general merchandise conundrum, notably sustained brand corrosion, will not be an easy or quick process. If it was then we assert that it would have been done so before now.

Rowe, Steve

Steve Rowe April 2016

Steve Rowe

“Equally, we do not believe that it is an impossible task either and Rowe may be particularly, nay distinctively, positioned to make the necessary changes to see things through as an M&S ‘lifer’,

“The solutions somewhat obviously revolve around product, merchandising, marketing and price to the extent that M&S can engineer a necessary process of positive change that delivers sustainable same-store and then trading profit growth in general merchandise; conditions for ongoing share price appreciation in our view.

“In the near term M&S may be on a course to go a little backwards in order to go forwards depending upon Rowe’s prognosis for the business.

“However, whilst it is only an act of faith to some degree, he is an executive that we are minded to back, one with the commitment, energy and insight to demonstrably take M&S on a better course, something for which long-standing shareholders’ pine.” – Clive Black, Shore Capital 

“What we are likely to get [from Rowe] seems fairly clear: in-store execution continuing strong but a much more demanding approach to central functions – product-related, where the problems have clearly been in recent times.

“How this balances between sales and margin delivery in clothing and home will be a key debate. But we sense that the current approach of being bailed out by the efforts of the buying team on the bought-in gross will no longer be enough for new management.

Marks & Spencer

Marks & Spencer

Marks & Spencer’s fourth-quarter results revealed falling general merchandise sales and a flat performance in food

“Overall this should reinforce the view that a geared recovery in clothing and home can be delivered in the near-medium term (allowing for the lags involved in buying clothing) even allowing for national living wage headwinds.

“This has been said often in the past twenty years at M&S and not delivered that often. But Rowe’s strengths should protect the downside. The longer term uncertainty over industry capacity related issues is likely to constrain valuation, but we expect earnings to recover and it may be material.” – Tony Shiret, Haitong

“The first step towards change is awareness. Whilst one quarter does not a recovery make, our view is that there is already evidence that Steve Rowe is aware that there is a major brand reputation issue within general merchandise and is willing to do something about it.

“Food has slowed along with the market but we’re sanguine about that: new store returns are highly positive. We are optimistic that the new chief executive can turn the general merchandise department around, even if it takes margin investment and time.

“We are optimistic that the new chief executive can turn the general merchandise department around, even if it takes margin investment and time”

Jonathan Pritchard, Peel Hunt

“Opening price points are a problem for M&S. They have been allowed to get out of line with the likes of Next and customers have voted with their feet.

“Rowe cut prices by 10-20% on 350 lines in early January and this will have been one of the factors in the better like-for-like showing. Availability is much better too.

“We are cautiously encouraged by the fourth-quarter statement but we’ve seen countless false dawns from M&S in the past and Steve Rowe surely won’t be so short-sighted to think that anything but a major overhaul in general merchandise is required.

“Our view is that process akin to that undertaken by the food division in 2008 is required. If that’s what is needed to put general merchandise back on an even keel then Rowe should be brave enough to take M&S to a lower initial level of profitability in order to rebuild it in a more sustainable way.” – Jonathan Pritchard, Peel Hunt

“In a sense, the fourth-quarter trading pattern is a case of déjà vu, with a robust food performance relative to the wider grocery sector, offset in sales terms by a weak general merchandise performance. Fortunately, the gross margin gains should offset or certainly mitigate the general merchandise sales shortfall in the near term.

“Steve Rowe has officially taken over as group chief executive, and we welcome his arrival in the hot seat, given the breadth and depth of his operational and managerial experience around the group over the past quarter of a century.

“We note that for the foreseeable future he intends to in effect retain the role of head of general merchandise, the position he was last in before his elevation, albeit for a relatively short time given the lead times within the clothing industry.

“With his stated aims of customer focus and simplifying the business, we see this as a positive and a statement of intent regarding unfinished business.” – David Jeary, Canaccord Genuity


“This latest poor performance from Marks & Spencer’s general merchandising business comes as no surprise to the City, since the clothing division has only managed to increase like-for-like sales in one out of the past 16 quarters.

MS Simply Food

M and S Simply Food

Food continues to fare better than fashion at M&S

“While the latest figures are an improvement on the retailer’s dire Christmas trading period, drastic changes are still needed to boost margins and encourage consumers back onto the shopfloor.

“Clearly incoming chief executive Steve Rowe has an uphill battle ahead of him. Ultimately Marks & Spencer needs to reposition itself in the hearts and minds of UK consumers as while everybody still loves M&S, nobody seems to be ‘in love’ with it anymore.

“With Steve stressing on his first day in the new job that the clothing division would be his top priority, at the same time as professing a simpler strategy that puts the customer at the heart of all decisions, there does appear to be a fresh optimism for the future here.” – Julie Palmer, Begbies Traynor


“With M&S it’s a case of new chief executive but same old story. Steve Rowe’s appointment has done little to arrest the clothing declines that have seen just one quarter of like for like growth in the clothing and home department in the last five years.

“Equally the talk of a new strategic emphasis on clothing from Rowe has an element of déjà vu about it as well. It feels that M&S have rarely issued a financial announcement without making similar claims, evidenced by the merry-go-round of designers and clothing chiefs that the retailer has appointed.

“Against this backdrop M&S continues to see its food division rise in prominence, improving share despite flat sales and continuing to make a compelling case for guiding future growth.

“What is slightly different this time is that M&S is far from being alone in reporting a difficult clothing market.

“A few weeks ago Simon Wolfson, the chief executive of Next, sent shockwaves through the UK clothing retail industry with a stark warning about tough trading conditions.

“In this respect M&S may have outperformed market expectations, but if Wolfson’s remarks are anything to go achieving growth in the near term is likely to prove very difficult.” – Jon Copestake, Economist Intelligence Unit