After almost seven years, Sir Stuart Rose has finally cut his links to Marks & Spencer. How big an impact did he have on the retailer, asks George MacDonald
Rose arrived at M&S in May 2004 as its returning king over the water, the only man viewed as capable of fending off an audacious takeover attempt by tycoon Sir Philip Green and restoring the fortunes of the legendary business.
But he formally left on Tuesday without fanfare. While his successor as chief executive Marc Bolland prepared to issue the traditional January update, Rose was far away from the British high street that made his fortune and his reputation - instead he was in Australia, watching the Ashes.
Rose’s preference for the sound of leather on willow on the other side of the world to the round of farewell interviews that would have been inevitable had he spent his last day in the office was perhaps understandable.
His tenure at M&S was a time of adulation and criticism in equal measure. He saw off Green and at the subsequent AGM lady shareholders swooned at his feet. Charismatic, sharp-witted and an accomplished retailer, Rose was able to return M&S to its glory days as it once more posted profits of £1bn.
But by the end of his reign Rose had become a more controversial figure. His assumption of the executive chairmanship in 2008 prompted a falling out with the City and, like other retailers, M&S suffered a hit to profitability as the credit crunch bit. Critics argued that power had gone to Rose’s head and that M&S still faced some of the same fundamental problems as when he arrived.
Back to the future
So what is Rose’s business legacy? At the top of his agenda was the need to draw upon the original springs of M&S’s success, which he believed had been lost sight of by previous management.
That meant going back to the future. From day one, the Rose mantra was quality, value, service, innovation and trust. He and his team mates parachuted in back in 2004 - marketing supremo Steve Sharp and strategist Charles Wilson - and set about rebuilding M&S upon the foundations that had sustained it for so long.
Initiatives ranged from the groundbreaking ‘Not just…’ advertising campaign that helped re-establish the retailer’s reputation for food quality and fashionability, to leveraging corporate citizenship credentials such as the Plan A programme (see box below).
There was increased emphasis on value through the good, better, best price architecture system and improved open-to-buy allowed more fashion newness. Renewed success meant the jettisoning of costly sideshows such as the Lifestore home and furniture fascia, more spending to improve the shopability of stores and improvements to business structure, such as bringing Per Una in-house after buying out founder George Davies for £125m.
It meant a break with hidebound aspects of the past, symbolised by the move out of M&S’s famous Baker Street head office to Paddington Basin. The sale of St Michael House raised £115m while the partial sale of the retailer’s financial services operation realised the equivalent of £2bn.
In the key apparel category there have been ups and downs during Rose’s time. Figures compiled by TNS data cited by Retail Week Knowledge Bank shows M&S accounted for 10.5% of the womenswear market by value. The proportion rose to just over 11%
in 2007 and in the two most recent financial years was 10.5% and 10.7% respectively.
Lingerie market share was 24.3% in 2005 and 25.9% last year, while menswear share was 9.6% and 10.4% respectively. In the current financial year the signs are that, under the leadership of divisional director Kate Bostock, M&S has continued to make ground. While M&S must fight every inch of its corner, the evidence is that its position by sales value is being sustained after it was eroded before Rose’s arrival.
Food for thought
In food, which accounts for just over half of M&S’s sales, the retailer’s strength has come under sustained pressure. The hiring of former Waitrose boss Steven Esom in 2007, seen as a coup, ended in his surprise departure just a year later.
Retail Week Knowledge Bank consultant Robert Clark notes: “A need to accelerate change in food was the reason given, and clearly Esom and Rose had a fundamental falling out over this and Esom’s ability or willingness to deliver along the lines Rose believed was required.
“It was always reckoned by Retail Week Knowledge Bank that in due course M&S would come up against problems in sustaining momentum for a premium priced range at some point when the market turned, despite the opening of many more Simply Foods.
“The latter arguably masked the inevitable day of reckoning when the like-for-likes went into reverse and store sales cannibalisation reared its head. This was initially exacerbated in the developing squeeze on consumers’ disposable incomes in 2008 and recession in 2009.”
During Rose’s leadership there was speculation of a tie-up between Sainsbury’s and M&S. Whether well founded or not, no deal ever emerged and under M&S veteran John Dixon change has been initiated at the food division.
Initiatives such as ‘Dine in for two for £10’ promotions and an increased level of innovation have had an impact and market share gains are being made. However, M&S continues to face a fierce fight against full-line supermarket groups despite shifts such as the introduction of third-party brands.
Aside from focus on the established core UK business, Rose realised that M&S needed new growth platforms too. He identified two priorities - multichannel and overseas expansion.
A relative laggard in ecommerce, M&S changed direction in 2007 with the launch of a new site on an Amazon platform. Rose set a sales target of £500m by the end of this financial year - a figure that was beaten ahead of deadline.
Despite its tardiness getting into multichannel M&S quickly made strides. Its use of social media and innovations such as online films and interviews were up with, or ahead of, the main retail pack and Rose must be credited with forcing the pace of change. The strides made are evidenced by Bolland’s introduction of a new sales target of £800m to £1bn by 2014.
While ecommerce is likely to play a growing role in M&S’s future international growth, the overseas focus during the Rose years has been on stores.
Rose has always said that he thinks the decision by M&S to withdraw from western Europe was a mistake. During his time in charge, however, the emphasis was on emerging markets such as India and China.
Progress has been mixed. The retailer forged a partnership with Indian group Reliance to roll out there and dipped its toe into the Chinese market - its third Shanghai shop opened at the end of last year. However, the first Shanghai opening was a fiasco. The store was ill matched to the local market and generated contemptuous comment.
International director Carl Leaver decided to leave, apparently also following disagreement with Rose after some of his multichannel responsibilities were given to retail director Steve Rowe. The clashes with Leaver and Esom are indicative of one of the most common criticisms made of Rose - that he had too proprietorial an attitude to M&S and too dominant a position.
It was a complaint that came to the fore in 2008 when Rose assumed wider powers as executive chairman. M&S argued that the appointment was an extraordinary response to extraordinary times as the downturn buffeted the retail sector, but the conflict with the City probably finally marked the end of the affair between Rose and some of the big investment institutions.
Despite such run-ins, Rose was personally popular. “He’s one of the most colourful retailers. He’s witty, he has great anecdotes - he’s larger than life,” says retail consultant and former City analyst Greg Lawless. But his charm was not sufficient on its own. “He acted as if it was his business,” says Lawless. “It’s not - he was the custodian.”
From then on the issue of succession became a business soap opera played out at AGMs and in the newspapers’ City pages until the appointment of Bolland just about brought the matter to an end - though the latter’s reward package quickly emerged as a new subject of dispute.
In November, after spending his first few months getting under the skin of the business, Bolland presented his findings and updated strategy. Rose, for once not on the stage in front of investors, watched from the audience.
Bolland outlined proposed changes such as streamlining the number of M&S fashion sub-brands. What was striking, however, was not what was new, but what was already familiar. He spoke of improvements to the core business, acceleration of multichannel operations, international opportunities to be grabbed. The Rose legacy seems to be the Bolland strategy.
|IN NUMBERS THE ROSE YEARS|
|Year (to March)||Sales||Pre-tax profit||Gross Margin|
|2010 (53 weeks)||£9.53bn||£702.7m||37.90%|
|Source: Retail Knowledge Bank|
Although less glamorous than the consumer-facing stores, in modern retail efficient business systems, infrastructure and the supply chain lie at the heart of success. Rose and former M&S finance director Ian Dyson launched the Project 2020 business improvement programme to save £250m annually by 2015/16. City analysts were excited by the size of the prize, but criticised Rose for not acting sooner on systems.
Retail consultant Greg Lawless says: “He didn’t tackle it as quickly as he could have done given the scale of the opportunity. He improved product and the stores, but didn’t do enough on the infrastructure.”
Last year M&S opened a state of the art warehouse in Bradford exemplifying its progress. This will allow faster delivery of goods such as furniture - improving the customer experience and M&S’s position in the home sector, a category in which it has constantly tried to achieve greater growth. Bolland is speeding up the 2020 programme.
It’s Good to be Green
While there may be arguments about Rose’s commercial legacy, few would dispute that in Plan A he leaves one of the most ambitious and successful corporate social responsibility programmes in the world.
Plan A was unveiled at the start of 2007, inspired by Rose’s reading of the Stern report on climate change, and comprises targets ranging from carbon neutrality to ethical trading.
The venture clicked with the times - although there was controversy over charges for carrier bag - and the retailer has stuck to its guns even though saving money seemed to take precedence in shoppers’ minds as the winds of recession blew.
Rose believes that apart from being the right thing to do, Plan A continues to resonate with consumers and makes business sense. The programme generated £50m additional profit last year.