Is Marc Bolland making his Marks?

Analysts fear that two years into his role, Marks & Spencer's chief executive is still struggling

Marc Bolland, the chief executive of Marks & Spencer, will be hoping for no unpleasant surprises around his two-year anniversary this week. The day after the Dutchman took the helm at the high street stalwart on 4 May 2010 the retailer's finance director, Ian Dyson, quit to become head of the pub group Punch.

Following in the footsteps of his larger-than-life predecessor, Sir Stuart Rose, Mr Bolland has quietly ushered in a plethora of changes at the retailer, which has more than 700 UK stores.

He has overseen the overhaul of M&S's sub-brands, relaunched the chain back into France, introduced scores of new food products and launched a £500m UK store refurbishment programme – to name a few.

However, City analysts and industry experts are not convinced Mr Bolland has delivered the goods, although he has been hindered by the first double-dip recession in the UK since 1975.

Bethany Hocking, an analyst at Investec, said: "In terms of the financial performance at M&S over the past two years, the jury is still out."

Mr Bolland is expected to unveil pre-tax profits of £694m for the year to 31 March later this month, a 3 per cent fall on the previous year. While this year's results will be higher than the £632m posted in 2009-10, they remain a country mile from the £1bn-plus delivered in 2007-8.

Neil Saunders, the managing director at the retail consultancy Conlumino, said: "M&S has tended to perform in line with how it was before he joined. There has not been a significant advance or a retreat from where they were."

The group's shares also provide more fuel to the argument that M&S has been running fast to stand still over the past two years. Its stock traded at 366.5p before Mr Bolland joined and closed at 361.1p yesterday.

At a trading level, the Bolland years have so far been largely characterised by contrasting fortunes for its food and general merchandise division, which is dominated by clothing.

Mr Saunders said: "The food business has made significant progress. The bit that has struggled is clothing and womenswear in particular.

"M&S has been a bit behind the curve on clothing."

The latest trading update on 17 April did little to suggest that all is well in its clothing department, with M&S admitting it did not have enough own-brand knitwear during February's cold snap.

John Stevenson, an analyst at Peel Hunt, said: "The fact we had cold weather in February and you needed plenty of knitwear is not unusual. That was arguably the first big miss in two years."

This contributed to M&S posting a 2.8 per cent fall in general merchandise sales over the 13 weeks to 31 March.

Mr Saunders said: "The latest set of results suggest they may be starting to lose a little bit of momentum, although it is unclear whether this is the start of a trend or a blip."

Emphasising the importance of turning around its non-food performance, Investec said a 1 per cent rise in underlying UK general merchandise sales can add about £22m to its profit forecasts for 2012-13.

It has been a different story recently at its food division, which accounts for nearly half of group sales. While its latest underlying UK food sales growth of 1 per cent in its fourth quarter was behind City expectations, the division has grown faster than general merchandise in the last year.

Mr Stevenson said: "Food has pretty much performed all the way through. What Bolland has done is to bring in more innovation in food, such as the number of new products it has introduced. Innovation has been stepped up and there has been a clear focus on delivering a decent promotional offer."

However, in the wake of the retail giant's recent lacklustre performance on general merchandise, M&S has to thank an impressive round of cost-cutting for meeting consensus profit forecasts in 2011-12.

Mr Stevenson said: "They have hit their profit before tax numbers through cost cutting. Operating costs for the financial year to March 2012 are around £100m below original guidance, offsetting lower-than-expected gross profit. [Finance director] Alan Stewart has been very good at extracting costs and cost discipline."

While questions remains over profitability under Mr Bolland, many of the operational changes he has made, particularly to its sub-brands and international strategy, have been well received.

Ms Hocking said: "I think the biggest two changes that he has made have been differentiating the sub-brands and the international strategy."

From last autumn, the retailer gave its core ranges the new identity of M&S Woman and M&S Man, in an effort to strengthen its brand values. At a more macro level, M&S has started to vary the layout and merchandise according to affluence, age and ethnicity, as well as local competition, in a number of pilot stores, for the first time in 128 years.

In a further fillip, M&S has cut the cost of refurbishing its 700-plus UK stores by mid-2013 to £500m from £600m.

Under Mr Bolland, the retailer's international strategy has also been given a cautious thumbs-up by the City. While M&S's return to France with a store in Paris in November attracted the headlines, the more powerful growth story will be its stores concentrated around major cities in emerging markets, such as in China and India, aided by online.

Ms Hocking said: "He has clarified the international strategy. While we think this strategy will prove to be successful, the performance of countries, such as Ireland and Greece, is likely to continue to weigh on the international business for some time to come."

Indeed, the recent 2 per cent fall in M&S's international sales in the fourth quarter matters, as it is currently tracking behind its target of increasing group sales by up to 25 per cent to as much as £12.5bn by 2013-14, say analysts.

Closer to home Mr Bolland has had to deal with a string of departures among his senior personnel, such as Andrew Skinner, the second in command to Kate Bostock, M&S's executive director of general merchandise.

Other departures this year include Susan Aubrey-Cound, its director of new channels, and Alison Jones, general merchandise brand director.

Speculation has also centred on whether Ms Bostock will seek a role outside the company, but she has always denied any such intention.

Mr Saunders said: "There have been reports of tensions and there have been a number of departures. I don't get the sense that the team is as cohesive as it possibly could be."

Overall, however, Mr Bolland knows his time at M&S will be judged by financial metrics – notably its share price, earnings per share and profits – and not initiatives, such as Thursday's launch that encourage customers to exchange, or swap, old or unwanted clothing of any brand when they buy a new item from M&S.

As Mr Bolland approaches his second anniversary, the City jury remains out his performance.

But what is clearer is that his honeymoon period, if ever he had one, is over.

Five areas Marks & Spencer must get right

Women's clothing has failed to deliver consistent growth and suffered from a shortage of stock in its fourth quarter

Pre-tax profits are expected to have fallen by 3 per cent to £694m for the year to 31 March

Strategy in countries such as France, China and India applauded but recent sales dragged down by Ireland and Greece

Food performance has continued to improve, driven by innovation, new products and sharp promotions

Finance chief Alan Stewart has cemented his reputation as a savvy controller of costs