Jeremy Warner: Downturn bites hard at Marks & Spencer
Wednesday 05 November 2008
Sir Stuart Rose, chairman of Marks & Spencer, is no quitter, but he must occasionally wonder why he didn't quietly bow out earlier this year while he still had the chance. Instead, he not only incurred the wrath of shareholders by elevating himself to the executive chairmanship, but by doing so he has ensured he is still at the helm as the ship sails into the recessionary storm. Already the impact on sales and profits is brutal.
Sir Stuart could have retired on a high note, with the company once again in £1bn profit territory. Instead, he has hung around long enough for the City to start questioning anew whether he is actually any good. The big disappointment in the half-year figures was foods, where the company has been forced to reinvest a sizeable chunk of its margin in price promotions. Even so, this did not prevent a 5 per cent fall in like-for-like sales. M&S's unashamedly upmarket foods proposition is all very well in boom times, but when the going gets tough, it becomes exceptionally vulnerable to value-driven competition.
On clothing and general merchandise, M&S claims broadly to have held its market share, but again, what a contrast with discounters. Yesterday, Associated British Foods released figures which (embarrassingly for M&S) showed that its Primark subsidiary is still managing to grow sales and profits despite the downturn. This apparently continued even into October, a month which M&S described as "volatile".
Still, although things plainly look difficult for M&S, they can hardly be described as terminal. M&S has been on the high street for 127 years and, as Sir Stuart remarks, should be around for a few more yet. Costs, capital and market spend are being pared across the group, and debt remains well within manageable proportions.
How different this might have looked had Sir Philip Green succeeded with his highly leveraged bid a few years back. Human dynamo that he is, maybe Sir Philip would by now have paid back much of the money he planned to borrow to finance the takeover. If he hadn't, M&S might today already have become the first major retail casualty of the downturn. Enough "what if" history. For the time being, the dividend is held. Whether it will survive once others begin to cut theirs is anyone's guess.
- 1 Qataris pledge to expand Canary Wharf
- 2 #JeSuisEd: People share photos of themselves eating awkwardly in solidarity with Labour leader
- 3 Women think Irish men are the sexiest, survey finds
- 4 Florida couple forced to register as sex offenders for having sex on public beach
- 5 Watch eerie drone footage of destroyed building in Stalingrad
#JeSuisEd: People share photos of themselves eating awkwardly in solidarity with Labour leader
Florida couple forced to register as sex offenders for having sex on public beach
General election 2015: 'Nasty party' Ukip faces fresh questions over candidates on eve of vote
Who should I vote for in the general election? Take The Independent's interactive quiz to find out which party is the right choice for you
Ohio 'Shawshank Redemption' fugitive Frank Freshwater arrested after 56 years on the run
In defence of liberal democracy
General Election 2015: Post-election 'shambles' looms as 70 per cent of voters say SNP 'should not be able to veto UK government policies'
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
General Election 2015: Sturgeon claims Scots 'appalled' by Ed Miliband's refusal to work with SNP
iJobs Money & Business
£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...
£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...