Marc Bolland quits: City welcomes M&S chief executive’s departure following dismal Christmas trading results

56-year-old announces his resignation on the day that high street chain reveals tumbling sales of clothing

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The Independent Online

The Marks & Spencer chief executive, Marc Bolland, headed for the exit on a day when the company reported one of its worst Christmas sales performances for several years.

Mr Bolland insisted he had only ever planned on staying in the job for the five and a half years he has served – having spent a decade at the helm of British retailers – and his chairman said there had been no pressure from shareholders or the board for him to quit.

But before he could head into the sunset, the 56-year-old suffered the indignity of watching the company’s share price close up on a day on which 97 of the 100 companies on the blue-chip FTSE 100 index were down, suggesting that investors were glad to see the back of him. The shares closed up 0.5p at 439.2p.

Mr Bolland is set to walk away with a year’s salary of £975,000, a £293,000 pension boost and share options worth as much as £9m – although the company was keen to stress that these were set against very tough targets.

M&S named his successor as Steve Rowe, the head of general merchandise. He will be on a lower annual salary, £810,000, and is not set to take the top job until April, with Mr Bolland staying on until the end of June to help the transition.

The boardroom change came as M&S reported that sales for the non-food division in the 13 weeks to Boxing Day dropped by  5.8 per cent on a like-for-like basis. The fall was eased by online sales ticking up 20.9 per cent, with analysts predicting that in-store sales are likely to have fallen by 9 per cent.

The results were worse than even the most pessimistic analysts had predicted. However, the City was cheered by the news that a drive for higher margins is likely to come in at the top end of expectations, amid cost-cutting in the supply chain and more stock being sold at full price.

Sales plunged due to the warm November and December weather, but also because stores failed to stock enough suitable clothes. Shelves were packed with winter coats and thick woollen jumpers, while lighter items were sold out.

Mr Rowe, who has been with M&S for 25 years, was welcomed by City analysts, but there were questions over the appointment process.

The decision of the chairman Robert Swannell to appoint an internal candidate, when the company has been struggling for several years, was questioned. He refused to say whether he had interviewed any external candidates, with Mr Bolland having told the board last summer  of his desire to retire in 2016.

Mr Swannell said: “This has been the most rigorous process… and I’m delighted that we have chosen Steve as Marc’s successor. Steve’s record in the business is obvious… He has a deep knowledge of the business inside out.”

Mr Bolland explained: “Right from the outset I saw my tenure as a five or six years term, and last summer I informed them [the board] that I would retire in 2016.”

Mr Swannell said outside advisers were brought in to search for a replacement, but when asked if other candidates were interviewed, he would only comment: “We did external benchmarking.” 

And while the City was happy with the job Mr Bolland had done for M&S, others urged Mr Rowe to take a different direction. Jonathan Pritchard and John Stevenson, retail analysts at Peel Hunt, said: “Our wish is that Mr Rowe brings in a revolutionary spirit; further evolution of the current strategy will lead to further weak sales and souring of the M&S brand.

“We would argue for a rethink on gross margin [lower prices or higher quality], an overhaul of merchandising, advertising and service, and an abandonment of the share buyback to invest in the real estate.”

The veteran retail analyst Richard Hyman was scathing about Mr Bolland: “It’s like the emperor’s new clothes. His record on non-food is appalling. That’s not a matter of opinion; it’s a matter of fact. 

“You have to understand exactly who your customers are and M&S has been very bad at that – and the body language of the stores say that. They’ve been in denial about who their customers are. I’m cautiously optimistic but the key strategic issues the company faces are the same as they were.”

Sector by sector at a glance

Online 3/10

Marc Bolland inherited a dog of a website when he came to M&S. Yet the reboot took four years and the £250m website, when it was finally relaunched, was a complete flop. All  6 million customers were forced to re-register, with the previous host Amazon refusing to hand the details over. Sales actually fell 5.9 per cent – something virtually unheard of in online. There were also big problems also hit the website’s distribution, which the company failed to own up to. It left online chief Laura Wade-Gery out of the running for the chief executive role.

Distribution 8/10

Another legacy for Mr Bolland was a seriously creaky infrastructure in desperate need of investment. Shareholders at annual general meetings would hear that the systems were “crap” and had to be upgraded before anything else could be put right.

By the end, analysts reckon Mr Bolland had spent £1bn on upgrades, shutting dozens of small distribution centres, implementing more centralised control for stock ordering and streamlining everything. It was arguably one of his biggest successes and highlighted extensively in Thursday’s valedictory statement.

Food 9/10

We may have fallen out of love with M&S’s fashion, but the groceries have shone ever since M&S created “food porn” adverts.

For every quarter of tough clothes sales, there was an equally good set of food results, consistently outperforming the market.

It is now one of the only grocers that can maintain higher margins – although not having “big box” stores like Tesco et al has helped, and comparisons could be questioned. Also, while margins might be high at 5 per cent in food, they are nowhere near those in clothing, which can be up to 70 per cent.

Womenswear 2/10

Womenswear is M&S’s biggest department and its biggest problem. Mr Bolland never managed to understand who his customers were. Older women didn’t want sleeveless dresses, and daughters didn’t want to go where their mothers shop.

Two general merchandise bosses left over the years and although the style director Belinda Earl was brought in, a breakthrough into positive territory failed to materialise. Today, margins are put above sales, with fears quality could be compromised – keeping shareholders happy at the expense of customers.

Stores 5/10

Overall, analysts reckon £2.4bn has been spent by Mr Bolland during his tenure. Some went on IT and systems, while the rest went on stores (and a bit is going back to shareholders through buybacks).

But most people agree the stores still need a lot of work. The bigger premier outlets may look slick, but smaller stores in the suburbs tend to be drab and unable to offer enough stock. Some argue M&S also has too many, and bosses quietly closed around 10 last year. Simply Food stores do well, particularly in travel hubs, and 150 new ones opened in just three years.

International 6/10

M&S has always had mixed fortunes overseas – most notably its ill-fated tilt at the US. Mr Bolland continued in the same vein with victories in France, where food sells well, and Savile Row inspired suits in Hong Kong and China – but the macroeconomic factors hitting Russia and the Middle East have had a negative effect. Its biggest overseas market – Ireland – has really struggled, with many of the same problems in clothes sales as in the UK. However, M&S secretively decided not to break out sales for each individual country.