M&S defends its executive pay as UK sales surge in first quarter

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The Independent Online

Sir Stuart Rose, the chairman of Marks & Spencer, boasted yesterday that its resolution on executive pay would be passed by investors at its annual meeting next week, after the retailer reported that clothing sales had soared ahead of expectations.

M&S could face a protest from shareholders in London next Wednesday after Pirc, the corporate governance body, urged them to vote against its remuneration report and its "highly excessive" executive pay. In particular, Pirc highlighted the potential for the M&S to grant a variable remuneration of 650 per cent of base salary.

It also cited the potential £14.8m that Marc Bolland, who became the chief executive of M&S in May, could earn in his first year, although half of this relates to compensation for bonuses accrued at Morrisons. However, Sir Stuart said: "I am very confident that all the resolutions will be passed and we can move on to a new place."

He also launched a vigorous defence of Mr Bolland's pay, saying: "If you pay peanuts, you get monkeys".

The chairman added that only Mr Bolland's pension and salary were guaranteed and the rest of his package – excluding the compensation from Morrisons – was related to performance.

Sir Stuart, who will step down by March 2011, has faced criticism for the £875,000 salary he gets from the end of this month when he becomes non-executive chairman.

He said: "I am working pretty extensively. I don't turn up two days a week. I am in the office five days a week and I am available seven days a week." Shareholder anger at executive pay in the UK is growing. Last week, only 53 per cent of investors' votes were cast in favour of Tesco's remuneration report. But the mood at M&S's annual meeting in the Royal Festival Hall will be helped by the high street giant's strong first-quarter performance.

Its total UK sales jumped by 4.8 per cent, although its international sales rose by only 0.9 per cent, hit by "difficult trading" in Ireland and Greece and an adverse impact from currencies.

Its closely-followed UK like-for-like sales, including online, jumped by 3.6 per cent over the 13 weeks to 3 July. The star performer was its general merchandise division, which grew underlying sales by 6 per cent. Sales of its Per Una brand were particularly strong, both in-store and online.

Mr Bolland said: "We have grown market share across all areas of the business." It grew its share of the womenswear market, based on sales value, by 50 basis points to 10.4 per cent – an identical rise and market share in menswear – as well as a 90 basis points jump in lingerie to 26.7 per cent.

Mr Bolland pointed out the uplift in lingerie sales came despite strong sales for the same period last year, when it ran its "We boobed" advertisements after ditching its policy of charging woman an extra £2 for bigger bras.

While England had a miserable World Cup, M&S benefited by selling 7,000 of the grey suits it provided to the national football team. This was despite the Arsenal star Theo Walcott, who appeared in the retailer's high-profile billboard campaign, not being selected for the final squad.

UK underlying food sales at M&S rose by 1.5 per cent, as the improvement under John Dixon, the executive director of food, continues.

But Mr Bolland warned on the outlook for the high street. "We have made a good start to the financial year, but following the recent Budget and the actions proposed to reduce the national deficit, including the increase in VAT, we are cautious about the outlook for consumer confidence and spending."