M&S slashes dividend as succession plan suffers setback

Chief executive warns of a deterioration in margins

The task of finding a chief executive to succeed Sir Stuart Rose at Marks and Spencer became even more difficult yesterday as a leading candidate resigned and the retailer posted a 40 per cent slump in profits and risked the ire of its private shareholders by slashing its dividend for the first time in nearly a decade.

The downbeat statement came as Sir Stuart forecast that the high street bellwether's UK gross margins would deteriorate further this year, and said he had not seen any green shoots of recovery. However, he was upbeat about M&S's launch this week of a new marketing slogan, "quality worth every penny", and the introduction of a mid-range sub-brand of casualwear for men and women, called Indigo.

The resignation of Carl Leaver, the director of international, home and M&S Direct, came after he was told his responsibilities for its home business and e-commerce were being given to other executives. Mr Leaver and Steve Esom, the former head of food who left after about a year in the job, both joined M&S in 2007 and were considered to be strong candidates to succeed Sir Stuart when he steps down, which will be no later than 31 July 2011.

Mr Leaver will stay on for a few more months but his departure leaves Ian Dyson, the group finance and operations director, and Kate Bostock, the executive director of clothing, as the two internal frontrunners for the top job. Yesterday, Sir Stuart said any announcement about his successor was unlikely this year, but the group expected to appoint someone next year. He again reiterated his desire for an internal candidate to succeed him, but Justin King, the Sainsbury's chief executive, is considered to be a potentially stronger candidate.

City analysts are far from decided if either internal candidate will get the job, although Mr Dyson's chances are considered better than Ms Bostock's. Tony Shiret, an analyst at Credit Suisse, said: "Her range of experience is not that wide and she has been in charge of clothing and that has performed very poorly."

Ms Bostock has also been given responsibility for M&S's home division, while Mr Dyson's has been put in overall charge of a new transformation programme called "2020 – Doing the right thing", that seeks to make M&S more efficient in key areas, including multi-channel, international operations and communications with customers. Nick Bubb, an analyst at Pali International, said M&S was pointing at Mr Dyson being the "lead candidate but he is not a shoo-in". He added: "I don't think he is massively popular in the City."

M&S said it would slash its dividend by a third to 15p a share from the current 22.5p a share. Its final dividend for 2008-9 has been reduced to 9.5p a share, which will be followed by a reduction of 2009-10 interim dividend to 5.5p a share. Sir Stuart added: "The outlook is uncertain and we need our balance sheet to retain its strength and flexibility." The dividend cut will save about £120m on an annualised basis.

For the 52 weeks ended 28 March 2009, the group's adjusted pre-tax profits fell by 40 per cent to £604.4m. M&S's UK like-for-like general merchandise sales, largely clothing, fell by 6.9 per cent and underlying food sales fell by 5 per cent. Sir Stuart said it had been a "challenging" year for sales of menswear and womenswear, suggesting that it had lost market share, but childrenswear and lingerie sales fared better. Total sales were boosted by a 25 per cent uplift in international markets and M&S will lower its capital expenditure to £400m this year from £652m last year.

On the UK economy, Sir Stuart said: "There is more stability. It has not got any worse and that is good because last year it got worse evevery week."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future