Rose: no double dip but UK recovery will be slow

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The Independent Online

Sir Stuart Rose, chairman of Marks & Spencer, declared that Britain's economy had turned a corner and will avoid a double-dip recession yesterday as the high-street bellwether unveiled a small rise in annual profits to £632.5m. In his last set of results before stepping down, Sir Stuart said that the UK was "through" the recession and added: "I don't think we will get into a double dip. We will get very slow growth but it will be tough."

For the 52 weeks ended 27 March, Marks & Spencer posted adjusted pre-tax profits, before property disposals, up 4.6 per cent to £632.5m, compared with £604.4m a year ago.

Marc Bolland, who joined M&S as chief executive this month from Morrisons, declined to provide details on strategy until the retailer's interims in November, but said he did not believe in "change for change's sake".

After outperforming its operating plan targets, all of M&S's staff will share a bonus pot of £81m, which will see 55,000 customer assistants in shops receive up to £500.

But its latest pre-tax profits are 37 per cent down on the £1bn delivered for the year to the end of March 2008.

Yesterday, Sir Stuart admitted: "My record on profits over the last three years has not been very good. But the answer is we have invested."

He defended his tenure at M&S after returning in 2004 to fight off a hostile takeover bid by the retail tycoon Sir Philip Green at £4 a share. Shares in M&S fell by 7.1p to 326.4p yesterday, compared with 360p on Sir Stuart's first day on 31 May 2004. But he said it was "like apples and pears" comparing the business today with 2004, citing the £4.6bn in share buy-backs and dividends it had returned to shareholders over the last six years.

Sir Stuart said: "I think it would have been a tragedy if it had been sold into private hands. And I believe if it had you would not see the same Marks & Spencer today."

Citing progress made in all areas of the business, Sir Stuart also said he was "unrepentant" at investing £3.4bn in the business, such as store refurbishments, over the six years. But Tony Shiret, an analyst at Credit Suisse, said: "It is pretty much where Stuart came in all those years ago. It is like the duck paddling to stand still." He said Mr Bolland needed to carry out a "much more radical and fundamental rethink in terms of what they are doing".

Sir Stuart cited a "satisfactory start" to its first quarter and said there is "some evidence we have been outperforming the market over the last few months". For its last financial year, M&S grew group revenues by 3.2 per cent to £9.3bn, of which the UK accounted for £8.4bn.

Overseas sales increased by 5.7 per cent for the year to March 2010, but this is sharply down on growth of 25.9 per cent posted a year ago. Sir Stuart said its sales had been hit by the troubled Greek and Irish economies, but said it was "pleased with progress in China and India". The retailer grew UK underlying sales by 0.9 per cent, with general merchandise, mainly clothing, rising by 1.6 per cent and food up by 0.3 per cent.

M&S has now delivered six consecutive quarters of improving food sales. But gross margins on food tumbled by 95 basis points (bps), reflecting its hefty investment in price in 2009-10. However, gross margins on general merchandise improved by 70 bps. On clothing, Sir Stuart said: "We grew market share on womenswear, menswear and kidswear."

Who will take over from Sir Stuart Rose?

Sir Stuart Rose, the chairman of M&S, remained tight-lipped on the search to find his successor yesterday, as speculation mounts that an appointment of a City heavyweight is close.

However, Sir Stuart did say: "There is an active search and there certainly is a list. There will be some white smoke at some point."

At the weekend, Roger Carr, the former chairman of Cadbury who sold the chocolatier to Kraft this year, ruled himself out of the running for the job of M&S chairman.

Others linked with the role include Alan Parker, the outgoing chief executive of Whitbread, the owner of Costa Coffee and Premier Inn; Lord Davies of Abersoch, the former chairman of the bank Standard Chartered; Sir Crispin Davis, the former chief executive at Reed; and Niall Fitzgerald, the deputy chairman of Thomson Reuters, the media company.

Sir Victor Blank, the ex-chairman of Lloyds, is reportedly not in the frame.

M&S has said that Sir Stuart will step down by March 2011, but he is likely to leave before then if its search for a new chairman is concluded swiftly.

Sir Stuart's salary will be reduced by 25 per cent to £875,000 from 31 July, reflecting his move to non-executive chairman. Jan Hall, at the headhunter JCA Group, is leading the search for a new chairman. More details emerged over M&S's search for a new finance director yesterday with the news that Ian Dyson will leave on 31 August to take the helm of Punch Taverns.

Mr Dyson resigned the day after Marc Bolland took the helm as chief executive. Mr Bolland said: "I would have loved Ian to stay."