Credit Suisse calls for a strategic rethink at Marks & Spencer

Marks & Spencer came under fire yesterday from analysts who are sceptical about the strategy pursued by its executive chairman, Sir Stuart Rose, in recent years, and argued that the beleaguered company is suffering from its own misjudgements as much as the economic downturn.

The food and clothes retailer is failing to achieve its stated aim of reaching out to younger customers, according to the retail research team at Credit Suisse. The analysts said that despite its attempts to focus on the 35-to-55 age range, two-thirds of its main clothing customers are still over 55 years old and three-quarters of food customers are over 45 – with nearly 40 per cent of retirement age.

Sir Stuart joined M&S as chief executive in 2004 as it was fighting a hostile bid from his former boss, the retail tycoon Sir Philip Green. The ex-Arcadia man helped to fend off Sir Philip's approaches by pledging to revamp the stores and rejuvenate their clientele.

Credit Suisse said yesterday that faced with the failure of its current strategy, the chain should consider an alternative plan of action to achieve its goal.

"We suggest this needs to involve a re-working of the store network into a core, serving older customers out of the larger units while M&S establishes a more relevant young chain in its smaller stores over a period," the analysts said.

They also recommended closing, selling or outsourcing its "Simply Food" supermarkets.

After a promising start at the helm of the country's biggest clothing retailer, Sir Stuart has recently faced mounting problems. In January Marks & Spencer unveiled tumbling third-quarter underlying sales and a massive cost-cutting programme that included plans to cut 1,230 jobs and close 27 stores.

The Credit Suisse analysts also suggested the possibility of M&S cracking the younger end of the fashion market by buying a rival such as Next to kick-start its presence and get a ready brand it could use.

"We believe 2009 will continue to highlight the structural problems that have afflicted the company for a long time and that investors will take a more negative view of recovery prospects here and accordingly increasingly recognise the need for a significant resetting of strategy," Credit Suisse concluded.