M&S stands by succession plans as sales improve

Retailer's first-quarter sales beat City expectations

Sir Stuart Rose, the executive chairman of Marks & Spencer, refused to cede any ground on the retailer's stuttering succession plans yesterday, but improved first-quarter sales could ease the pressure on him at a potentially stormy annual meeting next week.

Sir Stuart said the retail giant was sticking to its timetable of hiring a new chief executive next year, and a chairman before he steps down by 31 July 2011, despite the Local Authority Pension Fund Forum filing a shareholder motion that calls for M&S to bring forward the appointment of a chairman to July 2010.

"Nothing has changed. The logic of what we did [in April 2008 with the dual role] still stands," said Sir Stuart, adding there was "no disagreement about the end game... to get back to normal governance", merely a difference of opinion about the timing of replacing the two roles. After M&S appoints a new chief executive in 2010, Sir Stuart said he will become non-executive chairman before leaving.

Alongside questions on the succession at the AGM, Sir Stuart is likely to face anger from shareholders over M&S's decision to slash its dividend by a third. There could also be a protest vote over the remuneration report, after M&S posted a 40 per cent slump in pre-tax profits to £604m in 2008-09.

For the 13 weeks to 27 June, M&S reported a 1.4 per cent fall in UK like-for-like sales, comfortably ahead of City forecasts for the first quarter and up from the fall of 4.2 per cent in the previous quarter. However, its sales were boosted by the recent balmy weather and weak comparables last year. M&S attributed about 0.7 per cent of the sales improvement to the later Easter.

Its underlying food sales fell marginally by 0.5 per cent and its clothing-dominated general merchandise division was 2.4 per cent lower in the quarter, which compared with declines of 3.7 per cent and 4.8 per cent in the fourth quarter, respectively.

However, the high street bellwether invested 230 basis points of gross margin in its food offers pricing last year, including its Wise Buys deals and "Dine in for £10" promotions. Yesterday, M&S stuck to previous guidance that a further investment of 125bps to 175bps this financial year would be evenly split between food and its general merchandise division. Despite the improved sales, City consensus forecasts still point to profits falling further to £497m in 2009-10.

M&S said its clothing market share grew 30bps, citing improved performance for women's, men's and kidswear. M&S's market share in lingerie also grew 1 per cent to 26 per cent – boosted by sales of one million bras after its U-turn on charging higher price for larger bras with its "We Boobed" campaign.

Sir Stuart said: "We are in a much better place than this time last year, when we were all falling down a slope trying to stop ourselves before we got to the bottom. I am cautiously optimistic, but we must not get carried away." Group sales grew by 2.9 per cent, lifted by growth of 15.9 per cent overseas and a 28 per cent rise online.