M&S chief shrugs off talk of an investor rebellion after results

MARKS & Spencer’s chief executive Marc Bolland has dismissed speculation that shareholders could force him out after the group posted its lowest annual profits since 2009.

The former Morrisons boss warned that growth this year will be held back by investment in online and logistics.

M&S will spend £2.4bn over the next three years on store revamps, logistics, IT and systems, as well as investment overseas.

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It aims to become an international multi-channel retailer, offering customers the chance to shop instore, online, by mobile and on tablets.

John Ibbotson, director of retail consultants Retail Vision, said: “However many operational improvements it makes, it’s all immaterial unless the retailer can rediscover its panache.”

Mr Bolland was poached from Bradford-based Morrisons in 2010 on a multi-million pound pay and performance-related bonus scheme.

He acknowledged the challenge, but said he was confident of success.

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“Two years into a three-year plan, we’ve made strong progress on the transformation. We know we’ve got a job to do on general merchandise and womenswear,” he said

Chief financial officer Alan Stewart said M&S’s investors are backing the board.

“They agree with the strategy, they agree with the investments we’re making.

“They are recognising that it is a process of transformation,” he said.

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M&S, which has over 700 UK stores, reported an underlying pre-tax profit of £665.2m in the year to March 30, down six per cent on the previous year, but better than the £658m forecast by City analysts.

This was way down on the £1bn reported in pre-recession 2008 and a 3.2 per cent decline on the £687.2m made in 2011-12.

Sales rose 1.3 per cent to £10bn, boosted by international revenues.

The group forecast an “underlying profit improvement” in 2013-14, but said it expects to incur £30m of non-recurring dual-running costs.

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These are as a result of the transition to a new web platform and the opening of a new distribution centre in Castle Donington.

Falling clothing sales were partly mitigated by a rise in sales at its upmarket food business.

Total like-for-like UK sales fell by one per cent with general merchandise, which includes clothing down 4.1 per cent. Like-for-like food sales rose by 1.7 per cent

M&S forecast that capital spending will be £775m in 2013-14, down from previous guidance of £850m, and will fall to around £550m the following year.

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Mr Bolland refused to comment on reports that he could miss out on a substantial chunk of a £2m bonus pot because of the profits figures – or on the question of whether he would give back the bonus.

M&S has said it is two years into a three-year programme to transform it into a “truly international, multi-channel retailer”.

Mr Bolland said there are no plans to go head-to-head with the big supermarkets by selling food online.

He also announced the latest executive departure from M&S, after Steven Sharp, executive director of marketing, announced he was stepping down.

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He will be replaced by Patrick Bousquet-Chavanne, a former Estee Lauder executive who Mr Bolland said knew “what feminine styles are all about”.

He is currently corporate director of strategy implementation and business develop- ment.

Nayna McIntosh, director of store marketing and design, is also leaving later in the year.

Clive Black, retail analyst at Shore Capital, said there remained a degree of caution about the scope for improvement, but added: “M&S is a valuable brand with upside to come.”

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Peter Saville, partner at advisory and restructuring firm Zolfo Cooper, said: “M&S has repeatedly tried and failed to reinvigorate its fashion offering and appeal to a younger audience.

“Strong food sales have not been enough to offset the weak performance of its clothing range. Bolland’s future with the retailer is likely to depend on whether the current efforts to turn the retailer around pay off.”

Analyst Mr Ibbotson added: “More dismal numbers from M&S.

“For too long now it has been the same old story, namely general merchandise struggling, food just about keeping the retailer afloat.

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“Increasingly, M&S seems like a rabbit in the headlights.

“It’s make or break time at M&S. Despite its restructuring, overhaul of IT and logistics, and continued strong food sales, it’s all in vain if clothing sales don’t improve by Christmas.”

M&S kept its annual dividend at 17p a share.

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