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M&S may just have done it

    Alexa Chung in her suede skirt
    Alexa Chung in her suede skirt

    Of all the great British companies including Shell, Tesco and Land Securities founded by remarkable Jewish entrepreneurs only one - Marks & Spencer - truly retains the loyalty and affection of the community. It has done so despite the fact that the founding Marks and Sieff families have left the scene and Israeli fresh produce is no longer exclusive to its food halls.

    Much of the connection to the community rests among the company's unusual army of two million private shareholders. When faced with the opportunity to sell to Sir Philip Green's Arcadia-BHS empire in 2004, shareholders, who tend to be devoted customers, made it clear that they were overwhelmingly against. Given the fate of BHS, recently sold for just one pound after years of losses, that may be just as well.

    The following decade has nevertheless been troubling. Aside from a brief flicker of light in 2008 when profits hit £1 billion under the charismatic leadership of Sir Stuart Rose, it has been a hugely challenging time - until the last three months. Under Rose's successor, the suave Dutchman Marc Bolland, the company had a catastrophic loss of momentum.

    The biggest challenge was to its womenswear brands where it had held the dominant market share for decades. Competition from overseas challengers Zara and H&M, no-frills clothing brand Primark and Lord Wolfson's Next left it in the dust. M&S recorded a dismal 14 successive quarters of falling sales. Its woes were compounded by its weak online presence and loss of global revenues. The pre-2004 management of Luc Vandervelde and Roger Holmes defenestrated the international footprint, including the landmark Rue Haussmann store in Paris.

    Amid the shambles elsewhere food sales went onwards and upwards, almost certainly preserving Marc Bolland's job amid pressure from the media and shareholders. At a time when most grocers including Tesco and latterly Sainsbury found themselves under severe pressure from the German discounters Aldi and Lidl, the M&S focus on quality and innovation constantly kept it ahead of the pack.

    Indeed, building on this success M&S has plans to open a further 150 freestanding 'Simply Food' stores in the next couple of years.

    Bolland focused investment on rebuilding M&S's creaking infrastructure, creating a new flexible online presence and restoring flair to woman's fashion. The task of reinvigorating the clothing was given to Belinda Earl, formerly of Debenhams. She worked on improving the quality of materials and design and re-introducing British sourcing.

    It has started to work. In the first quarter of this year women's clothing sales climbed, despite a squeeze on living standards. Growth was led by the Limited brand, which targets Zara customers. The company also gained free publicity for its 1970s retro suede skirt worn by celebrities' Olivia Palermo and Alex Chung.

    Moreover, after a punishing start for its new online shopping service, designed by retail director Lucy Wade-Gery, it finally appears to have convinced customers. In the first quarter of the year, online sales, serviced from the company's new fully automated Castle Donnington warehouse, rose 14 per cent. M&S recorded more than two million hits to the 'living' sector of the site which offers design and fashion tips. The website takes the battle directly to Next which has dominated the online sales channel until now.

    One quarter's return to growth in non-food sales, including fashion, does not means M&S is out of the woods. But it does have a number of things going for it. The return to the global stage has seen strong growth in India and Continental Europe with Paris a roaring success.

    At home the company's capital spend on revamping tired stores such as the 'Pantheon,' at the Tottenham Road end of Oxford Street in London's West End, has improved the shopping and display environment.

    Having invested heavily in upgrades it is planning to hold future capital spending at around £550 million a year and focus on improving margins and profit for shareholders. It seems to be working. The share price has picked up momentum and in much of retail confidence is built around image so resurgent sales and the good publicity will bring its own rewards.

    At the start of 2015 the betting in the City was that Bolland vulnerable to getting the sack. If the progress continues he may finally receive the ultimate accolade: a round of applause from private investors at the next annual general meeting scheduled for July.

Alex Brummer

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