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 But the arrival over the last 20 years of fast, cheap fashion at one
end of the market and affordable luxury at the other has left M&S
struggling to recapture its universal appeal.
After 14 consecutive quarterly declines in clothing, footwear and
homeware sales, time could be running out for the man tasked with
finding a solution - Dutchman Marc Bolland.
A rising share price, a strong dividend and signs of improvement in
its clothes had largely kept investors onside during his five-year
tenure, but a disastrous Christmas has reignited the question of
whether M&S needs a fresh direction.
A change of faces at the top of several of Britain's biggest
retailers in recent months could also add to the momentum.
A top-30 investor said he was sticking with M&S for now.
"There have been clear signs of improvement in recent years, not
least in merchandise, and the Christmas problems should prove to be
a one off," he said on condition of anonymity.
M&S declined to comment for the story.
Investors broadly support Bolland's strategy. M&S has a reputation
for quality and innovation in food no longer replicated in clothing,
something Bolland has tried to address.
In 2012, he brought in Belinda Earl, previously at upmarket store
Jaeger, to resuscitate womenswear. Her recent collections have wowed
the fashion press. This season, Vogue has singled out a
seventies-style suede skirt and a pink trench coat.
Quality has also improved through the use of more natural fibers and
he moved to make M&S more competitive against rivals like Zara, part
of Spain's Inditex, where new ranges hit the shelves every week. He
is overhauling the supply chain to respond quicker to fashion trends
and improve margins.
Over Christmas womenswear was the best performing category, and the
signs are good for the spring. "These pieces are more edgy and more
trend-led than anything we've seen from middle England's erstwhile
favorite to date – and we're more than a little impressed," said the
Metro newspaper.
The website has been revamped, with customer reviews, links to
social media and content tailored for mobile devices although it has
had teething problems.
The strategy has yet to deliver higher sales, although margins are
improving, giving investors hope for higher payouts after hints it
could increase the dividend in May.
"There is an element of investors being paid to wait in as much as
the dividend yield is 3.8 percent, which is fairly punchy," said
Hargreaves Lansdown Stockbroker's head of equities Richard Hunter,
of a yield that compares to a sector return of 3.4 percent on a
forward year basis.
DRESSING THE NATION
Founded in 1884 on a market stall in northern England, M&S
flourished in the second half of the twentieth century.
In the 1960s came innovations such as ladder-resistant stockings,
while machine washable wool jumpers took off in the 1970s and
chilled ready meals were all the rage in the 1980s.
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When asked where she bought her underwear, Margaret Thatcher, prime
minister from 1979 to 1990, replied, "Why, Marks & Spencer of
course. Doesn't everyone?"
In 1997 it became the first British retailer to post profits of 1
billion pounds but a couple of years later sales and profits fell
and its market cap halved. Subsequent turnarounds have proved short
lived.
ROOM FOR IMPROVEMENT
But in a sign of the challenge faced by M&S, attempts by the fashion
team to win over shoppers at one end of the spectrum can sometimes
alienate others. "Shapeless, unattractive 'dresses' that I don't
think my Granny would have worn when she was alive," Shirley Em,
aged 66, said on M&S's Facebook page this month.
Progress made online was undone by problems in fulfilling orders
from a distribution center, opened with fanfare in 2013.
Online, which accounts for around 15 percent of non-food revenue
against the more than 37 percent of online and catalogs sales Next
makes, were down 5.9 percent in the 13 weeks to Dec. 27.
"It was not working over a period when online is critical," Neil
Saunders at retail researcher Conlumino said.
Shares in M&S, which hit a high of 759 pence in 2007 before falling
sharply, have risen 26 percent under Bolland's tenure, outperforming
a 17 percent rise in the FTSE 100 index <.FTSE>. Next, however, is
up more than 200 percent in the same period.
Internally, ditching Bolland is not a subject of conversation, say
insiders.
But shareholder patience won't last forever. An update on April 2
could prove decisive.
"The chairman and senior independent director at M&S are probably
asking themselves whether his scorecard is acceptable and they
should be asking M&S shareholders the same question," David Cumming,
head of equities at shareholder Standard Life, said last week.
(Additional reporting by Simon Jessop, James Davey and Emma
Thomasson; editing by Anna Willard)
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