M&S Fashion Novice Marc Bolland Trails Designers in Blouse War

When naming his successor, former
Marks Spencer Group Plc (MKS) Chief Executive Officer Stuart Rose
said Marc Bolland didn’t need to “know detail. He doesn’t need
to pick blue, green or yellow blouses.”

Two years later, with the company’s share of the U.K.
women’s wear market at the lowest in at least a decade,
investors are wishing the executive — who spent the first two
decades of his career at brewer Heineken NV and grocer William
Morrison Supermarkets Plc — had more of a designer’s touch.

Bolland, 53, will tomorrow unveil what analysts expect to
be the worst sales performance since he succeeded Rose in May
2010. Almost a year into a 600 million-pound ($932 million)
store investment program, the CEO’s plan to turn labels such as
Per Una women’s wear into fully-fledged brands has failed to
prevent sales declines from worsening as shoppers seek out
designer fashions at Debenhams Plc and John Lewis Partnership
Plc, and spend more with online retailers such as Asos Plc.

“People are talking about it as if it’s in the doldrums
again,” said Jon Copestake, a retail analyst at the Economist
Intelligence Unit. “He must be under pressure.”

Bolland was hired to revive two years of declining same-
store sales growth at the London-based retailer, which gets
almost 50 percent of revenue from its upscale food business. His
introduction of distinctive store layouts and individual
advertising campaigns for sub-brands such as the classic
Autograph collection has yet to show much benefit, while the
retailer’s online sales trail those of smaller rival Next Plc. (NXT)

Market Share Decline

Tomorrow’s figures may show that first-quarter sales at
U.K. stores open at least a year slid 2.5 percent, according to
the median estimate of 11 analysts compiled by Bloomberg News.
The general-merchandise unit, of which clothing is the biggest
part, will likely show a 6.5 percent decline, more than
offsetting 1 percent growth in sales of food.

Britain’s double-dip recession and record April rainfall
hurt business at most fashion retailers in the latest quarter,
although according to Investec Securities analyst Bethany Hocking, a primary concern for Bolland is a declining share of
the market for women’s clothing. At 10.4 percent, Marks
Spencer’s slice of the 39-billion pound ($61 billion) market is
almost a full percentage point lower than it was five years ago.

“There are lots of women who used to shop at MS who now
shop elsewhere,” said Maureen Hinton, an analyst at Verdict
Research in London. Bolland’s unfamiliarity with clothing “is a
problem” for the CEO as he seeks to fight back, she said.

Online Competition

Competitors such as John Lewis, Debenhams and House of
Fraser Ltd. are concentrating their attack on the market for
women aged 45 to 54, teaming up with designers such as Julien Macdonald and Osman Yousefzada to produce more fashionable
frocks and workwear. Verdict Research estimates that market was
worth 11.1 billion pounds last year, representing more than half
of the total U.K. clothing expenditure.

The emergence of online retailers such as Asos, whose sales
have more than quadrupled in three years, and the growing
popularity of the Primark discount chain with cash-strapped
shoppers also is eating into Marks Spencer’s lead. Primark
sales topped 3 billion pounds for the first time last year.

Kate Bostock, who as general merchandise director is
responsible for getting the right looks on the shelves, may step
down this week after almost eight years at the retailer, the
Financial Times reported June 28. A Marks Spencer spokeswoman
said the company doesn’t comment on speculation.

Market Value

Bolland’s store-investment program is due to be completed
by the middle of next year, adding in-store delicatessens and
bakery counters alongside new interiors for each brand.

At the retailer’s High Street Kensington and Stratford
stores in London, mannequins stand on plinths adorning
contemporary fashions such as leopard-print dresses from the
Limited Collection. Per Una, for older women, has white glass-
fronted vintage cupboards and tables in-store offering the
latest accessories such as a 29.50-pound snakeskin chain bag.

Still, the changes may not bring immediate benefits as
Marks Spencer’s brands are “still very indistinct to the
shopper,” said Verdict’s Hinton.

It’s not just in clothing that Marks Spencer is being
caught by competitors. The company’s market value was surpassed
for the first time last month by Next, even though its sales are
almost three times larger. Marks Spencer shares have declined
about 13 percent since Bolland took over as CEO, valuing the
retailer at 5.1 billion pounds. Next has gained 39 percent in
the same period, for a capitalization of 5.3 billion pounds.

Faltering Earnings

Next’s main advantage lies in a strong multi-channel offer,
with its online business comprising almost a third of sales,
compared with 5.6 percent at Marks Spencer. One of Bolland’s
main goals has been to accelerate online revenue, which climbed
18 percent to 559 million pounds in the last fiscal year.

“They need to do more online given they are such a big
general merchandise retailer,” David Gray, an analyst at
London-based research company Planet Retail, said of Marks
Spencer. Not being as well established online as some
competitors “is starting to come through” in sales, he said.

Bolland reined in the retailer’s sales targets in May after
conceding that a slump in consumer spending was worse than
expected. Earnings per share in the financial year through March
2013 are likely to be little changed after failing to grow in
the previous year, according to the average analyst estimate.

“The next six months are going to be pretty critical” for
the CEO, said Richard Black, a fund manager at Legal General
in London, the fifth-largest holder of Marks Spencer shares.
“Two years into the plan, we would hope to see the benefits
come through clearly into the results.”

To contact the reporter on this story:
Sarah Shannon in London at
sshannon4@bloomberg.net

To contact the editor responsible for this story:
Celeste Perri at
cperri@bloomberg.net

Jul 8th, 2012 | Posted in Fashion
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