M&S smartens up

High-street retailer Marks & Spencer is undergoing a refit. Is it time to snap up the shares? Alex Williams investigates.


Marks & Spencer is getting a refit. Steve Rowe, the new chief executive who took over at the group in April, has unveiled a plan to boost clothing sales at the high-street giant. Rowe wants to lower prices and trim the group's baffling number of ranges to please loyal customers, who he dubbed "Mrs M&S". "We need to cherish her and give her what she needs," Rowe told the BBC.

The new plan is horribly practical, says Jonathan Guthrie in the Financial Times. Rowe wants to produce "unbeatable wardrobe essentials", from socks to vests, aimed at women in their fifties. He is lifting pay on the shop floor by 15% to £8.50 an hour to encourage better service (having begun his career at M&S as a Saturday boy in Croydon, Rowe is aware of the importance of staff satisfaction). He also plans to do up the toilets. But if Rowe wants to "cherish" customers, he needs to stop calling them "old".

"Phew," says Maggie Pagano in the Daily Mail. M&S is veering away from Rowe's "starry-eyed" predecessor, Marc Bolland, who had chased younger customers by drafting in model Alexa Chung to promote overpriced dresses. Bolland led a jet-set lifestyle, but Rowe is a Millwall supporter who lives well off the business circuit. But that could benefit rivals, says Clare Hutchison in The Evening Standard. Debenhams has already gone on the offensive, unveiling "Clare", or "Mrs Debenhams", a younger customer who likes to interrupt her shopping with a glass of Prosecco.

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Investors are rightly worried, says Simon Goodley in The Observer. Rowe's new plan will "blow a hole" in profits by lowering revenue and bumping up costs. The new strategy instantly wiped £700m off the value of the group's shares, in its worst day on the stock exchange for seven years. At best, M&S is static. After years of heavy investment by Bolland, it generates the same profit it did ten years ago, despite adding to its costs and floor space. Food sales are higher, but clothing has fallen for five years.

Still, in the short term M&S looks due to bounce. Rowe's jargon is "straight out of the 1980s" and will "alienate" the very customers he plans to attract, says Nils Pratley in The Guardian. But at least he has "given up the pretence" that growth is around the corner, allowing M&S to focus on its positives. It commands 10% of the UK's clothing market, and Bolland has left the company with a slick supply chain and a website that "finally" works. The new plan is "credible", especially on a 4.7% dividend yield. Buy.