Britain’s beloved retailer is cutting jobs, but the CEO will need to take more drastic steps.
Mark & Spencer’s boss Steve Rowe is making his first major shake-up since becoming chief executive in April, by axing hundreds of jobs. The job losses are due to be concentrated on the group’s headquarters in Paddington in London, where 525 positions will go. The redundancies are intended to save £30m per annum and slim down a head office that is said to have become bloated under former CEO Marc Bolland.
Rowe, who has worked at M&S since he was 15, was seen as ushering in a welcome change of management culture when he took the job (he refused to use Bolland’s office at the Paddington HQ, saying he prefers a more modest space).
But he is still “under pressure” to turn M&S around, says Ben Harrington in The Times, after a string of “abysmal sales figures”. In the three months to the beginning of July, clothing and home sales fell 9%, the sharpest drop for a decade. Meanwhile, M&S’s share price has fallen from £6 a year ago to around £3.50 now.
Rowe is due to announce a strategic review in November, but he needs to consider radical changes at Britain’s beloved retailer, says Julian Harris in CityAM. M&S’s food halls are thriving among customers willing to pay for a better quality ready meal. Its £10 pizza-and-prosecco offer shows an astute understanding of the target market. But the clothing business is struggling, forcing cost cuts and creating tension between management and staff. “Most M&S customers either buy its food, or its clothes – but never both. So perhaps it’s even time to split the company in two.”
Rowe has been “embarrassed” by the drop in clothing sales, says Mark Kleinman at Sky News, he is more likely to make modest moves. Analysts expect him to shrink store numbers in response to tough competition from online fashion firms.
Rowe is also looking overseas for savings, says Ashley Armstrong in The Sunday Telegraph. He has already dumped plans by Bolland to open a large new store in Amsterdam. Rowe could also close M&S’s flagship store in France, which sits on the Champs-Élysées in Paris. Bolland pushed the group into Italy and Spain, leaving M&S with nearly 500 shops in 58 different countries outside the UK, compared with around 800 in Britain.
Management has said that its results in stores abroad are “unsatisfactory”, so foreign outlets will bear the brunt of Rowe’s retrenchment. This week’s cuts will make M&S more nimble, Rowe says. Streamlining the head office will let it take “bolder” decisions (it has seven “head offices” across the UK, with around 3,500 office staff). Rowe has also reshuffled the board, cutting the number of directors. But after years of “tinkering”, says Harris, this still may not be enough.
Bids & deals: Russia backs Aim-listed gold miner
Russian president Vladimir Putin and billionaire Roman Abramovich have pumped cash into an Aim-listed gold-mining company. Shares in Highland Gold have nearly tripled since January, rising another 6% this week after it announced two deals to add to its coffers.
The Far East Development Fund, a state-backed vehicle in Russia personally championed by Putin, has pledged Highland Gold a two billion rouble loan, worth roughly $31m, at an interest rate of 5%, unusually cheap for a mining company. Highland, which has three gold mines in Russia, will put the money towards building a fourth in the far eastern province of Chukotka.
It has also reached an agreement with the local government, which has pledged to pay for new power lines to “improve the economics” of the mine. Highland is 32% owned by Roman Abramovich, the billionaire behind Chelsea Football Club, who was the governor of Chukotka until 2008.
Highland Gold was beset by difficulties in Russia, including environmental complaints, delays and a fatal fire, before Abramovich made a £200m investment in the company in 2007. A few years later it was on the brink of the FTSE 250, with a market cap of over $500m. Highland Gold can “count on continued cooperation” in the region, its chief executive said.