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 M&S 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

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