Nov. 9 (Bloomberg) -- Marks & Spencer Group Plc’s new Chief Executive Officer Marc Bolland plans to add stores in Shanghai and India and strengthen the U.K. clothing retailer’s online offering to boost sales by more than 30 percent in four years.
The number of Simply Food convenience outlets will also increase, while a cost-saving plan will be accelerated, Bolland said today after a six-month review of the business. Marks & Spencer also reported a 14 percent gain in first-half earnings.
“The business is in good shape and we have strong foundations on which to build through evolution not revolution,” the CEO said on a conference call. “We want to bring more specialty back into the brand and our stores.”
Bolland, the 51-year-old Dutchman who joined Marks in May, said he aims to build on the retailer’s “brand strength” to maintain an acceleration in sales growth at the U.K. food and clothing businesses. The plan will lead to additional capital spending of 850 million pounds ($1.37 billion) to 900 million pounds over three years, funded from existing cash flows.
“It’s a bit more of everything, more international, more online, more cost savings,” Simon Irwin, an analyst at Liberum Capital, said by phone. “It’s a bit dull.”
Marks & Spencer rose 2.8 pence, or 0.7 percent, to 416 pence at 10:28 a.m. in London trading, reversing a drop of as much as 3.2 percent. The stock has gained 3.5 percent this year.
Bolland said he aims to increase the retailer’s sales to as much as 12.5 billion pounds by fiscal 2014. Revenue was 9.54 billion pounds in the year ended March 2010.
Overseas sales are forecast to increase to between 800 million and 1 billion pounds. Marks & Spencer, which has more than 320 owned and franchised stores in 41 countries, plans to make India the first “priority market” for overseas growth, followed by Shanghai, where it will open a third outlet in December. Stores will also open in countries such as Poland through joint ventures and franchise arrangements.
“We are looking at a couple of new markets,” Bolland said. These include western Europe and Asia, though the CEO said he has “no specific plans” to buy back stores sold to El Corte Ingles in 2001 following a report in the Sunday Telegraph that he plans to repurchase some of the 38 stores sold that year.
Bolland also plans to increase online sales to between 800 million pounds and 1 billion pounds by fiscal 2014 by building a new platform for the retailer’s website and adding innovations such as “personalization” which allow customers to tailor jeans or dresses to their own style, color and size.
The CEO ruled out adding a full online food service “at present,” as it wouldn’t be economically viable.
Pretax profit rose to 348.6 million pounds in the six months ended Oct. 2, Marks & Spencer said today, less than the 348.9 million-pound average estimate of nine analysts.
Bolland, who spent his first months in the job meeting suppliers abroad and visiting stores, has a reputation for reviving businesses. Within two years of his arrival as CEO of William Morrison Supermarkets Plc, he turned a 250 million-pound loss into a record profit of 554 million pounds, scrapping the company’s century-old logo and introducing new store formats.
At Marks & Spencer, he’s starting with a new team of executives. Alan Stewart began in October as finance director to replace Ian Dyson, who stepped down days after Bolland started. Robert Swannell, who helped defend the company against billionaire Philip Green’s 2004 takeover bid, will replace Rose as chairman in January. The company is also seeking division heads for its Internet, international and homeware businesses.
The 125-year-old retailer said today it plans to reduce a trial of 400 branded food products such as H.J. Heinz Co. ketchup to 100 items and will add 100 exclusive international brands like Japanese soy sauce.
The Portfolio clothing brand, which was introduced last year and aimed at female customers aged 45 years and over, will be eliminated as part of the shake-up in clothing. Other brands will get dedicated managers and be enhanced through better in-store presentation and marketing, the retailer said.
Marks & Spencer will also exit the technology market where it sells televisions, in preference for more home furnishings, kitchen products and bedding.
The CEO plans to increase the amount of selling space by 3 percent per year with more Simply Food convenience outlets. Cost savings from the supply chain and information technology will increase to 300 million pounds from 250 million pounds.
“Overall, this package looks challenging, but not impossible,” Tony Shiret, an analyst at Credit Suisse, said in a research report. He has a “neutral” recommendation.
The retailer said its dividend will continue to be “broadly” 50 percent of earnings per share, after increasing the first-half payout by 13 percent to 6.2 pence a share.
Bolland said he’s “cautious, but optimistic” about this year’s holiday season, with 12,000 orders for Christmas dinners already in place and 1,000 new food products in store.
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