Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

M&S Margins Defended
2016 and 2017 figures are Bloomberg consensus estimates

Marc Bolland is leaving Marks & Spencer with a strategy that's starting to look as tired as one of its stores after the January sales. His successor as CEO will need to change course.

As CEO, Bolland sought to defend the retailer's margins at the expense of revenue growth after failing to hit the sales targets he initially set. While Bolland can point to evidence margins on clothing are widening and sales have shown a quarter of growth, shareholders have so far failed to give him much credit.

M&S has generated a return of 24 percent since Bolland took over in May 2010 -- while WHSmith, another retailer that has pursued a similar margin-led strategy, has delivered a whopping 246 percent return. In the face of sluggish sales, the newsagent has been able to widen margins and return cash to shareholders.

M&S Outshone by WHSmiths

But M&S is a fundamentally different proposition to WH Smith. Clothing purchases are highly discretionary. Buying lingerie, a pair of leggings or a leather jacket is very different to popping in for a lottery ticket or a ballpoint pen.

And to be fair, Bolland has had to run much faster to stand still in the face of competition from online retailers and low cost competitors like Primark. He's racked up more than 3 billion pounds ($4.4 billion) in capital expenditure since 2011, overhauling stores, the retailer's distribution chain, and moving the company's website from a platform run by Amazon to one run by M&S.

M&S's underlying profit climbed 6 percent in the year through March -- but it's still lower than when Bolland joined. That's given him little room to return money to shareholders, a mere 150 million pounds in buy backs, a little over half the figure for WHSmith.

M&S's Revenue Growth Stagnates
2016, 2017 figures are Bloomberg consensus estimates

Bolland's big failure was in not reviving clothing sales, which are still, for all the success of the retailer's food operation, at the heart of the business. About half of M&S revenue comes from food, while clothing and home furnishings have dwindled to about 39 percent, according to Bloomberg data.

General Merchandise's Decline
M&S's clothing sales have shrunk in the wash while food has thrived

M&S's clothing arm needs to inspire and at the same time compete on price against rivals such as Primark and Sainsbury that are capturing more of its traditional customers. M&S has quietly improved some of its women's ranges such as its Autograph brand. But more needs to be done.

Steve Rowe, the new CEO, needs to put expanding general merchandise sales at the heart of his priorities. Since taking over as head of all of M&S's non-food businesses in July, he has set out to improve the availability of M&S's clothing in stores as well as ensure that clothes fit properly and are more stylish. He is also keen to expand in areas such as fitness wear, an obvious complement to M&S's health-food ranges.

Rowe -- who started on the shop floor and previously ran M&S's successful food business -- has a good chance of turning around clothing. But for M&S to recover, and deliver returns to shareholders that resemble a fashion classic rather than a fleeting trend, it needs to revive clothing sales and regain market share fast.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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