Comment: Bolland will be hoping his new team can deliver
MOVE aside Kate Bostock and, for that matter, Twiggy. The aforementioned head of merchandise was regarded as a highly-prized asset by Marks & Spencer but is now departing by mutual consent.
As for the high-energy advertising campaigns fronted by an array of top models, the evidence from yesterday’s weak trading update suggests this was not money well spent.
M&S boss Marc Bolland has hired a new top team to help him turn round the business and will be particularly delighted with the addition of Belinda Earl as style director. The former chief executive of Debenhams, Jaeger and Aquascutum is well positioned to know what sells and how M&S might get its flagging womenswear ranges back in demand.
The appointments showed a determination to tackle underlying problems and helped offset reaction to otherwise disappointing results. Investors seemed sufficiently impressed to mark the shares up and were probably prepared to give the company the benefit of the doubt, given the poor weather that kept shoppers at home. There have also been some encouraging messages about the store re-fits, specifically that the store pilots have been on track and on budget.
Notwithstanding these positives, Bolland faces some obvious challenges. M&S is hardly alone in facing a tough retail environment, but other fashion chains, including Debenhams, have performed well, as has John Lewis. Analysts believe M&S’s problem is the old one of seeing itself somewhat out of fashion. Despite the millions spent on celebrity promotions more needs to be done to appeal to younger shoppers who have more choice and have not been brought up to see M&S as a destination store.
The inescapable truth is that M&S is being squeezed not only by more fleet-of-foot online rivals such as Asos, but by those at both ends of the high street, notably Primark and Matalan in the discount fashion market and by Waitrose in quality food. M&S has had limited success in trying to grab a greater slice of both through the Simply M&S value range and by moving into speciality foods.
Bolland took a hammering from shareholders at yesterday’s AGM over his pay package and although he’s expected to survive he’ll be looking for an early payback from his new look stores and management team. First he’ll need to clear the unsold summer stock and hope that the autumn/winter collections and investment in beauty products prove popular.
The shares trade on a decent yield, providing a better return than any bank deposit, but they’re also putting M&S on a valuation that is now well within a range that could tempt a takeover bid.
OFT may be driving bus services off the road
STAGECOACH’s decision to pull out of the acquisition of North Devon buses may have implications for FirstGroup’s plan to offload up to £100 million of bus assets.
If Stagecoach is unwilling to meet the cost of a competition inquiry into a relatively small deal then it raises questions about its likely interest in acquiring FirstGroup’s other divisions where there is any overlap. Unless non-transport groups decide to enter the market it could leave a shortage of willing buyers, and with the bus market suffering from cuts in concessionary fares it does not look encouraging.
FirstGroup is playing down the impact of the decision, as well it might. It says circumstances differ markedly in other areas where there is very little overlap.
That may be so, but North Devon is seen as an area of poor growth. It is equally valid to argue that one company’s domination gives it the economies of scale enabling it to reduce prices.
The wider issue here is whether the Office of Fair Trading (OFT) is being over-zealous and somewhat misguided in protecting consumers and promoting competition.
A similar situation arose in the media industry last October when a proposed merger by two small newspaper groups in Kent was referred to the Competition Commission for further investigation. The OFT was concerned that the monopoly of local newspapers would result in costlier advertising for businesses and higher cover prices for readers, despite media regulator Ofcom warning the OFT that papers could close unless the deal went through.
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Weather for Edinburgh
Tuesday 21 May 2013
Temperature: 6 C to 16 C
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