Marks & Spencer (LONDON:MKS) is one of the UK's more iconic retailers, and has been one of the cornerstones of the High Street for decades, and one of the first UK retailers to generate a pre-tax profit of over £1bn back in 1998.
Those days seem a long time ago now as the company struggles to adapt to the changing face of the retail sector in the UK as fashion tastes and shopping habits evolve in the face of new technology.
The announcement in May that the company had reported a fall in profits for the third year in a row, dropping below sector peer Next (LONDON:NXT) in the process as the largest British retailer, has once again prompted shareholders to ask questions about the pace of the latest turnaround strategy.
It was over four years ago in May 2010 that new CEO Marc Bolland was tasked with the job of turning Marks and Spencer around into one of the UK's biggest and best multi-channel retailers at a time when it was coming under increasing pressure from nimbler peers like Next who seem to have a much broader appeal to a wider demographic, as well as a better on-line presence.
That, and the rise of cheaper clothing retailers like Primark, has also served to make the UK high street a much more competitive place.
Over four years later shareholders are entitled to ask themselves when they can look forward to the fruition of the promised turnaround strategy as the new management grapples with an ever competitive retail environment, and the general merchandise division continues to struggle, despite a £2bn investment in the company’s infrastructure as it seeks to modernise its systems and process for the 21st century.
Today’s Q1 trading statement is likely to be a key litmus test as to the progress which has been made on the teething problems that hampered the launch of a new website earlier this year, and which was blamed on the previous quarter being rather disappointing.
Having already played down sales expectations for Q1 in the update in May in light of these website teething problems, another gloomy update with respect to the remainder of this year will not go down well.
Given that the new website was part of a new multi million pound turnaround strategy, the fact that customers had to re-register their details, when the site was first launched, wasn't an ideal start, but six months in these problems should now be behind them.
It’s been by no means all bad news as there are some silver linings with womenswear, under the leadership of Belinda Earl, now showing some signs of improvement with the new spring summer range getting good reviews. The key question is whether these reviews are translating into increased sales.
Fortunately for Mr Bolland the food division continues to outperform as one of the bright spots that has helped the company beat profit expectations, and could well continue to come to his rescue this week as well.
Clearly there remains some way to go, but trotting out the same excuses quarter after quarter could well start to wear a little thin for a man who, despite his pedigree, has done little so far to suggest he has a plan to turn the business around.
Marked out as the chosen one to take the business forward, the high expectations and multi million pound salary still remain some way from being justified, and while there are signs that some of the recent investment is starting to bear fruit, shareholders are entitled to ask why it’s taking so long.
More promises of tomorrow just won’t do.
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