By James Davey
LONDON (Reuters) - Steve Rowe, the new head of British retailer Marks & Spencer (L:MKS), conceded he had his work cut out to end five years of almost constant falls in clothing sales after the firm suffered another quarterly decline.
Rowe, a company veteran of 26 years, succeeded Marc Bolland as M&S chief executive on Saturday, taking on arguably the most prestigious and high profile job in British retail. He moved up from the role he took only last July as head of the troubled Clothing and Home division.
While Dutchman Bolland oversaw an impressive performance from M&S's food business and rebuilt the group's logistics, he failed to deliver a rise in clothing sales to accompany the profit margin gains he did achieve.
"Let me be really clear: This performance was not good enough," Rowe said of a 2.7 percent fall in clothing and home sales at stores open over a year in the 13 weeks to March 26, M&S's fiscal fourth quarter.
"Our priority is fixing our clothing business," he told reporters.
The fourth quarter outcome for clothing and home, which contributes about 60 percent of M&S's profit, was better than analysts' consensus forecast of a 3.4 percent decline and a third quarter drop of 5.8 percent. However, it meant the division has enjoyed just one quarter of like-for-like sales growth in 21 quarters.
M&S will report results for 2015-16 on May 25 and Rowe plans to outline his strategy then, saying he was reviewing every aspect of the business.
Shares in M&S have fallen by a quarter over the last year and last month hit an 18-month low after Simon Wolfson, CEO of rival Next (L:NXT), warned this year could be the toughest since 2008.
However, they rose as much as 3.4 percent on Thursday and analysts were prepared to give Rowe time to make an impact.
Some expect Rowe to lower short term profit expectations in May, with the promise of growth later. Others say he may streamline M&S's board structure to hasten decision making and reduce the firm's bloated estate of nearly 900 UK stores.
"Given Rowe's nature - dynamic, active and to the point - we anticipate that M&S will enter a period of further change," said Shore Capital analyst Clive Black.
"Whilst not necessarily insurmountable, fixing M&S’ general merchandise conundrum, notably sustained brand corrosion, will not be an easy or quick process."
CUT PRICES
Rowe indicated that making M&S more competitive was a likely focus, noting price cuts in the quarter represented the "start of a programme looking very carefully at the balance between pricing and our promotions."
The price of ladies black "jeggings" was reduced from 19.50 pounds to 17.50 pounds and M&S sold over 30,000 units, a 230 percent jump year-on-year, while the price of a mens white T-shirt was cut from 7.50 pounds to 6 pounds.
"We're doing this across the piece. I'm pleased with the result so far," he said, also pointing out the need for better availability, and improvements across range and design.
Rowe's biggest challenge is arresting the decline in womenswear sales, which have struggled to compete with the fast fashion of Zara (MC:ITX) and Primark (L:ABF).
Womenswear has been described by a former M&S executive as "the golden key to the golden door" because of the beneficial effects it has on other parts of the business.
Progress at M&S' food business stalled in the quarter. Like-for-like sales were flat, ending a run of 25 straight quarters of growth.
However, Rowe said the division still outperformed the wider food market by 3.5 percentage points, growing its market share to a record 4.3 percent.