Marks and Spencer Hooks Big Fish for CEO

Marks & Spencer’s MKS (LSE) well known CEO Sir Stuart Rose, who has been instrumental in turning the fortunes of the British clothing retailer around, will officially be replaced next year. The company has been working on a CEO search for nearly two years. Rose was even on my CEO Watch list back in September 2008. M&S selected Marc Bolland ,the highly regarded CEO of supermarket group William Morrison Supermarkets PLC, as it new CEO. Bolland is a real catch for M&S and a serious loss for William Morrison. According to a story by Sarah Shannon for Bloomberg,

Bolland joins M&S as the company seeks to restore same- store sales growth after two years of decline. He spent three years as CEO of Morrison, restoring profit after the 2004 purchase of competitor Safeway led to the company’s first-ever loss. M&S gets close to 50 percent of sales from food.

“To get someone with credibility in place is a huge positive,” said Paul Mumford, a fund manager at Cavendish Asset Management who holds Marks stock. M&S’s food division has been “suffering” from cheaper-priced supermarkets and Bolland will “help them move towards winning back market share.”

… The appointment “removes the uncertainty that’s been hanging over the stock for some time,” according to Mumford.

… “He brings a wealth of consumer marketing experience and has made a great success of his time at Morrisons,” Rose, who will remain as M&S’s part-time chairman, said in the statement. Rose will stay on to “ensure a smooth transition,” the retailer said, and will leave as planned by July 2011.

Bolland’s selection is a real feather in M&S’s hat. Despite the long amount of time it took to find a CEO, Bolland has many of the qualities M&S needs as it moves forward. According to a story by James Davey and Mark Potter for Reuters,

Bolland is widely regarded as having delivered a successful turnaround at Morrisons. Previous to that job he was chief operating officer at Heineken (HEIN.AS) based in the Netherlands.

… He took the reins from Ken Morrison, son of the founder and a major shareholder, and showed the kind of diplomacy he may need during what could be a period of powersharing with Rose.

Rose said the handover period would be about six weeks.

Ignoring some analysts’ calls for him to sell off Morrison’s food manufacturing operations and invest in non-food ranges, Bolland stuck with the group’s traditional “Market Street” format of fresh food counters and gave it a makeover.

Combined with innovative promotions and new product ranges, he transformed Morrison into the fastest growing of Britain’s top four food retailers for most of the past two years.

Bolland’s greatest risk as M&S’ new CEO is his lack of clothing expertise. He seems to be a quick learner and I would expect he will rely on his team to help him come up to speed. Stay tuned.

For more:

Wall Street Journal

Management Today

ICM

IB Times

UK Guardian

Recommended Reading - Sir Stuart Rose reshuffles his team at Marks and; Spencer, Times Online

Marcus Leroux wrote a story in the U.K.’s Times Online that examined the dramatic management changes Sir Stuart Rose, the head of troubled retailer Marks and Spencer, has taken to try and turn the retailer around.

The M&S executive chairman effectively promoted two of his lieutenants and announced the imminent departure of a third, as part of measures that he said would accelerate a change in fortunes for the 125-year-old retailer.

…The reshuffle came as the company reported a 40 per cent plunge in profits and a 33 per cent cut in the final dividend.

Carl Leaver, who had led the international division, homewares and e-commerce businesses, is to leave by mutual agreement in the next three months, removing another potential successor to Sir Stuart…

… Steve Rowe is to be put in charge of the online business, while Kate Bostock, head of fashion, has been given additional responsibility for homewares.

Ian Dyson, the finance and operations director, is to be placed in overall charge of the latest initiative to reinvigorate the retailer, called Doing The Right Thing…

… The shake-up suggests that Mr Dyson and Ms Bostock have pulled ahead in the race to succeed Sir Stuart. It is understood the retailer would prefer an internal candidate.

If interested in retailing or what executives sometimes do to try and turn things around check out the story. I have discussed Marks and Spencer and its current Executive Chairman, Sir Stuart Rose, for sometime and believe his moves are worth watching.

CEO Watch List - Sir Stuart Rose, Marks and Spencer, Update 2

Marks and Spencer MKS (LSE) surprised the British market earlier today with the announcement of a substantial drop in retail clothing and food sales.  The well known retailer under the firm hand of Sir Stuart Rose, the company's CEO and Chairman, saw its shares drop precipitously earlier today after the sales announcement.  According to Grame Wearden who a story for the U.K.'s Guardian,

Shares in the group, Britain's biggest clothing retailer, plunged by almost 25% to 240p today after it warned that profits will be hit by the slowdown in trading, which chief executive Sir Stuart Rose warned could last another two years. Analysts called the statement, which was rushed out this morning, a "significant profits warning"

.... Today's plunge puts M&S shares at their lowest level in four years, and wiped around £1bn off its market capitalisation. The company is now worth just over £4bn. Finance director Ian Dyson insisted that M&S is not planning to cut its dividend.

Rose, Marks and Spencer's golden boy (CEO), may actually find himself in some trouble now that sales have dropped so much.  Last month, I wrote about the criticism the firm and its board received for making Rose the company's chairman in direct conflict with the UK's executive governance recommendations. 

Keep a close eye on Marks and Spencer and what might happen with Sir Stuart Rose.

For more:

Times Online (7/3 update)

Financial Times

Times Online

Reuters

BBC

CEO Watch List - Sir Stuart Rose, Marks and Spencer, Update 1

Sir Stuart Rose, the CEO of British retailer, Marks and Spencer who despite a great deal of opposition took on the role of Executive Chairman of the firm back in March (see blog) finds himself back in the news again.  According to a story by Julia Finch for the Guardian,

Marks and Spencer shareholders are being urged to vote against the retailer's chairman Sir Stuart Rose at next month's annual meeting in protest at his promotion from chief executive.

Corporate governance research group Pensions and Investment Research Consultants (PIRC) has advised its clients - who include many local authority pension funds and faith-based investors - to show their disapproval of Rose's new role. Commenting on the PIRC voting guidance an M&S spokesman said: "They are entitled to their views. We have made our position clear."

... The Association of British Insurers, whose members include many of M&S's biggest shareholders, has stopped short of recommending a vote against Rose. But in its voting guidance to members it gave the company an "amber top" - which urges shareholders to consider the issues carefully before voting.

Keep a close eye on the vote results.  

CEO Watch- Sir Stuart Rose, Marks and Spencer

Marks and Spencer MKS (LSE) the well-known United Kingdom mid-priced department store company has been embroiled in a governance/top executive controversy.  The company's highly regarded CEO, Sir Stuart Rose, recently (March 10 announcement) added the executive chairman title while remaining the firm's CEO.  Rose is expected to give up his CEO title in 2011.  The dual title promotion is a direct violation of one of the UK's governance regulations. Sir Rose was originally brought in to serve as the company's CEO back in 2004, when Marks and Spencer was expected to become a hostile takeover target of well-known British retailer/money man Philip Green. Rose out manuveured Green.   According to a BBC story,

At the time, the High Street icon was in deep trouble, losing market share to hipper and cheaper rivals and fending off a hostile takeover bid from Arcadia's owner, retail tycoon Philip Green.

In a dramatic boardroom shake-up, M&S replaced embattled chief executive Roger Holmes with Sir Stuart.

He immediately unveiled an ambitious turnaround strategy that involved buying the women's fashion brand Per Una from its creator George Davies and selling the firm's financial services division to focus on the chain's core business - women's fashion.

But the challenge was tough and analysts were sceptical.

Successful mission?

With half-year profits at M&S up 11% at £451.8m for the six months to the end of September, despite a wet summer and higher interest rates dampening consumer spending, it is generally accepted that Sir Stuart has, in three years, put M&S firmly back on the map.

Rose appears to recently have put pressure on Mark's and Spencer's board.  Either they gave him the dual role or he would leave as of 2009 as originally planned.  With no apparent successor in place and a retailing environment that appears to be getting worse, the board apparently decided they would be better off defying governance requirements and keeping Sir Rose happy.  In a March 15, 2008 Economist story entitled, A Rose by any other name; Shake-up at Marks and Spencer the story stated,

... M&S board members say they had to agree in order to keep him around beyond 2009, when his existing contract runs out. Sir Stuart is credited with engineering the dramatic improvement in the retailer's performance from 2004, and with tougher times looming his fans were loth to let him go.

Shortly after this decision was made public, a number of large investors expressed their displeasure with the decision despite a recognition of the retailing talents Sir Rose has shown throughout his executive reign at the firm and in the past.  The Economist story went on to state,

Investors, however, are furious. Legal & General, an insurer, frets that his promotion is a "potentially damaging concentration of power". The Association of British Insurers, which represents many large investors, has demanded an explanation.

Shareholder unease comes at an awkward time for the firm. After nine quarters of steadily improving sales, M&S stumbled over Christmas. In January it said that in the last quarter of 2007 sales in stores that had been in existence for at least 12 months slumped by 2.2% from a year earlier, and clothing sales by 3.2%. Same-store sales at rivals rose, however, and retail sales in general were 3.7% higher in December. M&S shares have fallen by 31% this year, compared with 20% for the retailing sector.

At first, the company seemed to be defiant but after the controversy continued the company made what might be considered small concessions to allay the concerns of major investors.  It is difficult to tell whether the changes will be sufficient and whether Sir Rose will be happy over time with them.   According to BreakingNews on April 3, 2008,

... The retail giant is said to have drafted a letter to shareholders spelling out measures to win backing for Rose's move to the post of executive chairman.  It is understood that M and S will propose that Rose stands for re-election every year, which will allow shareholders to vote on his appointment at this year's annual general meeting in July.  The group will also reportedly pledge not to give Rose a pay rise and look to appoint a senior independent director to ensure his influence is kept in check.

The real issue that remains is whether Sir Rose is too strong and as a result could impose changes that might not get sufficiently vetted in advance from a board that is outgunned and controlled by Sir Rose.  

Keep a close eye on moves and results related to Marks and Spencer for next number of months.

For more:

Times Online

Forbes

DDI

Fresh Plaza

The First Post

Leaders We Deserve

Business Week