Bolland outlines aim to exploit the brand, develop multichannel and up overseas growth

New chief executive Marc Bolland’s plans for Marks & Spencer raise the prospect of a return to profits of more than £1bn within two years.

If executed successfully Bolland’s blueprint for the high street bellwether, including in-store and brand improvements, multichannel development and overseas growth (see box, right), could deliver the totemic figure even before the 2015 end-date of his change programme.

Altium analyst Philip Dorgan said Bolland’s ideas give it the chance to escape the “yo-yo” profit history of the past. Only Tesco, M&S and Boots have made profits of £1bn or more.

Dorgan said: “We see £1bn pre-tax profits as being a realistic target for 2012/13.” Investec analyst Katharine Wynne said assuming market share gains, sales growth and margin requirements are met then profits could top £1bn in 2014.

Bolland would not commit himself to a return to £1bn profits and analysts have not formally changed forecasts following his update. Bolland said: “I never make promises. What we’ve given is a clear view of what we can do.”

Central to Bolland’s plans is the power of the M&S brand itself.

He intends to build the food and general merchandise divisions upon its reputation for quality and exclusive product.

In fashion, the womenswear brand Portfolio will be rebranded M&S, while in food, own-brand will be complemented with the introduction of exclusive international brands.

“The company has always taken big steps forward by being special,” Bolland said. He said he would consider the introduction of exclusive external brands in certain non-food categories, such as beauty.

Bolland will plough £900m into the programme, including the accelerated completion of the existing 2020 supply chain improvement plan by 2015, which he said could be funded from existing cash flow. By 2014 he expects to generate extra UK sales of between £1bn and £1.5bn.

The main planks of Bolland’s strategy are similar to those of predecessor Sir Stuart Rose and analysts said that success would be down to the effectiveness of implementation.

Numis analyst Andy Wade said: “The review addresses the key challenges and outlines sensible initiatives, but shifts the focus firmly onto execution.” Credit Suisse analyst Tony Shiret said: “This is all fine subject to doing it. The strategy outlined was reasonable but incomplete.”

Bolland’s blueprint

  • Exploit the power of the brand
  • Generate extra UK sales of £1bn to £1.5bn by 2013/14
  • Deliver multichannel sales of £800m to £1bn by 2013/14
  • Generate international sales of £800m to £1bn by 2013/14
  • Add space ensuring 95% of population is within 30 minutes drive of a full-line store
  • Cut third-party branded food SKUs but introduce exclusive international food brands
  • Improve stores’ shopability
  • Improve cross-selling
  • Accelerate 2020 project

Customer at the heart of Bolland’s strategy

The customer looms large in this word cloud highlighting the terms used most frequently in Bolland’s strategy, implying that shopper appeal is at the heart of his plans.

New is apt too, reflecting the changing of the guard as Sir Stuart Rose passes on the baton and novel ideas being tried out.

Year indicates measurement dates for the Bolland plan, and a reminder that the clock is ticking on the delivery of results.

 

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