M&S profits fall as boss Rowe unveils strategy: what the analysts say

“Following this update to the market, we are provisionally downgrading our full-year 2017 pre-tax profit estimate for M&S from £746m to £625m, which is a substantial reduction.

“Clearly, we would rather be upgrading than downgrading our M&S financial forecasts. Furthermore, this company has had to go backwards to go forwards several times before now. As such, what makes this time different?

“Well, while we do not characterise Steve Rowe as the man with the golden gun, we do believe, as we have written before, that he is someone with good and distinctive insights into the challenges of M&S with respect to clothing, beauty and home in particular. Plus, he is capable, decisive and passionate about the business.

“As ever with big commercial problems, if they were quick and easy to fix then it would have been done before now. However, in Mr Rowe, we do also see someone who will bring new insight, urgency and pace to the proposition.” – Clive Black, Shore Capital

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“Overall, a major downward revision to consensus estimates and deferral of the results of the strategic review seems a poor combination.

“This said, investors know Steve Rowe is principally an operator and his skills as a strategist are as yet unknown. This is his judgement that the clothing offer needs to be repositioned and that it needs to be done properly.

“The danger here is that the strategy review when it arrives will bring further news of negative numbers.

“We expect the share price to reset downwards today, probably in line with the movement in consensus estimates given the lack of clarity on key strategic issues – which we did not expect at this stage – and the renewed uncertainty over trading prospects for the key non-food business.” – Tony Shiret, Haitong

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“We welcome the announcement that Rowe is willing to take a short-term hit on profitability in an effort to restore turnover growth, an essential action, which his predecessor was unprepared to implement.

“Investment in price, product quality, availability and customer service is a message we have heard before from M&S, but the sacrifice of profitability signals a stronger commitment this time round.

“As well as focus on price positioning and style authority to improve its clothing business, both of which are essential in driving footfall back into stores and online, M&S has put a large emphasis on the importance of customer experience.

“It hopes to slim down its clothing offer further and reduce duplication across ranges to remove shopper confusion. Again, this was addressed a few years ago but under Rowe’s new management structure and shift in its buying strategy (buying by product category, not by sub-brand), issues of repetitiveness across collections should be prevented.” – Honor Westnedge, Verdict Retail

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“The real gains Marks & Spencer has made in the retailing of food have been eroded in non-food, especially clothing sales.

“The quality and value for money of their clothing should not be in dispute, but the customer journey to discover it is fraught with confusion and blind alleys as the shop floor is navigated. Trying to find your tribe within the tangle of sub-brands has driven many customers to follow a trail of breadcrumbs back to the shop door.

“Rowe has identified this in his statement and is planning more focused ranges, deeper more authoritative buys that also address the issue of availability of key pieces in smaller stores. Adding improved customer service into the mix gives M&S back the part of its proposition that has been failing. He just needs to deliver it now.” – Phil Dorrell, Retail Remedy