Spotlight - M&S in doldrums
In the spotlight: another drop in profits and overseas branch closures are expected at M&S, but FD Robert Colvill has emerged stronger from recent boardroom upheavals.
There cannot be many retail finance directors who would wish to be in the shoes of Marks & Spencer FD Robert Colvill when he announces the company’s year-end results next Tuesday.
Despite already initiating a package of cost-cutting measures, analysts estimate that the retailer’s pre-tax profit will finish little above the £650m mark – more than 44% down from last year.
Since January’s disastrous trading statement, which reflected the company’s incorrect assumption that its unprecedented increase in sales footage would be matched by sales increases, the market has hedged its bets against an early recovery. A bitter boardroom leadership battle conducted in public, leading to the departure of deputy chairman Keith Oates and the re-organisation of the board to remove three others, did not help restore the company’s image.
It confirmed, however, Robert Colvill’s position as both head of financial services and finance director. Since he became managing director of the financial services division on its formation in 1985, he has seen it grow to account for some 8% of the group’s operating profit (£89m in 1998).
This experience, coupled with more than 15 years spent working for several banks, including Morgan Grenfell and Chemical Bank, have enabled him to lead a number of changes alongside chief executive Peter Salsbury to curb the company’s costs.
Some 200 staff have been made redundant and a similar number could still follow. Meanwhile, the group’s struggling Canadian branches will be closed by the end of the current financial year.
But one analyst said many overseas stores remained in place as a ‘hangover’ from the late 1980s expansionist policy. Because the company had failed to give them direction, these stores had failed to shine for some time, he added. Another observer said M&S had never realised that, in order to compete on a local level, it needed to respond far more to changes in taste, which did not sit easily with its core belief in the product.
‘No-one wants to be the last to spot an operational recovery, but that does not mean that it is happening,’ he said.