Surprise: M&S has a CEO who knows where the company is going despite £200m loss

Steve Rowe’s plan is concealed behind horribly mangled English but the City quietly applauded even though he’s not yet definitively worked out what the retailer is for, writes James Moore

M&S is set to accelerate its store closure programme (Reuters)

Imagine the chaos if Marks and Spencer boss Steve Rowe were, say, a driving instructor.

“OK, now we’re coming up to a route option variance so gently depress the velocity enhancement reduction foot pedal. No… no… that’s the velocity enhancement activation pedal. OMG we’re going to… um… um… crash!!!!”

Having reported a £201m pre-tax loss and a Covid-created sales slump, Rowe was understandably keen to steer people’s attention to the future with the retailer’s results statement. So there was a big song and dance about how M&S is going to be, um, “never the same again”.

What does that mean? “A changed M&S” makes sense. “Never the same again” makes none.

The corporate mangling of English was evident throughout the company’s missive. The sub headers explaining the plans for the group’s various businesses were just as bad.

There was one discussing the “accelerated rotation of the full-line store state” another on the “omni-channel Clothing & Home business emerging” which apparently involves “substantial reshaping” creating a “product engine” and bleeurrggh.

The committee that put this stuff together, and the execs who signed it off, including Rowe, would clearly benefit from spending a few months in my 10-year-old daughter’s English classes, except I’m not sure that they’d cope with the level she’s working at.

But here’s the thing: the City of London’s institutional investors are used to this sort of language because they use it themselves, mostly when the performance of the funds they oversee look shaky. So their BS detectors are (usually) finely tuned.

What they realised, after applying them, was that in the middle of the verbiage lurked a plan.

Rowe seems to have an idea for how this business is going to look in future, something a succession of his absurdly overpaid predecessors, who spent lots of time having their photos taken with models decked out in M&S clothes people didn’t buy, lacked. Which is why M&S is where it is.

What “accelerated rotation of the full-line store estate” means is that Rowe is stepping up his store closure programme while also planning to open some new ones at favourable sites.

When it’s complete, the group will have a 180-strong national chain, down from 254 at present, with a number of existing stores becoming food-only outlets. There will be a sharper online offer (at least, that what I think the aim is). The steady increase in M&S lines appearing in Ocado baskets, courtesy of their joint venture, will continue.

Investors aren’t going to get a return on this, and the other initiatives Rowe has got working through the system, for some time because the company is still in the investment phase.

It arguably should have taken the axe to the beloved divided so it could have started that earlier, although hindsight is a wonderful thing.

But there was some reassurance to be had from the fact that the group’s debt pile fell.

Taken together, all this explains why the shares were flying off the shelves, even after a strong run in recent months.

Does Rowe have an answer for the deeper question that’s plagued this business for more than a decade, namely what is M&S actually for?

That’s still not entirely clear, but with the impressive rise of the food business capped by the acquisition of half of Ocado’s UK retail operations (for a fancy price), it’s perhaps not as urgent as it once was. And the fact that M&S is still trading, and still on the high street, when so many other famous names have fallen also has to count for something.

If Rowe can ultimately arrest the decline in the clothing and home business, tap the accelerator and deliver a little growth, he’ll probably be hailed as some sort of wizard who’ll be driving this business for as long as he wants.

But despite the juice the shares have acquired, he’s not quite there yet.