A Marks & Spencer store in London. Picture: REUTERS
A Marks & Spencer store in London. Picture: REUTERS

London — Marks & Spencer chairman Archie Norman broke with convention when he arrived at the UK retailer’s London headquarters in 2017, turning down a private office and positioning his desk prominently out in the open.

From his perch in the engine room of a once-proud British institution that’s fallen on hard times, Norman quickly started asking questions about things he didn’t like: why was it selling hoity-toity venison steaks but not the humble shepherd’s pie? Why was it charging more than $150 for Christmas trees?

If anyone at the glass-sheathed offices doubted Norman’s determination to get to the bottom of the food-and-clothing chain’s woes — or to move on from previous management’s failed strategies — the chairman set them straight this week when the company disclosed £514m of write-offs for past mistakes.

"Our middle name is ‘false dawn,’" Norman said at a media briefing. "Our board has been a glitterati of the British business establishment, but the company hasn’t changed. The organisation and culture has made it very hard."

M&S turned to Norman, an outsider known for his brutally effective turnaround of grocer Asda, to force down the tough medicine he says it needs. The retailer plans to close at least one-third of its 300 largest UK stores after its dowdy clothing sections were abandoned in favour of e-commerce emporiums like Amazon.com and fast-fashion chains and even its trendier grocery aisles that used to drive growth lost momentum.

Nonexecutive chairman

It’s an unusual role for the nonexecutive chairperson of a UK company — often a hands-off ambassadorial post. Yet at M&S results presentations since he has taken over, Norman has been seated alongside CEO Steve Rowe, a lifelong M&S employee who started his career as a teenager on the shop floor.

With Norman serving as the iconoclast, Rowe tries to preserve the peace inside a company reeling from multiple turnaround plans, each one more expansive and less successful than the last.

"I’ve got a chairman who’s given me an envelope to push the business forward," Rowe said at the briefing this week. "We agree on about 75% of things. There’s about 20% of things we wrestle to the ground and about 5% of things we will never agree on. That’s healthy."

There’s plenty for both men to hash out. Marks & Spencer, founded as a market stall in Leeds, England, in 1884, grew into one of the most successful British companies of the 20th century by offering everything from wrinkle-free suits to cucumber-and-salmon sandwiches, made in the UK and sold under its own private label.

It’s as British as red buses and black taxis. To mark Prince Harry’s marriage to Meghan Markle last weekend, M&S rebranded some of its stores as "Markle & Sparkle."

The rise of Amazon and fast-fashion chains such as Zara and Primark upended M&S’s business model. The company lagged behind rivals in buying apparel from lower-cost countries and adopting e-commerce, which accounts for 18% of UK retail sales, compared with 12% in the US. M&S plans to build a new online distribution centre after a disastrous £200m investment into an automated warehouse that still can’t match rivals’ delivery speeds.

Falling sales

M&S’s clothing sales have been falling for seven years. Food sales, which remained a source of growth for most of that time, have begun to slump. As problems piled up at home, the company has pulled out of money-losing international ventures in China and the US, where it used to own clothier Brooks Brothers.

Meanwhile, M&S’s competitors are giving it new headaches. In April, supermarket operator J Sainsbury agreed to buy Asda from Walmart for £7.3bn to create a new industry leader. Tesco, currently the country’s biggest retailer, bulked up its buying power in 2018 with the acquisition of wholesaler Booker. If the latest turnaround plan fails, M&S could become a target.

"M&S makes perfect sense for Amazon," said Steve Dresser, director of consultancy Grocery Insight. "Their heritage, innovation in food and the quality of the brand would entice them."

Norman is used to getting results. After studying at Cambridge University and Harvard Business School, he joined McKinsey. He steered Asda from near-bankruptcy by cutting 1,000 managerial roles, refurbishing old stores and cutting prices, then sold the company to Walmart. After a foray into politics, he became chairman of broadcaster ITV; when he left in 2016, shareholders were sitting on a 400% return.

While Norman has immersed himself in turning around M&S, he relies on the more affable Rowe — known for reminiscing over old battle stories from M&S’s heyday, according to people who have worked with him — to implement his measures.

"Steve is an M&S hero," said former Tesco deputy CEO Tim Mason, who competed with Norman during his Asda years. "Archie needs him to translate his pretty cerebral view of the world into something that ordinary people who work on checkouts can actually relate to."

The company declined requests for interviews with Rowe and Norman.

There’s little doubt over who’s calling the shots. M&S’s chief financial officer, as well as the heads of food, marketing, womenswear and menswear, have all left. Many of them were replaced with Norman’s proteges. The chairman curtailed the aggressive expansion of M&S’s Simply Food convenience stores — a Rowe initiative — and installed Stuart Machin, a former colleague, as head of food to push through price cuts.

The larger M&S stores include a scaled-down supermarket and department store,. The womenswear collection aims to translate catwalk trends into tasteful, down-to-earth garments. But a lack of music and shoppers means there’s little buzz.

"M&S food draws people in," Dresser said. "But if you walk through the clothing section, it’s usually dead."

Amazon lurks

Amazon is pushing more aggressively into the grocery business in Europe after acquiring Whole Foods Market in 2017. The series of retail deals and a share price that’s fallen about 50% from 2015 levels have turned M&S into a potential target, analysts say. By buying the retailer, Amazon could combine its logistical mastery with a high-quality food brand and install its delivery lockers in stores up and down the UK.

Amazon declined to comment.

Norman has said M&S’s turnaround plan has a five-year horizon, but tumult in the UK’s retail industry is escalating — and Amazon and others are prowling.

"Archie is a great strategist, like a chess player," independent analyst Richard Hyman said. "He’ll want to engineer some sort of deal because nobody has got five years in this market."

Bloomberg

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