In-fighting smokescreen won’t deter M&S bidders

Boardroom squabbles at M&S are distracting some commentators from the company’s poor sales figures

In some respects, Marks & Spencer and New Labour have much in common. Both are tarnished brands of which the British public have tired. Despite that, both are sufficiently entrenched in British life to survive, for the time being. And both are led by men who are unpopular among their own troops. But there are important differences too, the most obvious of which is that no one appears to want Paul Myners’ chairmanship of M&S, least of all chief executive Stuart Rose. If chancellor Gordon Brown can be described as Tony Blair’s chief executive – and I think he can – then it can fairly be said that he’s gagging for it. And it has to be said that the Labour Party is still selling some lines that its customers actually want.

My own solution for M&S would be a radical, Old Labour one. It should be nationalised. It could then become a state-controlled retailer, not unlike the old Soviet department store GUM, flogging outdated lines through dispirited staff to Middle England shoppers. It could be run by some party apparatchik – there would be no shortage of willing candidates from the ranks of the Government’s toadies and “special advisers”. (In a case of life imitating art, incidentally, Russia’s biggest grocery retailer, Pyaterochka, is seeking a listing on the London Stock Exchange, so there is a useful former Soviet culture for M&S to tap into.)

But should anyone really be surprised that no one can be found to replace Myners as chairman, despite a nine-month hunt? If this were the sort of job that was advertised, you can imagine how the copy might read: “Chairman wanted to head major high street retailer well past its sell-by date. The successful candidate will follow a string of the finest management brains, all of whom have been frustrated by the sheer scale of the company’s growing irrelevance in the retail sector. Must be willing in due course to be utterly humiliated by an aggressive and super-rich private bidder. A propensity for leaving the post with your business reputation in tatters would be an advantage. Good pension guaranteed, as well as opportunity to see it vilified by shareholders in the national press.”

Before anyone accuses me of being overly cynical, I’d just like to point out that no one has lost money in recent times betting that M&S cannot be put right through organic trading means. The trouble is that shareholders have consistently fallen for promises that M&S can return better value from improved trading than from a takeover bid. Let’s just remind ourselves of what that means in recent historical terms. Last year, Philip Green (alias the aggressive and super-rich bidder) indicated that he was prepared to bid 400p a share for M&S. Last week, M&S’s shares closed at 356p. Fourth-quarter figures announced earlier this month show clothing sales down by 3.4 per cent, like for like, with total sales down by 2.2 per cent.

Rose will need to demonstrate that he is turning M&S around by the first anniversary of Green’s withdrawal. He is nine months into his remedial treatment of the company and it’s beginning to demonstrate all its old recidivism. Anyone approached by headhunters for the chairmanship will be thinking that, if Rose can’t solve M&S organically, then it simply can’t be done without the retailer being re-incarnated by a new owner. I offer that as a more serious reason for chairmanship candidates staying away – why take a chair where the unspoken agenda is to fight a hopeless cause against a wealthy bidder? Probably better to make yourself available to potential bidders. This thought must, belatedly, have crossed Rose’s mind.

The question, raised by other commentators, is why Kevin Lomax, head of M&S’s nominations committee and a senior non-executive director, should be lobbying for Myners’ replacement as chairman. But where other commentators are wrong, I think, is in concluding that a boardroom scrap doesn’t do M&S any good under the current difficult trading circumstances. It’s true that Lomax’s alleged reasons for undermining Myners are weak ones – that Myners was only ever meant to be a temporary chairman to fend off the putative Green bid and that he enjoys too close a working relationship with Rose. So what is the M&S board playing at?

My view is that, far from being irritated by these distractions, M&S is actively encouraging them. If I can return momentarily to the political parallel with which I started, Brown and Blair have had a far greater interest in voters concentrating on their relationship with each rather than their record in government. So it is with M&S. Far better that we concentrate on boardroom in-fighting than on the M&S management’s miserable trading record. But, unlike voters, bidders for M&S won’t be so easily distracted.

George Pitcher is a partner at communications management consultancy Luther Pendragon


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