LONDON BRIEFING:NO WONDER Sir Stuart Rose shrugged off the flurry of disapproving headlines that greeted pictures of him leaving a London nightclub in the early hours of the morning, looking somewhat the worse for wear.
Marks & Spencer’s fun-loving executive chairman had been partying at Annabel’s in Knightsbridge, celebrating his own 60th birthday and the 57th birthday of retailer Sir Philip Green (the rivals, whose birthdays are just two days apart, are friends once again after falling out a few years ago over Green’s takeover bid for M& S). Joining in the celebrations was supermodel Kate Moss, who designs her own clothing range for Green’s Topshop chain.
The Daily Mail,which takes a dim view of this sort of behaviour, left its readers in no doubt of its disapproval, displaying the photos under the headline: "It's 1.30am. Two knights of the realm and 'Cocaine' Kate fall out of a nightclub. Haven't they heard there's a recession on?"
Rose certainly knows about the recession – in January, M&S reported its worst sales performance in a decade, along with store closures and 1,200 job losses.
But, as calls for his head mounted after the publication of the party pictures last month, Rose also knew that business at M&S was looking up.
The sales figures reported yesterday by Britain’s biggest clothing retailer may still show the impact of recession, but they beat analysts’ expectations by a comfortable margin. Against some forecasts of a 7.5 per cent slump, the sales slide in the fourth quarter was restricted to 4.2 per cent.
That figure strips out the contribution from new stores; if that is included, total sales were ahead by almost 2 per cent, which includes a 20 per cent leap in online sales and a strong performance overseas.
It still marks the group’s sixth consecutive quarter of falling like-for-like sales, but is a distinct improvement on the 7.1 per cent decline suffered in the third quarter. Rose said yesterday that the group has maintained its market share in clothing and that the ailing food side is recovering under its new management team. The improved performance was down to “hard work” rather than any upturn, he added.
Shares in M&S responded yesterday by leaping more than 10 per cent, taking the rest of the retail sector with them, as the market dared to hope that the recovery may now be under way.
The forecast-busting sales performance from M&S should quieten the calls for Rose’s head – for the time being at least. His controversial elevation last year from chief executive to executive chairman, which means he now holds both the top jobs at the group, is in contravention of the City’s corporate governance guidelines and still irks institutional shareholders.
There was a sizeable protest vote at M&S’s annual meeting last July and we could be in for a re-run this year. One shareholder group has already tabled a resolution for the appointment of an independent chairman by 2010, although it is not objecting to Rose staying on as chief executive. Rose has already said he plans to quit in 2011.
He has a few hurdles to negotiate before then, however. One of the most pressing is the M&S dividend, which will be announced along with the group’s preliminary results in May.
Most analysts expect the payout, a chunky 22.5p a share last year, to be cut, perhaps by half. Shareholders will hate that even more than they disapprove of the boss being caught on camera tipping out of a nightclub in the early hours of a weekday evening.
Although profits are forecast to slump from £1 billion to around £600 million, there is a slim chance the payout could be maintained, which would go a long way to silencing Rose’s critics.
But that would require further improvements in trading for the next two months, and can only be a long shot, particularly as Rose himself said yesterday that while the outlook is no worse, there were still “no signs at all that it’s getting any better”.
Further out, Rose will have to grapple with the group’s hefty pension deficit, which analysts say could be in the region of £1.4 billion. Results from a revaluation of the scheme are expected in the autumn.
If he can negotiate those obstacles, and if the recovery at M&S really is under way, then it won’t matter to most shareholders how many top roles Rose holds at M&S – or what he does in his free time.
Fiona Walsh writes for the Guardian newspaper in London
