Rowe to exit M&S with jump in profit, but much still to do

Steve Rowe will next week step down as chief executive of British retailer Marks & Spencer after a turbulent six years in the top job, with his internal successor set for a baptism of fire amid a worsening cost-of-living crisis.

Rowe, who joined M&S at the age of 15 before rising through the ranks, will end a 39-year career at the clothing and food group after presenting annual results on Wednesday that are expected to show a jump in profit.

Along with chairman Archie Norman, Rowe has sought to transform the 138-year old M&S with a radical overhaul of its store estate, a renewed focus on the quality and value of its clothing and food, and heavy investment in technology and e-commerce, including a joint venture with Ocado that belatedly took M&S food online.

Having steered M&S through the COVID-19 pandemic, he exits with hopes raised that one of Britain's most elusive turnarounds could finally materialise after two decades of false dawns.

But he also departs with M&S's share price at well below half the level it was when he became CEO in 2016 and with UK consumers facing the biggest squeeze on disposable income since at least the 1950s.

Rowe will be succeeded by food boss and joint chief operating officer Stuart Machin, who will become chief executive and take on responsibility for day-to-day leadership of the business and its executive committee.

An unconventional structure will see him backed up by Katie Bickerstaffe, currently M&S's other chief operating officer, who will become co-chief executive, and finance and strategy chief Eoin Tonge.

Machin's first task will be to navigate Britain's cost-of-living crunch.

"While the typical clothing & home M&S customer is less exposed to mortgages, they will no doubt be feeling the pinch, while the food business is at risk of (shoppers) trading down over the coming months," said Santander analyst Rebecca McClellan.

With M&S having already flagged headwinds it is facing in the 2022-23 year, including labour, energy, fuel and logistics inflation, analysts expect a cautious outlook statement.

Last month, rivals Tesco and Sainsbury's both warned of lower profit this year.

Norman said this week that Britons were still spending despite inflation hitting a 40-year high. Official data also showed an unexpected jump in April sales.

"The crunch is going to be in the autumn when people come back from their holidays, they've spent their money and there's nothing left in the kitty," Norman told BBC radio.

For the year to April 2, M&S is expected to report profit before tax and adjusting items of 522 million pounds ($651 million), according to analysts' average forecast. It made just 41.6 million pounds in the pandemic hit 2020-21 year.

Total clothing and home UK sales are seen up 46.6% on 2020-21 and up 0.5% on 2019-20, while food sales are seen up 10.3% on 2020-21 and 9.7% on 2019-20.

No dividend is expected.