Marks & Spencer has been restructuring itself for about two decades, so no one can be surprised that the latest rejig is being rewritten already. It was as recently as November 2016 that the chief executive, Steve Rowe, declared that a “forensic” review of the store estate would mean 30 shop closures within five years. That figure became 60 a year later. Now it is 100, suggesting the original estimate was just a rough guess. Usdaw, the shopworkers’ union, is right to complain about “salami slicing” – this programme should have been handled better for staff.
For all that, restructuring is a way of life in modern retailing as the old guard struggles to adapt to the rise of online shopping. Once upon a time, a hubristic Tesco pitched its non-food Tesco Direct operation as a way to defeat Amazon in the UK; now it is opting for discretion and will close the unprofitable venture.
In M&S’s case, there can be little confidence that the third iteration of the store plan will be the last. Twenty-five per cent of the old floorspace devoted to clothing and homewares will close but, if the opening of new stores (typically bigger out-of-town outlets) is taken into account, the net reduction will be closer to 10%. Is that bold enough, if you expect a third of your sales to be online by 2022? Even after the closures, M&S will have 220 clothing and home outlets, whereas John Lewis serves England, Scotland and Wales from 51 department stores.
The only real certainty is that restructuring is expensive. The extra financial damage from Rowe’s more “radical” plan will likely be unveiled with Wednesday’s full-year profit statement. But the fuller story is the astonishing £890m in “adjustments to reported profit” – all downwards adjustments, naturally – that the group has recorded over the last six years. Even at a business the size of M&S, that’s going some, especially when the end is not in sight.
Shell’s proxy war
Companies are obliged to issue a few conciliatory words these days if more than 20% of votes are cast against the report on directors’ remuneration. At Shell, where the protest was 25%, the charm offensive amounted to three short paragraphs that said, in effect, “You’re wrong.”
The high-ups in The Hague seem to have decided that the result can be dismissed because proxy voting agencies – firms that advise fund managers on how to vote – played a role. Thus the oil and gas giant said it “would particularly welcome the opportunity to work with proxy advisers more closely in the future”.
What Shell seems to be implying is that the revolting shareholders were silly to take their cue from outsiders. It’s a favourite plea of companies on the receiving end of a pay rebellion: blame the proxies.
Shell would have done better to reflect on why Institutional Shareholder Services, one of those firms, recommended a vote against a report that detailed the €8.9m (£7.79m) pay packet awarded to the chief executive, Ben van Beurden. It objected to the “silence” in the report about the explosion of a Shell Pakistan oil tanker that killed more than 200 people.
Shell’s view is that, because the tanker was operated by a subcontractor, the disaster did not have to be considered when setting Van Beurden’s pay; the bonus framework, you see, looks only at safety issues where Shell has “operational control”.
That’s advantageous for the executives, obviously. But, given the size of the disaster (and the fact that Shell’s subsidiary paid a fine to the local regulator), it is surely entirely reasonable for ISS to suggest that the bonus setters think more deeply. Shell’s lofty dismissal of the views of proxy agencies jars horribly.
Halfords grinds the gears
Halfords gets a new chief executive roughly every two years, and each one says the same thing: the business is full of potential, but more investment is needed in “service”.
Graham Stapleton, four months into the job, is the latest boss to repeat the diagnosis and he promptly knocked 12% off the share price. Pretax profits, after falling 5% last year to £71.6m at an underlying level, will be flat this year, he said. The City had expected an improvement of at least 6%. The explanation, naturally, is that more money needs to be spent on training staff and marketing. It is also proving impossible to increase the price of bikes.
When he unveils his full strategy in September, let us hope Stapleton spares shareholders another empty slogan. Matt Davies’s “Getting into Gear” mantra was followed by Jill McDonald’s “Moving up a Gear”, refrain but the share price is where it was in 2013. “Still in Neutral” might be more honest.
