Paddington Bear, the star of Marks & Spencer’s Christmas ad, always kept a marmalade sandwich in his hat in case of emergency. M&S itself just reaches for another restructuring.
The latest rejig is not the full sandwich, it should be said. Chief executive Steve Rowe is merely accelerating the store closure programme and making the expansion of Simply Food simply slower.
Both measures look sensible. Taking five years to close 10% of the floor space devoted to clothing and homeware always felt too leisurely. As for food, finding new trading tricks – as opposed to opening lots more stores – is clearly the priority. Like-for-like sales are going sideways at a time when food inflation is 3%. M&S has been caught on the hop in food. Competitors have saturated the country with convenience stores and online competition is biting.
Yet nobody is pretending that the latest strategic shuffle is the final stage in delivering the “faster, more commercial M&S” that Rowe wants. “The business still has many structural issues to tackle as we embark on the next five years of our transformation,” he declared.
He’s been saying as much since he got the job 18 months ago, but some of the details should shock shareholders. His predecessor, Marc Bolland, spent a fortune on logistics and digitalisation but, it turns out, yet more investment is required in technology. That expensive tale seems never-ending.
So do the “adjustments” – always downwards, naturally – to profits. The adjustments in the latest half-year totalled £101m but arrive after a colossal £437m in the last financial year and £201m in the year before that. If five more years of toil lie ahead, there may be more to come.
On the plus side, Rowe can claim early success in his big push to get M&S off the promotional treadmill in clothing. Full-price sales were up 5.3% in the half-year, which is a significant number. But “stronger headwinds” – his description of trading conditions in food – is a phrase chief executives use when they’re not expecting the breezes to change direction soon. That is a new factor that makes the reinvention of M&S even harder. “Things are always happening to me,” complained Paddington. M&S shareholders know the feeling.
GSK’s priorities right with top scientific appointment
Emma Walmsley, after six months as chief executive of GlaxoSmithKline, hasn’t yet worked any magic on the share price but she clearly knows how to make high-profile hires.
Her first coup was to poach Luke Miels from arch-rival AstraZeneca as head of pharmaceuticals. AstraZeneca boss Pascal Soriot was reported to be livid. The latest arrival, as GSK’s chief scientific officer, is Hal Barron, who is a big name in the pharma world.
He comes directly from Calico, a Google-funded Californian biotech outfit, but was previously chief medical officer at Roche, responsible for developing drugs for both the parent and its high-flying Genentech subsidiary. There were a few big blockbuster drugs out of Roche in that period. GSK is in need of similar medicine.
Barron doesn’t come cheap. He’ll be paid slightly more than Walmsley, reflecting both the cost of US pharma executives and the fact that, at a big pharma company, the top scientist is arguably more important than the chief executive. If he hits his incentive targets, Barron will be on about $13.5m (£10.3m) a year.
GSK’s shares have fallen 10% since Walmsley talked vaguely at last month’s third quarter update about bidding for Pfizer’s consumer products division. It remains hard to see how GSK could afford the Pfizer unit, which might cost $15bn, while still maintaining its much-prized dividend. But the hiring of Barron addresses the parallel worry that she’s gone wobbly on pharmaceuticals.
The appointment underscores “the absolute unequivocal prioritisation” of pharmaceuticals, said Walmsley. She’s labouring the point, but it’s the right point: GSK needs a fatter pipeline of new drugs.
About time boardroom diversity shifts to executive appointments
“Too much of the focus has been on the non-executives of listed firms, not the day-to-day leaders of our biggest businesses,” says Carolyn Fairbairn, director general of the CBI, pointing out the obvious flaw in the multiyear drive to get more women into the boardrooms of our biggest public companies.
Mildly encouraging headline figures – 27.7% of board positions in FTSE 100 companies are occupied by women, up from 11% in 2007 – mask the real story. There have been lots of women appointed to non-executive posts, but too few to executive jobs.
Currently only six chief executives at FTSE 100 firms are women, and there are only 10 women in the top executive posts at FTSE 250 companies, reports Cranfield School of Management. For women in all executive directorship roles, the ratios are only slightly higher: about 10% in the FTSE 100 and just 7.7% in the FTSE 250.
For all the prodding by government-backed reviews, those figures are terrible. Attention is now shifting to executive appointments – about time too.
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