Will M&S sharpen up its fashion arm? Analysts forecast profit rise as chief Steve Rowe expected announce a bumpy road to recovery
Marks and Spencer may want to give its clothing lines a makeover as analysts predict a rocky road to recovery.
The 132-year old retailer, which has seen its fashion division fall out of favour with the public in recent years, is expected to report a two per cent rise in pre-tax profits, but analysts suggest that the road to full recovery will be long.
Despite the rapid-growth of its food business in recent years, shares in M&S have fallen 24 per cent in the last year as the struggling retailer has tried to right its ailing general merchandise offering. Rowe is expected to set out a strategic overhaul of the non-food arm of the company alongside its annual financial results.
Read more: New M&S boss Steve Rowe reshuffles womenswear team
Since the firm's grocery division began to grow in the past five years, M&S' results have been seen as a tale of two businesses. Before former chief executive Marc Bolland resigned from his position earlier this year, he bemoaned the media's focus on the firm's disappointing fashion results despite strong food sales.
“In six years, why have you not asked me about food?” the Marks & Spencer boss admonished a reporter in January who questioned the company’s bleak Christmas clothing sales.
Read more: Can anyone turn around M&S’s faltering clothing business?
M&S has around 900 stores across the UK, over half of which only sell food.
On average, analysts are forecasting a two percent rise in group pre-tax profit of £673m – a second straight year of profit growth following three years of decline.
City analysts have faith in Rowe's assessment of the business. "Rowe's vision of the future will make or break the shares short-term", said Peel Hunt. It predicts that the M&S boss will set his sights on improving quality, staff densities and visual merchandising.
"We expect a pretty candid analysis of what M&S is doing wrong."
It expects cash from margins to be reinvested to improve product quality, an issue the firm believes has held M&S back for years.
"Bolland never felt there was a problem here but every M&S shopper you speak to will tell you otherwise. There are too many basic mistakes being made (sleeve lengths wrong, jagged seams), and the fit of some ranges is questionable
"We suspect core pricing is too high…we think Rowe understands this and will take action on both price and quality."