Steve Rowe's switch from running Marks & Spencer's food business to heading its general merchandise arm could make or break his chances of succeeding Marc Bolland as chief executive, arguably the most prestigious job in British retail.
Steve Rowe’s switch from running Marks & Spencer’s food business to heading its general merchandise arm could make or break his chances of succeeding Marc Bolland as chief executive, arguably the most prestigious job in British retail.
Rowe has led the upmarket food division for three years, delivering 23 straight quarters of underlying sales growth and an outperformance of the wider industry, helping M&S post a first rise in profit in four years in 2014-15.
However his shift to general merchandise – the 131-year-old firm’s flagship division, accounting for about two-thirds of profit – represents a significant step up. He faces the challenge of delivering the sustained rise in sales, along with profit margin gains, that will convince investors the M&S recovery is on track.
The opportunity came his way when Britain’s biggest clothing retailer announced on Thursday that John Dixon – who had been tipped as a possible successor to Bolland – had quit as executive director of general merchandise, a position he has held since 2012, to become a CEO elsewhere.
Rowe, who has been at M&S for more than 26 of his 47 years, and whose father Joe was an executive director until 2000, has made no secret of his desire for the top job, telling Reuters last year he would love to be CEO.
If he can replicate his food success in his new division, which spans clothing, shoes and homeware, he may get his chance and outmanoeuvre the claims to Bolland’s job of Laura Wade-Gery, executive director multi-channel, and finance chief Helen Weir.
M&S’ return to profit was helped by the strong performance of food and also gross margin gains in general merchandise, driven by improvements Dixon made in sourcing. Its share price has risen a quarter over the last year on recovery hopes.
But following Dixon’s exit, analysts are divided over the future performance of general merchandise, reflecting uncertainty after a dip in its first-quarter underlying sales this month dealt a setback to M&S’ recovery. The division had seen a return to growth for the first time in 15 quarters in the previous three months.
Jefferies analysts said Dixon’s departure was a blow, but added: “With Rowe stepping into Dixon’s shoes … we believe the M&S recovery can continue relatively unscathed.”
But others were concerned about potential unnecessary tinkering of a strategy that could be on the verge of proving to be a winning formula. “We fear another period of rebuild and thus underperformance,” said analysts at Peel Hunt.
Industry experts had been similarly split over the first-quarter slowdown, with most taking the view it reflected slowing market conditions across the UK apparel sector, but others saying M&S’ ranges were still failing to gain traction despite the firm’s claims of style and quality improvements.
Rowe is no newcomer to general merchandise; as an 18-year-old he started out at fashion chain Topshop and his M&S career has included stints in menswear, homeware, beauty and e-commerce. He has served under eight M&S chairmen and six CEOs.
He had succeeded Dixon as head of the food business in 2012, and benefited from lower grocery prices his predecessor had pushed through. Similarly he may now be poised to reap the rewards of the billions of pounds of investment that Dixon oversaw in M&S’ clothing supply chain.
In regard to the company’s top job, some see Rowe as more a work-in-progress than the finished CEO article.
“In terms of driving the clothing business we have no doubt he would be good at the driving part but we are less certain that he could act as a catalyst for the positioning and creative work needed to make the game-changing moves needed in women’s clothing,” said Tony Shiret, analyst at Espirito Santo.
He also notes that Rowe has had some “difficult investor-facing experiences” and needs to “demonstrate a broader strategic awareness.”
And while clothing gives Rowe the opportunity to shine, there’s no hiding place if it all goes wrong.
“He would have been much better placed if he was still running food rather than drinking from the poisoned chalice that is M&S clothing,” said independent retail analyst Nick Bubb.