M&S looks for comfort in overseas markets

RELATED QUOTES

SymbolPriceChange
MAKSY14.615-0.151

Chief executive Marc Bolland emphasises store outlets in Istanbul and China, writes Graham Ruddick

Marc Bolland, the chief executive of Marks & Spencer (Other OTC: MAKSY - news) , has already had enough surprises this year after all he was forced to rush out the retailer’s disappointing Christmas sales statement early last month after a leak in the press.

But it seems 2013 is the year of the unexpected for the Dutchman. Or so it seemed at an investor event held in Turkey last week.

After welcoming investors and analysts to Istanbul, Bolland invited M&S’ s franchise partner in Turkey, Husnu Ozyegin the country’s richest man and founder of conglomerate Fiba Group to the stage.

“I’m not going to ask you to sing, but you are so multi-talented,” Bolland joked. Ozyegin though, who turns 70 next year, took the opportunity to do just that. “Regrets,” he started signing. “I’ve had a few ....”

Thankfully, Bolland saw through the joke.

Ozyegin, clearly working outside the M&S script, then spent the next 30 minutes outlining the shape of the Turkish economy and extolling the virtues of M&S.

After the criticism that M&S and Bolland have faced since the 3.8pc fall in like-for-like Christmas clothing sales, it was a welcome burst of positivity.

The fall in sales has prompted questions about Bolland’s future and the progress that has been made at M&S since he took over in May 2010.

However, in Istanbul, Bolland had the opportunity to show that he is changing M&S and moving the 129-year-old towards his goal of it becoming an “international, multi-channel retailer”.

Ozyegin and his Fiba Group are growing M&S in Turkey, Ukraine and Russia and have plans to launch a Russian-language website for M&S.

In Istanbul, alone, the retailer now has 23 stores. They range from a store in the ageing Metrocity shopping centre, which was opened in 2003, to a site in Bagdat with a location and presence that echoes that of Topshop on London’s Oxford Street.

The Bagdat store has just been refurbished into M&S’s new “Concept 11” format. As a result, the five-floor shop appears more like a department store than the traditional M&S in the UK.

The retailer’s brands, such as Autograph, Per Una, and North Coast, are clearly separated and defined, and the shop is much more sparsely-populated with products than many of its UK counterparts.

Clive Black, analyst at Shore Capital, pointed to “the strong and clear sub-branding, the defined space management and the application of the 'less is more’ principle, that may be very effective in the UK.”

Bolland himself said: “The international business is a step ahead in visual merchandising. This store looks better than what you see on a daily basis. What we learn we can apply to stores of similar size in the UK.”

In Turkey, where the retailer does not sell food, the M&S stores emphasise its British roots and the brand is seen as more upmarket than in the UK.

This tactic of trying to establish the brand locally through high profile store locations and local partners such as Fiba is Bolland’s attempt to divert M&S from its failed attempts to expand overseas in the past, when he says it was simply an “exporter”.

Even in France, the emphasis by M&S on its British roots appears to be working. Customers at M&S on the Champs-Élysées and in the So Ouest shopping centre have snapped up its traditional British food, such as biscuits and jams, prompting Bolland to propose opening standalone M&S Simply Food shops across France .

India is another location were Bolland feels the M&S brand can gain traction. The company is working with Reliance Industries to expand its business in the country from 30 shops today to 80 by 2015/2016.

However, despite the obvious opportunities, there were still difficult questions for Bolland to answer in Istanbul.

M&S reported flat international sales in its Christmas trading update because of pressure on its Irish and Greek businesses, and the weakening of the euro.

In addition, it is understood that sales at M&S’s China shops are up to 30pc below internal expectations. Bolland said China is a “fantastic market, but also a difficult market” and that M&S now planned to halt store openings to “evaluate” its business in China, where it has 14 shops in Shanghai.

“We have double digit growth, healthy growth. There is an opportunity there, we just want to see how to do it,” he said.

And, while Istanbul may have been the focus last week, the UK still looms over M&S. Ninety per cent of the company’s revenues come from the UK and the international stores rely on the same fashion products as the stores in M&S’s home market, where the clothing range has been heavily criticised.

“Let this be part of a journey,” Bolland said at the end of the Turkey visit .

“I am not going to be famous for international, but it is something I don’t want you to forget.”