When Philip Green was trying to buy Marks and Spencer, his critics said he was nothing more than a cost cutter. Those doubters said Stuart Rose was the real class act. After all, he ran Bhs before Green took it over, and the reforms that saw such a dramatic change in the retailer’s standing were to a large extent put in place by Rose. It’s just that Green saw it through, or so went the argument.
For that reason, more than any other, shareholders at MS decided to give Rose a go, and bravely turned down Green’s 400p bid. But the mighty Marks had been through a torrid time, with a previous regime change doing little to change fortunes. It was easy to be cynical about Rose and his plans, and it must have been tempting to sell out to Green, after all, his track record was extraordinary. At the EGM when the Rose plan was accepted, one shareholder said he preferred to see the company “through Rose tinted spectacles”, but at the time, many thought these same shareholders really were seeing the world though a distorted view, based on the misguided notion that MS would inevitably recover.
And yet, two and a bit years on, those optimists have been proved right. MS is back, and as for Bhs, it’s down in the dumps.
The latest round in the Green versus Rose battle was unveiled yesterday, with Rose having gone into a commanding lead. Over the last 12 months profits at Bhs have halved, from £105 million a year ago, to £48.5 million. Like for like sales were down an alarming 7 percent, and analysts have started talking about how it’s now time for Green to show he is more than just a cost cutter.
Relax, Green’s on the case. He has put in place a new team, and he is working 16 hours a day. What’s the point in having all that money if you work 16 hours a day? - Ed.
Contrast this with MS. Reform is everywhere. Take the latest TV ads. There are two, one starring Twiggy and Erin O’Connor, and then the same ad is mirrored with children acting out the same poses of their more illustrious colleagues, to the sound of the Monkeys. The two ads are superb, and illustrate how well thought out the reformation at MS has been.
It’s not that the improvements at the store can be explained by the new ads, rather the campaign is indicative of a company whose management know what they are doing.
How does this hit the bottom line? While like for likes tumble at Bhs, MS saw an 8.2 percent rise in its last quarter, while shares are now trading at over 640p, almost 50 percent up on the Green offer.
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