Mixed market reaction to M&S chief's pledge

Stuart Rose’s pledge to remain at Marks & Spencer for another three years has put an end to persistent rumours surrounding his tenure at the helm of the retail chain.

However, while departure speculation has been put to bed, the news was met with a mixed reaction in the market, with questions surrounding the group’s decision to appoint him as chairman and the implications for his succession plans.

Analysts described the move as “unusual”, with City best practice guidelines on corporate governance clearly recommending that a company should avoid promoting a chief executive to the role of executive chairman.

Industry experts also said today’s commitment to stay until the firm’s annual general meeting in July 2011 suggested M&S was struggling to find a boss to follow Sir Stuart when he leaves.

Nick Bubb, retail analyst at Pali International, said it indicated that Sir Stuart had not got a clear successor and did not want to go out on a low note, with UK sales growth stalling in recent months.

He added: “Market share is under pressure in a weakening market and today’s big management changes don’t immediately do much to change the outlook.”

M&S shares dipped 1% immediately after today’s announcement and have been under significant pressure since its disappointing Christmas trading figures and amid fears over consumer spending.

Sir Stuart has said when asked recently that he was not planning to desert the group now that times have got tougher and his commitment to stay until 2011 signals a desire to see the recovery plan through to the end.

His record with the group has been impressive so far, despite the third quarter trading blow and Investec Securities analyst David Jeary said he would be a “tough act to follow”.

“This announcement has delayed the dreaded day of having to name a successor to Stuart Rose,” he said. “It saves them a tricky decision. He will be a tough act to follow, but still will be in three years.”

It is thought that his plan not to retire for another three years also gives him time to continue with the group’s overseas growth plans.

One trader said the management changes were “a bit of window dressing”, but said it would be seen as a positive for the group, as long as M&S does not wait too long to “bring in new blood”.