Which UK Chief Executive has revived three companies while quaffing champagne with models?
How many people waited years for the top job only to become a disappointment once there? Anthony Eden had to watch Churchill's decline into enfeebled senility for four years before he wrested the Premiership that he considered rightly his. Yet he was gone in two years, having embarked on a lunatic and unwinnable war in the Middle East.
In March 2000 Peter Davis returned to Sainsbury
(LSE: SBRY)
having been a director there in the 1980s. He had just revitalised Prudential
(LSE: PRU)
and the boardroom doors were flung open for the saviour. He was kicked out four years later.
Another boss who has returned to his old boardroom as Chief Executive is Marks & Spencer
(LSE: MKS)
boss Stuart Rose in 2004. Given the examples above, there appeared to be a good chance he might fail. Especially since he supposedly likes to keep his hands on the pump by inviting lesser mortals to his office for a glass of champagne.
Sure, he had turned things round at Booker and Arcadia Group, but many put that down to his long-standing right hand man, Charles Wilson.
Nevertheless, Rose achieved early success with common sense changes. Even when Charles Wilson left in 2005, M&S powered on, regaining market share in clothing, now above 10% again.
Today's trading figures for the three months to end 2006 show Rose continuing to outpace rivals Next
(LSE: NXT)
and Alexon
(LSE: AXN)
. UK sales are up 9.2%, and 5.6% on a like for like (LFL) basis. This meets analysts' expectations and is a very good result considering the lack of freezing weather. Philip Green's BHS was one rival forced into a half price sale before Christmas while M&S smugly maintained unblemished tickets.
Rose has been famously coy about offering up a hostage to fortune by saying that M&S has recovered, but today he could resist it no longer:
"We have now delivered growth on growth in all areas of our business, thus completing the first part of our recovery plan."
The only cloud in Rose's blue, blue sky is a warning that accelerated store modernisation will hit Q4 sales growth. The payoff is that 70% of store space will be in the new format by Christmas.
Brokers are forecasting 2007 profits of £960m and underlying EPS of 39p, rising to 43.7p in 2008.
M&S is on a forward PE ratio of 18.4, deservedly higher than erstwhile growth champion Next, at 13.9. Next suffered a 6.9% drop in store LFL in the five months to Christmas, though total sales ended just ahead. Perennial laggard Alexon, which has just sold off the lossmaking Dolcis shoe chain for a pittance, saw LFLs off 4% in the 22 weeks to the year end.
The great and good
So M&S is great again but is it good value?
The turnaround is textbook but a PE of 18.4 leaves no room for a consumer retrenchment that must come one day. As a nation we have kept a new shirt on our backs by consumers borrowing a trillion Pounds and the Government increasing spending ahead of GDP growth for the last six years. When the turn comes it will be ugly, but I've been saying this for two years and have been wholly wrong so far.
More:Marks & Spencer Keeps On Growing
