James Davey

LONDON (Reuters) – Steve Rowe will next week step down as chief executive of British retailer Marks & Spencer (OTC:) after a turbulent six years in the top job, with his internal successor set for a baptism of fire amid a worsening cost-of-living crisis.

Rowe, who joined M&S at the age of 15 before rising through the ranks, will end a 39-year career at the clothing and food group after presenting annual results on Wednesday that are expected to show a jump in profit.

Along with chairman Archie Norman, Rowe has sought to transform the 138-year old M&S with a radical overhaul of its store estate, a renewed focus on the quality and value of its clothing and food, and heavy investment in technology and e-commerce, including a joint venture with Ocado (LON:) that belatedly took M&S food online.

Having steered M&S through the COVID-19 pandemic, he exits with hopes raised that one of Britain’s most elusive turnarounds could finally materialise after two decades of false dawns.

But he also departs with M&S’s share price at well below half the level it was when he became CEO in 2016 and with UK consumers facing the biggest squeeze on disposable income since at least the 1950s.

Stuart Machin will replace Rowe as chief executive officer and food boss. He will also assume the responsibility of day-today leadership and management of the business.

An unconventional structure will see him backed up by Katie Bickerstaffe, currently M&S’s other chief operating officer, who will become co-chief executive, and finance and strategy chief Eoin Tonge.

Machin’s first job will be to help navigate Britain’s rising cost-of living.

“While the typical clothing & home M&S customer is less exposed to mortgages, they will no doubt be feeling the pinch, while the food business is at risk of (shoppers) trading down over the coming months,” said Santander (BME:) analyst Rebecca McClellan.

With M&S having already flagged headwinds it is facing in the 2022-23 year, including labour, energy, fuel and logistics inflation, analysts expect a cautious outlook statement.

Sainsbury’s (OTC:) warned that Tesco and its rival Tesco could see lower profits in 2013.

Norman stated this week that Britons are still spending, despite the fact that inflation has risen to a 40 year high. Unexpected sales growth was also reported by official data.

Norman said that “the crunch” will come in autumn, when many people have returned from holiday and spent their money.

For the year to April 2, M&S is expected to report profit before tax and adjusting items of 522 million pounds ($651 million), according to analysts’ average forecast. In the 2020-21 pandemic, it made only 41.6 million pounds.

The total UK clothing and home sales have increased by 46.6% in 2020-21, and 0.5% in 2019-20. Food sales were up 10.3% and 9.7% respectively for 2020-21.

It is not possible to expect a dividend.

($1 = 0.8018 pounds)