Outlook: M&S is wounded, but not fatally

IT HAS TAKEN many years for Marks & Spencer to lose its St Michael halo and it could take as long to get it back. Years of a "command and control" management culture have led to an over-staffed, bureaucratic organisation that huddles too much decision-making at the centre and leaves the company ill-equipped to respond to the changing demands of modern retailing.

M&S's policy of buying British has been good news for the domestic textile industry but less welcome for UK shoppers, who were left facing high prices and so shopped at Gap or Next instead. Combine this with the supermarkets' move into clothing, then mix with an ill-timed expansion programme, and it is not hard to see why the Rolls-Royce engine in the M&S motor juddered to a halt.

It was no surprise either that Sir Richard Greenbury, who is still chairman for the time being, chose to be elsewhere yesterday - at a House of Commons Select Committee briefing on the textile industry - when the full horror of M & S's performance for last financial year was announced to the City. Can the man left this inheritance get the engine purring again?

Peter Salsbury has certainly made an encouraging start, getting rid of hundreds of "yes-men" managers at the Baker Street head office and doing away with a layer of regional managers at store level too. More staff can be deployed where it matters - on the shop floor.

In the buying department, lead times are being shortened and more merchandise will be introduced mid-season. The proportion of goods sourced from overseas will rise from 30 per cent two years ago to 40 per cent this year with more to come.

For investors the phrase "shareholder value" has been mentioned for the first time and there is talk of gearing up the under-utilised balance sheet for share buy backs or sale and leaseback deals. Unlike Sainsbury's, another mighty name which ran into the mire, M&S remains dominant in its major clothing market with a share several times larger than that of its nearest competitor. It remains the best known and best loved retail brand in this country, and has a tremendous heritage to leverage. The recovery will take time, and at 24 times this years earnings, the shares are probably fully valued for now. But don't write the old beast off quite yet