LONDON Marks and Spencer boss Stuart Rose, lauded for reviving the landmark retailer just a year ago, is battling to save his job after bungled management changes and a big profit warning.
About 2,000 shareholders are set to gather for an annual meeting in London's Royal Festival Hall later on Wednesday, amid newspaper reports that up to 30 percent of them will abstain or vote against Rose's appointment as executive chairman.
That won't be enough to unseat the 59-year-old retail veteran, but it will step up the pressure on him to spell out his plans for management succession and for tackling a slide in underlying sales that has hammered profit forecasts.
"Shareholders need a Plan B or C," Lehman Brothers analysts said in a research note, cutting their rating on M&S shares to "equal-weight" from "overweight".
M&S infuriated some investors in March by saying that Rose would combine the roles of chairman and chief executive as part of a package that will see him stay at the company until 2011.
That dealt with speculation about whether Rose would stay with the company, but it also went against corporate governance guidelines, which warn against such a concentration of power.
Rose then upset some analysts last week by announcing that head of food Steven Esom, who had been tipped as a potential successor, was leaving after only about a year in the job, following a sharply weaker performance at the food business.
"I would expect high-profile shareholder resistance (at the AGM)," said Bernstein analyst Luca Solca.
"I think that major shareholders will also put pressure on the management team and Stuart Rose to come up with some kind of better management organisation and a succession plan."
A CLEAR CHOICE
Rose was brought in to defend M&S in 2004 from a 9.1-billion-pound, or 400-pence-a-share, bid approach from retail billionaire Philip Green.
He revamped stores and introduced new fashions to lure back shoppers and drive a recovery that lifted M&S shares to a record high of 759 pence in April 2007.
But his strategy has been called into question by disappointing Christmas sales and a profit warning last week, which sent the stock plunging to a 7 1/2-year low of 210.25 pence on Tuesday.
Rose has said the group will continue to expand and will also not cut its dividend payment to shareholders, which some analysts have challenged as unrealistic.
Barclays Stockbrokers strategist Henk Potts said Rose needs to clarify his strategy, particularly with regard to food, where cash-strapped shoppers are shunning M&S's upmarket ranges in favour of cheaper alternatives.
But Potts also said Rose had put M&S in a better position to cope with a consumer downturn.
"It's a clear choice for investors. Do they want someone to stay around in a position that perhaps they may not feel entirely comfortable with, but at least they've got someone who can spearhead the company's development at a difficult time," he said.
"Or do they feel some of the more established practices in terms of corporate governance are more important?"
At 9:30 a.m., M&S shares were down 0.7 percent at 230 pence, valuing the firm at about 3.4 billion pounds.
(Editing by Will Waterman)