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M&S suppliers in cash-call revolt as retail giant demands millions for facelift

Marks & Spencer faces a revolt by suppliers over demands by chief executive Marc Bolland for cash to help pay for its store refurbishment programme.

The retailer has been forced to defend the request amid 'heated negotiations' with major suppliers. At least one is understood to have refused to pay and Financial Mail has learned that others are prepared to follow suit.

The High Street giant has asked suppliers to contribute 1.25 per cent of their annual sales to raise a sum in the 'low tens of millions'.

Some suppliers will have no choice because part, if not all, of their business is with M&S and to refuse could mean commercial suicide. They would include some of its long-term clothing suppliers. Conversations between the firm and suppliers are continuing with some asking why they should pay. One source complained that the demand was 'misjudged' at a time when many businesses were struggling and even large firms were seeking to build up cash reserves. M&S has said that all suppliers will benefit from better-looking stores and that it is 'right' that suppliers should share the pain.

However, some experts have argued that retailers should account for store refurbishments within their annual capital expenditure, as with M&S's rival Next, and not as a major one-off cost every few years.
M&S declined to comment on the situation or say how many of its suppliers had paid up.

The chain has refurbished 15 stores as part of a £600million refit programme over the next three years. It said two weeks ago that it had received 'positive feedback' so far. Bolland's predecessor, Sir Stuart Rose, spent about £2billion and the new plan has left some analysts questioning how effective that investment has been.

Bolland is part way through a plan to reverse a profits decline at the chain by opening more international stores and boosting online sales. It is poised to open stores in France after withdrawing from there a decade ago under previous management.

Bolland warned this month that a third of all products bought on the High Street this autumn had been sold at a discount.

However, analysts said last week that new tests on food-only stores raised the prospect that M&S may be able to push the boundaries of its strategy next year.

M&S has not developed a multiformat strategy to the same extent as supermarkets. However, brokers at corporate services group Shore Capital said M&S's 'Food on the Move' store at Baker Street, central London, might be seen as a ' significant development' as it begins to test a more adventurous strategy.

It may also be a sign that Bolland is beginning to draw more heavily on his previous experience at supermarket chain Morrisons, where he was credited with turning round its fortunes.

Source : Neil Craven – Financial Mail
www.dailymail.co.uk/money/markets/article-2063668/M-S-suppliers-cash-revolt-retail-giant-demands-millions-facelift.html

19 November 2011
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