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When Sir Richard Greenbury delivered £1bn-plus profits at Marks and Spencer for the second year running in 1998, it looked like the beginning of the end.

The chairman warned the City that future profits would be hindered by penny-pinching consumers and an aggressive expansion programme. “These investments, essential for the long-term progress of the business, will affect our results in the short term,” Sir Richard explained.

In fact, it has taken another 10 years to reach the £1bn milestone again. But Sir Stuart Rose, soon to be executive chairman, is not basking in the glory. “The economic climate is uncertain,” said a sombre Sir Stuart. “I don’t have a clue [how long the downturn will last]. That is the $1bn question.”

The other important question is whether the Rose revolution can thrive in more troubled times. The company’s share price suggests observers are less optimistic than when Sir Richard was running the show.

Back in 1997, the shares traded on a forward price/earnings ratio of 19.5 times – ahead of the sector average of 16 times. Under Sir Stuart, the shares are on a forward multiple of about 9, slightly behind peers.

“In 1998, the 10-year record looked pretty solid, this time it doesn’t,” says Rod Whitehead, an analyst at Deutsche Bank. “Another way of looking at this is that M&S has had a bit of a recovery but people think it is going to hit a brick wall once more.

“I think it is going to be OK, but the world is moving faster and I think they need to move even faster too.”

Sir Stuart, keen to shake off the past, says his “new” M&S is different to the one he took over in 2004. He insists there is plenty more room for improvement in clothing, food and outside the domestic British market.

M&S is pushing its global strategy. The retailer, which retrenched earlier this decade, bought 51 franchised stores in Greece and central Europe in the year, signed a partnership deal with India’s Reliance Industries to create a 60-strong store chain by 2012 and is opening a flagship shop in Shanghai.

Meanwhile, in the UK it is opening 83 more convenience grocery stores this year, building Simply Food to an 185-strong chain. The other big idea is to break with the past and sell “must have” brands such as Marmite, Weetabix and Persil. It will starts a trial of 350 products in 19 stores next month.

The acid test is whether Sir Stuart can maintain the company’s share of the all-important UK market, which accounts for about 90 per cent of sales and operating profits.

There are signs of weakness. Sales started badly this year after a dreadful April – although May was a little brighter. Its share of the women’s wear market has fallen back slightly this year, in spite of an increase in selling space.

And it is not only falling sales that present a problem. Sir Stuart, having pushed prices down over the past couple of years, has to encourage cautious consumers to begin buying his more upmarket products again.

In the past financial year, cheaper lines accounted for 30 per cent of sales. But M&S needs to bring that figure down – it is running at 28 per cent in clothing – if it is to hold profits and margins in the longer run.

“They have done the big repositioning, but it is proving unsustainable,” argues Tony Shiret, an analyst at Credit Suisse. “They are having to sell more to hit the same profits.”

Copyright The Financial Times Limited 2017. All rights reserved.
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