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Marc Bolland’s annual bonus is under threat for the second year running, as Marks and Spencer is expected to announce its first fall in full-year profit for three years next week.
However the chief executive of the high street bellwether could still take home as much as about £6m, under the deal he stuck when he joined M&S just over two years ago.
The consensus of analysts forecasts is for M&S to announce pre-tax profit, excluding property disposals and exceptional items, of £693m in the year to March 2012, compared with £714.3m in the year-earlier period.
This is the first fall in underlying pre-tax profit since the 2008-2009 financial year, when it slumped from £1bn to £604m.
Some 60 per cent of Mr Bolland’s annual bonus, worth up to twice his salary, is based on pre-tax profit. Forecasts of pre-tax profit have fallen from £727m at the beginning of M&S’s financial year as conditions have deteriorated on the high street.
Mr Bolland was paid a basic salary of £975,000 in the year to March 2011 and he did not receive his maximum bonus.
However, he is expected to receive £1m of shares under the deal he agreed in 2010 that compensated him for shares he would have received at his previous employer, Wm Morrison. He could also receive up to £3.9m in shares, under a plan based on the growth of earnings per share above the rate of inflation over the past three years, including the year to March 2012.
Mr Bolland’s joining package – including long-term incentives to be paid over several years and worth as much as £15m in total – attracted criticism when it was announced in early 2010.
His pay for last year will be revealed in the M&S annual report, due to be published over the next few weeks. It comes against a backdrop of increasing shareholder discontent about executive pay.
According to several people familiar with the situation, the poor trading in womenswear that M&S reported in the final quarter of its financial year, has continued over recent weeks.
This could put pressure on Mr Bolland, but also Kate Bostock, head of clothing, who has been courted by Asos
, the online fashion retailer.
Although M&S declined to comment, Mr Bolland is also widely expected to scale back the ambitious growth targets he set out when he unveiled his strategic blueprint in November 2010.
He set the target of increasing sales to £11.5bn-£12.5bn by 2013-2014. However, analysts at UBS forecast that sales will fall short of this at £10.9bn.
Nevertheless, M&S is expected to stick to its plans to revamp stores, although it has cut the cost of this by £100m to £500m.
The remuneration and capital expenditure could raise concerns among shareholders.
One top 10 investor said: “Shareholders are going to want to see evidence of the [sale] uplifts coming through into the numbers to get comfortable that you are getting the right return on that investment.”