Rose needs to come up with a clear strategy on how to turn around the group's flagging food business and convince investors he is building a strong management team if he is to remain at the helm for long, analysts and investors say.
His chances of success, some think, are finely balanced.
"There is probably a 40 percent chance that in due course he will be forced to step down or resign," Pali International analyst Nick Bubb said in a research note.
Rose's most immediate challenge is the company's annual shareholder meeting next Wednesday, when investors will vote on his controversial move from chief executive to executive chairman, against corporate governance guidelines.
This had already raised questions about his leadership.
That was before a shock profit warning on Wednesday, which sent the stock price tumbling nearly 25 percent and also fuelled doubts about his strategy.
"We now think in broad terms that strategy as expressed by management is unsustainable and what is in issue is the pathway and cost of moving to a new strategy," Credit Suisse analysts wrote in a research note.
They said Marks and Spencer (M&S) needs to reposition its upmarket food offering, which has been hit by shoppers trading down to cheaper rivals, and boost direct sourcing of clothes.
"Clearly these are not strategies currently being considered by M&S management and as such we would expect that there is a strong possibility that management changes may have to be made here," they said.
PROTEST
M&S's major shareholders are so far staying quiet about their voting intentions at next week's meeting, but if comments from smaller groups are any guide, Rose is likely to face protests rather than an attempt to unseat him.
A group of four investors led by the Universities Superannuation Scheme (USS), which together account for about 2 percent of M&S's share capital, plan to vote against M&S's report and accounts at the meeting to register their dissatisfaction with Rose's move to executive chairman.
However, a spokesman said the USS did not plan to vote against Rose's actual appointment.
Rose was dealt a further blow on Friday, when M&S's joint broker Citi cut its rating on the stock to "sell" from "buy" and slashed its price target to 205 pence from 450 pence.
This helped to drive M&S shares down as much as 6.4 percent to a near seven-year low of 221 pence.
M&S shares have underperformed the UK general retailers index <.FTASX5370> by about 18 percent over the past year, and are now trading well below the 400 pence level at which retail tycoon Philip Green attempted to buy the firm in 2004.
Rose was brought in to defend M&S against that bid, and then presided over a recovery that lifted the shares as high as 759p in April 2007.
Tim Green, a fund manager at Brewin Dolphin (LSE: BRW.L - news) which owns around 1 percent of M&S shares according to Reuters data, said M&S needed to reassure investors on its food business and corporate governance, but thought both were achievable.
"A good head of food should be able to resolve the challenges at the M&S food business. M&S food still retains a deep and lasting appeal to customers," he said.
On corporate governance, he noted that M&S recently appointed David Michels, former chief executive of hotels group Hilton, as deputy chairman.
"There needs to be a feeling that the newly appointed deputy chairman really is a strong enough voice to dispel fears of there being a one-man band in terms of management strategy," he said.
Source: http://uk.biz.yahoo.com/06072008/325/m-amp-s-s-rose
-set-showdown.html
