May 3, 2017 / 6:43 AM / 4 months ago

UPDATE 2-Halfords boss swaps bikes for bras with M&S move

* Rowe to relinquish direct clothing role

* McDonald ran Halfords and British arm of McDonald's

* Halfords shares down 2.8 percent, M&S down 1.1 (Adds background, reaction)

By Kate Holton

LONDON, May 3 (Reuters) - Marks & Spencer has hired Jill McDonald to run its clothing division, betting that the boss of bike shop Halfords can bring her focus on improving stores and customer service to fix the struggling business.

Despite never having sold clothes, McDonald will take on one of the biggest jobs in British fashion, freeing up M&S CEO Steve Rowe to concentrate on running the overall company after he oversaw an improvement in its clothing performance.

The selection of McDonald fits with Rowe's strategy of getting the basics right by simplifying product ranges, improving quality and running fewer promotions, rather than chasing new fashion trends.

"I am pleased with the progress we have made in clothing and home over the last year and the time is now right for this appointment," Rowe said.

Marks was once the go-to destination on the British high street for clothes, selling everything from school uniforms to underwear to first interview suits.

But the retailer has been squeezed in recent years by the arrival of fast, cheap fashion at one end of the market and more affordable luxury at the other.

Under Rowe's new leadership the clothes division reported an increase in quarterly sales for the first time in nearly two years at the end of 2016, helping the 133-year-old company soundly beat forecasts for Christmas trading.

Set to join in the autumn, McDonald has spent the last two years running the bicycles-to-car-parts retailer Halfords and before that she was head of the fast-food chain McDonald's in Britain and worked for British Airways.

Analysts say McDonald focused on improving customer service within the 460 Halfords stores, persuading shoppers to buy on the high street rather than online. But the company's shares fell 17 percent while she was there, hurt by the impact of a weaker pound driving up import costs.

"This is an interesting appointment from an M&S perspective since McDonald ... cannot be seen as a clothing expert. What she does bring is considerable experience in marketing and customer relationship management, which have become even greater areas of focus under Steve Rowe's tenure," said Canaccord Genuity analysts.

In her new role, McDonald will have overall responsibility for all aspects of the M&S business outside food, which covers clothing, homeware and beauty products.

This will include setting the strategy for design and sourcing through to supply chains and logistics. She will report directly to Rowe.

Rowe, who has been in the top job for just over a year, will relinquish his direct oversight of the clothing business, as will the firm's finance director Helen Weir.

Analysts at Investec said Halfords was in much better shape than when McDonald joined in May 2015.

"The company is 18 months into her 'Moving up a Gear' strategy," they said. "Systems and processes have continued to be modernised. Halfords is more customer-centric."

Halfords Group shares were down 2.8 percent at 1000 GMT while M&S was down 1.1 percent, both underperforming the FTSE 100 Index which was down 0.3 pct. (Editing by James Davey and David Clarke)

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