UPDATE 2-M&S sets out long-term vision, shares fall

* Supply chain/IT revamp to yield 250 mln stg a yr by 2015-6

* To invest 1 bln stg in supply chain/IT improvements

* To focus on expanding online, internationally

* Internal CEO candidates present at investor day

* Shares close down 4.3 pct

(Adds more company comments, analyst, updates shares)

By Mark Potter and James Davey

LONDON, Oct 13 (Reuters) - British retailer Marks & Spencer (MKS.L) on Tuesday set out long-term plans to modernise its supply chain and boost its presence online and abroad as the internal candidates for chief executive jostled for position.

The 125-year old group, which sells clothes, food and homewares at more than 650 stores in Britain and about 300 shops abroad, said it expected to achieve annual benefits of around 250 million pounds ($395 million) by 2015-2016 from upgrading its supply chain and information technology systems.

However, its shares fell 4.3 percent as some analysts questioned whether the firm could act more quickly and noted that the benefits might be reinvested rather than boost profits.

"This was never going to be a fireworks event," said KBC Peel Hunt's John Stevenson, adding that major new initiatives were unlikely ahead of the appointment of a new CEO.

M&S has been under fire from some investors for allowing Stuart Rose to become executive chairman, which combines the roles of CEO and chairman, against governance guidelines.

The company has said it would appoint a CEO next year, when Rose will become non-executive chairman before leaving by July 2011. It has said it would prefer an internal appointment.

KBC's Stevenson said he thought the internal candidates -- Finance Director Ian Dyson, head of food John Dixon and head of clothing Kate Bostock -- gave good presentations, but remained of the view that the firm would make a "big name" external appointment.

M&S said at its first investor day almost a decade that its supply chain and IT improvements would cost about 1 billion pounds to achieve, but that 250 million of this total had already been spent.

The improvements will include shrinking the firm's network of 100 warehouses, which are run by third parties, to just four.

M&S also underscored plans announced on Monday to revamp its website and said it would expand its business abroad, including at least 50 stores in India over five years. [ID:nLC380128]

"We've established a long-term vision for where we want to take the business which we believe will create long-term sustainable growth," said Dyson.

"At the heart of this vision is moving the business from being product focused, store centric and UK dominated to being customer focused, multi-channel and international"

Dyson said M&S would conduct a review of its UK store network in the light of fast-growing online retail sales, with future new stores likely to be offset at least in part by closures.

SUCCESSION

Some investors are still unhappy with M&S's management succession plans, saying Rose may have to go earlier than July 2011 to ensure a smooth transition. [ID:nLF456453]

Others are concerned it might run into the problems faced by broadcaster ITV (ITV.L), which has seen a procession of big names rule themselves out of a top job. [ID:nLC270508].

Andy Bond, CEO of grocer Asda (WMT.N), and Charles Wilson, CEO of cash-and-carry group Booker (BOK.L) and a former lieutenant to Rose, have both said they will not be in the running for the M&S job [ID:nL1545760] [ID:nLC285738].

Supermarket bosses Justin King at Sainsbury (SBRY.L) and Marc Bolland at Morrison (MRW.L) are other tipped candidates.

M&S shares plunged around 60 percent last year as Britain skidded into recession and the firm admitted its upmarket foods business had been slow to respond to changing consumer demands.

But the stock has recovered around half those losses this year as M&S revived sales by cutting prices, stepping up promotions and introducing new products. [ID:nLT484259]

Head of food John Dixon said in his presentation that he planned to add 800 new lines to sustain the recent improvement, including extending a trial to sell a small number of brands.

Head of clothing Kate Bostock said she saw strong growth potential in childrenswear and footwear as well as homewares, where she hopes to lift M&S from its ninth place in Britain to compete with market leaders Argos (HOME.L) and John Lewis [JLP.UL].

M&S shares closed down 15.5 pence at 346.9 pence, valuing the business at about 5.6 billion pounds. ($1=.6333 Pound) (Editing by David Holmes, John Stonestreet and Karen Foster)