M&S strategy shows signs of starting to work

By Michael Stones contact

- Last updated on GMT

M&S is showing signs of improvement but its not yet top of the class, said Conlumino
M&S is showing signs of improvement but its not yet top of the class, said Conlumino

Related tags: Retailing, Term

Marks & Spencer’s (M&S’s) half-year results show its recovery strategy is beginning to work, according to some City analysts.

The posh retailer’s food business continued to outperform the market, with food sales in the 26 weeks to September 27 up by 3.6% and like-for-like sales up by 1%. Group sales rose by 1% to £4.9bn, while underlying profit before tax climbed by 2.3% to £268M.

Conlumino md Neil Saunders said the figures were more impressive than they first appeared. “On the face of it, the latest M&S numbers look rather lacklustre; however, beneath the surface some faint glimmers of hope are beginning to shine through as the company’s strategy starts to deliver.”

The food business continued to deliver with a robust rise in sales against a difficult backdrop, with good prospects for the make-or-break Christmas market, he added. “Having seen the early products of M&S’s Christmas fare, we are confident that M&S food will once again outperform over the critical Christmas trading period.

Christmas market

“Over the medium term the opening of more Simply Food branches will help ease up sales as it aligns M&S with the strong growth of the convenience food market.”

But the retailer’s clothing offer, particularly womenswear, remained problematic, said Saunders.

Also, the slip in online sales of 6.3% revealed M&S’s website was “simply not delivering the goods”. ​Conlumino judged the site confusing to navigate, as it appeared too much like a magazine which obstructed purchases. “Further refinement is needed if this channel is to provide the strong growth M&S needs it to.”

“Overall then, M&S’s school report for this term reads ‘showing signs of improvement’, but there is quite some way to go before it is back at the top of the class”,​ concluded Saunders.

‘Slow start to festive season’

Retail analyst Planet Retail agreed M&S was improving its offer to customers. Senior analyst Stephen Springham said: “There is evidence the business is slowly sharpening its promotional activity and achieving a more healthy margin mix as a result. But continuing to do so in the run up to Christmas, after such a slow start to the festive season, will prove much more challenging – a real test of nerve and mettle.”

Also, anything but a strong food performance on the food side would prove a major surprise. But the retailer remained one of a small band of stores – including Waitrose, Aldi and Lidl  – which was outperforming the market.

Begbies Traynor highlighted the impact of Christmas trading. Partner Julie Palmer said: “With Christmas just around the corner, analysts will be watching Marks & Spencer’s food sales extremely closely as success here will surely buy Bolland ​[ceo Marc Bolland] more time for his strategy to bear fruit.

“But the biggest test will be whether the new clothing ranges can help M&S regain some of its recent market share losses.”​ 

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