Not so very way back, had Marks & Spencer reported not solely rising gross sales but in addition market share beneficial properties each in meals and in clothes and residential, there would have been a euphoric response from shareholders.
Unfortunately for the retail bellwether, regardless of numerous encouraging information in as we speak’s half 12 months outcomes, some understandably cautious feedback from administration a couple of “gathering storm” for client spending has additional dragged down the share value – which had already fallen by 50% up to now this 12 months.
Archie Norman, the M&S chairman and one of the vital skilled operators working in UK retailing, mentioned: “It’s a tough old world out there. I don’t think there’s ever been a time in my career when the macro factors have been more formative on how the business is performing.
“We are actually within the client crunch interval. We can see that.
“We know that winter is coming and the customer knows that. We’ve already seen a falling leaves so we are seeing people change [their behaviour].”
M&S chief government Stuart Machin, who changed the long-serving Steve Rowe earlier this 12 months, added: “Uncertainty is at its maximum.”
As for the numbers themselves, they had been by no means unhealthy, in truth barely higher than most analysts had been anticipating.
Pre-tax income earlier than changes within the six months to 1 October got here in at £205.5m, down 24% on the identical interval final 12 months, though a lot of that displays unfavourable comparisons with the identical interval final 12 months – when income had been flattered by £47.5m price of enterprise charges aid through the pandemic. Sales had been up 8.8% at £5.6bn.
Mr Machin described buying and selling through the interval as “robust”, with clothes and residential gross sales rising by 14%, whereas meals gross sales grew by 5.6%.
He mentioned income in meals had been decrease as a result of M&S had been absorbing greater prices in quite a few areas reasonably than passing them onto clients.
Meanwhile, as had beforehand been flagged to the market, the corporate’s three way partnership with on-line grocer Ocado had suffered a £700,000 loss which Mr Machin mentioned mirrored inflationary headwinds, greater prices and a lower in common basket measurement as customers revert to pre-pandemic spending patterns.
In clothes and residential, for a few years a misfiring a part of the enterprise, Mr Machin hailed what he referred to as an impressive efficiency.
Online now accounts for practically a 3rd of clothes and residential gross sales however M&S has additionally seen a return of customers to its shops in metropolis centres and buying centres. Mr Machin highlighted that M&S had seen sturdy progress in what he referred to as ‘formal and occasion pushed’ classes, with gown gross sales up by greater than 50%, as had been males’s formal shirts and sensible put on.
The group seems to be benefiting from each a return to the workplace and a revival in events like weddings now the lockdowns are over.
In meals, Mr Machin mentioned M&S had supplied greater than 900 new traces through the interval, whereas it continued to open new meals shops – some 104 new Simply Food shops are deliberate in complete. M&S believes that, if customers determine to rein of their spending in eating places, it’ll profit from them selecting up £12 meal offers on their approach residence from work as a substitute.
The ‘Remarksable’ line or necessities has additionally apparently traded nicely.
M&S can also be working laborious on its retailer community extra broadly. Much was made from as we speak’s investor presentation of the brand new outlet at Stevenage, Hertfordshire, which just lately gained reward on social media with an sudden endorsement from Liam Gallagher.
The draw back to this, for some clients, is that they’ll see their native M&S shut as the corporate seeks to ‘rotate’, in its phrases, in direction of shops able to providing greater, more energizing, meals ranges and a greater click on and acquire service.
M&S final month introduced it was accelerating its retailer closure programme and mentioned it had earmarked 67 websites attributable to shut inside 5 years. It has not recognized the websites earmarked for closure however it’s price noting that it mentioned on Wednesday it was not seeing a return of customers to city centre shops in the identical approach it was metropolis centres and buying centres.
That sounds fairly ominous for smaller cities the place the native M&S is a key draw on the excessive road.
Even although the outlook is fairly grim, each Mr Norman and Mr Machin seem assured M&S can navigate the storm.
Noting that “customers have been hearing about this, they’ve been seeing this on their television screens for months now”, Mr Norman steered M&S was higher positioned than a few of its rivals as a result of the vast majority of its clients had been in employment and had greater than common earnings and decrease than common mortgages or, as a result of they had been retired, no mortgage in any respect.
He mentioned M&S may additionally outshine rivals throughout this era as a result of its value of enterprise had been too excessive “for years” however had been now coming down extra quickly than at some higher “oiled” rivals.
The chairman additionally cited the velocity at which M&S’s gross sales volumes had been shifting on-line. He mentioned the group’s on-line arm was now “roughly as profitable” as its shops enterprise and that will solely proceed as extra quantity moved on-line.
He additionally steered the heavy funding being made in information and digital would allow it to drive gross sales in future extra quickly than some rivals.
He went on: “We do believe we could end up in a market leading position, or certainly a position well ahead of our competitors, in that respect.”
Some out there are additionally coming round to that standpoint.
Kate Calvert, retail analyst on the funding financial institution Investec, advised shoppers: “M&S has emerged post pandemic in a much stronger market position and with good momentum in its transformation strategy.
“Relative to others, M&S has materials productiveness alternatives to go after, which ought to assist mitigate future inflationary strain.”
In the immediate short term, meanwhile, Mr Machin is confident that shoppers will not desert M&S during the festive season despite a desire to save money. He said customers were “telling us they do wish to defend Christmas”.
For more than two decades, now, M&S has been promising a turnaround to customers and investors alike.
It is deeply ironic that, just as there are increasing signs of that turnaround coming to fruition, it is at a time when the outlook for consumer spending is its least encouraging for many years.
But, as Mr Norman noted: “I do not need us to get too consumed with the macro setting…we’re trying ahead to the 12 months forward and we really feel we’ll come out of this higher than anticipated.”
Source: information.sky.com”